Tyler Cowen on AI & the economy
Cowen thinks AI has ended the great stagnation and will transform the world over decades, but he expects only a modest yearly boost to growth, about half a point, because of cost disease, slow diffusion and human resistance; intelligence is rarely the scarce input. He expects AIs to build their own markets, non-AI inputs such as human networks to gain value, tiny AI-native firms to matter while government, universities and regulators lag, and full employment to continue, though with real disruption and disorientation along the way.
16 points · 6 appearances · 2024–2026
How the view evolved
AI ends the Great Stagnation, bringing 20th-century rates of change → AI will add about half a point to annual growth
In 2024 he said the great stagnation is over and growth will return to earlier 20th-century rates of change; by 2025 he puts a number on it, about half a percentage point a year, transformative only through compounding and barely noticeable in any given year.
Full employment forever, but AI may bring demoralization → AI will create many jobs; full employment can continue
In 2025 he expected full employment but worried about demoralization and said he had no good prediction of what work would look like, within a slow-takeoff view; by 2026 he is 'very bullish on the labor market', names the mechanism (small AI-leveraged teams starting many projects) and says this revolution is likely to come more quickly than past ones.
Up next
2019–2026
“I didn't agree with that post. If you look at labor market data, the returns to IQ as it translates into wages, they're amazingly low. They're pretty insignificant. People who are very successful, they're very smart, but they're people who have say eight or nine areas where they're like, on a scale of 1 to 10, there are nine. Like they have one area where they're just like an 11 and a half on a scale of 1 to 10. And then on everything else, they're an eight to a nine and have a lot of determination. And that's what leads to incredible success. And IQ is one of those things, but it's not actually that important. It's the bundle, and the bundles are scarce. And then the bundles interacting with the rest of the world. Like just try going to a mid-tier state university and sit down with the committee designed to develop a plan for using artificial intelligence in the curriculum. And then come back to me and tell me how that went, and then we'll talk about bottlenecks.”
2019–2026 · changed view
“Absolutely. Yeah, and here that is either acceptable or even admired, or to be a loner. And since so many people are outsiders and that we're all immigrants, is selecting for people who left something behind, we're willing to leave behind their families, we're willing to undergo a certain brutality of switch in their lives, makes us a nation of weirdos. And weirdos are creative. Yeah, and Denmark is not a nation of weirdos. It's a wonderful place, you know, great for them. Ideally you want part of the world to be fully weirdos and innovating, and the other part of the world to be a little kind of chicken, risk-averse, and enjoy the benefits of the innovation, and to give people these smooth lives and six weeks off and free ride. And everyone's like, oh, American way versus European way, but basically they're complements.”
2019–2026 · changed view
“I don't think economics will ever be very predictive. It's most useful for helping you ask better questions. You look at something like game theory: well, game theory never predicted USA and USSR would have a war, would not have a war, but trying to think through the logic of strategic conflict, if you know game theory, it's just a much more interesting discussion.”
2019–2026 · changed view
“My basic rule is to read as much as possible. A lot of books are sent to my house, so I order on Amazon. On a weekday I might get five to ten review copies, and I look at each and every one, and I read some of those. I love to reread classics. The earlier parts of my life, I spent a much higher percentage of my reading reading the kinds of books that would be in the back section of Harold Bloom's The Western Canon. Most of those I've read, say, two to five times. And then I read what my friends write. I spend a great amount of time on Twitter, and I love to print out, say, economics working papers and read those. And then I take books on trips. I'm about to take a trip, and I just keep on reading, basically.”