Artificial intelligence is facing mounting resistance. Proposals to halt the construction of new data centres, fears about widespread job displacement and growing concerns over AI safety are intensifying scrutiny of the technology.
These concerns deserve serious attention. Yet they do not necessarily outweigh the potential economic benefits of one of the most consequential technological developments of the modern era. AI could help revive sluggish economic growth and strengthen society’s capacity to confront increasingly complex economic and social challenges. Despite its risks, much depends on whether AI can deliver meaningful productivity gains.
Basic economics helps explain why. Long-term economic growth essentially depends on two factors: the number of people working and the amount each worker can produce. Expanding the workforce increases the overall size of the economy, but sustained improvements in individual incomes and living standards ultimately require higher productivity.
Greater national income, particularly when generated through productivity improvements, also gives governments more fiscal room. Additional economic resources can help address inequality, manage public debt and support essential services such as education and health care.
Workers, however, cannot continuously raise productivity through individual effort alone. Capital investment can improve efficiency—for example, by replacing outdated machinery—and better training can enhance workers’ skills. But technological innovation remains one of the most important forces behind substantial improvements in productivity.
Automation provides familiar examples. Factory robots, self-checkout systems and automated lawn equipment reduce the amount of human labour required to complete particular tasks. By allowing the same work to be performed with fewer labour hours, such technologies can lower business costs and help restrain prices.
Crucially, labour-saving technology does not simply eliminate tasks. It can also free workers to devote their time to other forms of productive activity. That reallocation of labour can generate additional output elsewhere in the economy.
The case for AI therefore rests heavily on its potential to perform a similar function on a much larger scale: raising worker productivity, reducing the labour required for certain tasks and creating additional capacity for economic growth.
