I have an article in the current issue of the indispensable National Affairs on the economic implications of the artificial intelligence revolution. I argue that AI will not cause mass unemployment and that it will be a net benefit for typical workers and households. But I am not sanguine about its disruptive effects.
Economists are often too quick to dismiss disruption. Many economic historians believe that the living standards of the British working class did not improve for decades following the start of the Industrial Revolution. Entire occupations were wiped out, and wages fell dramatically for some of the jobs that survived. People flocked from the countryside into dirty, unsanitary cities to take factory jobs characterized by debasing discipline and hazardous working conditions.
These events shook British society to its core. Karl Marx and Friedrich Engels famously argued that “constantly revolutionising the instruments of production” had caused a revolution in the “whole relations of society.” “All that is solid,” they declared, “melts into air.” Charles Dickens began publishing David Copperfield the year after Marx and Engels released their Communist Manifesto. The London of this era — with its filth, poverty, and poor working conditions — was itself a Dickensian character. Marx walked the streets of Dickens’s London, directly observing how technology was upending society.
As I discuss in the article, the digital revolution that began in the 1980s was quite disruptive, but less so than the industrial revolution. Why? In part because the U.S. had policies in place to smooth disruption. Still, I don’t think we look back on those policies as being a stunning success. We should do better with the looming AI revolution. We are still in the very early stages of generative AI’s development, so this policy debate is necessarily and appropriately taking place at a high altitude. But any policy changes should be guided by three broad principles.
The first begins with recognizing that technological advances are beneficial to society, and that we should not try to slow their pace. The world would be much worse off if policymakers had tried to hold back or shape the new technologies of the industrial and digital revolutions; we owe it to our future selves and future generations not to do so with generative AI. We should instead take most technological change as exogenous — as a given that will develop according to the science and the imaginations of innovators — and design policy around organic technological advances. Policymakers should try to soften the short-term disruption from technological change, but not at the expense of denying workers and households the vast long-term benefits that technological advances will bring.
The second principle is that participation in economic life should be encouraged. Work is a positive good. For many people, contributing to humanity through market activity is key to building a full and flourishing life. Work brings people together through shared goals and experiences, and binds them to their communities. It builds a prosperous society characterized by mutual contribution, dependence, and obligation.
Policymakers designing ways to assist displaced workers should be careful not to disincentivize work. Calls for a universal basic income adequate to live on are understandable given fears of mass AI-induced unemployment, but they should be rejected on the grounds that they would discourage participation in economic life. The “welfare for all” model of a large middle-class entitlement state should also be rejected on similar grounds.
Third, the United States should maintain a strong safety net for those who truly need it. Rapid technological change overhauls enormous sectors of the economy, displacing workers who no longer have the education, experience, or skills needed to pursue opportunities in remaining or emerging industries. As noted above, the welfare policies set in place during the 20th century helped moderate the disruptive impact of the digital revolution. Policymakers should keep that example in mind when confronting the impact of generative AI.
These three principles can help guide us through the early stages of the policy debate, separating the wheat from the chaff. Policies to pause AI development should immediately be rejected as unrealistic. Those designed to “level the playing field” between workers and machines by increasing the tax rate on capital should be dismissed as efforts to slow down AI adoption, as should calls to increase the bargaining power of workers for the same purpose. Calls for greater use of antitrust measures to combat the perceived political influence of companies developing new technologies represent not only an abuse of antitrust authority, but a threat to long-term prosperity; they, too, should be turned down.
That’s the chaff. Check out the full article for the wheat.