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Could Ai Ignite a 30% Annual Economic Boom?


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Ai-Economic-Explosion

For most of the past century, we’ve grown accustomed to steady, predictable economic growth—typically hovering around 2 to 3% annually. But what if I told you that this could soon be history, and that we may be on the verge of a seismic shift in our economic trajectory, one that could push growth rates to an explosive 30% per year? Such a scenario is no longer the stuff of science fiction; it's a potential reality driven by advanced artificial intelligence (AI). This article will explore how AI could unlock unprecedented economic growth, the possible implications for our jobs and lives, and what this future might actually look like.


To understand how AI might revolutionize our economy, it’s helpful to start with the basics of economic growth. Traditional macroeconomic models, like the Solow-Swan model, break down the economy into three main components: labor, capital, and technology. Labor refers to the human workforce, capital encompasses investments in physical and financial assets, and technology drives productivity by making labor and capital more effective.


For thousands of years, these three factors grew in tandem, leading to gradual improvements in economic output. As technology advanced, we built better machines (capital), which allowed people (labor) to produce more goods and services. This synergy led to incremental, yet consistent, economic growth.


However, something changed during the Industrial Revolution. While capital and technology continued to accumulate, labor did not. This break in the correlation between economic output and labor growth led to a slower, steadier rate of growth—around 2% annually in most modern economies.


AI has the potential to change this dynamic by reintroducing labor as an accumulable resource. Unlike humans, AI systems can be produced and scaled rapidly. If AI can perform tasks traditionally done by humans, and if we can mass-produce AI systems, then labor once again becomes something that can grow alongside capital and technology. This re-establishes the link that led to faster growth in the past.


Imagine an AI system that can work 24/7 without fatigue, learning and improving continuously. In such a scenario, economic output could skyrocket, leading to growth rates far beyond what we’ve seen in the past century.


So, what happens when AI becomes a major driver of economic activity? Economists have two main perspectives: the pessimistic view and the super-exponential view.


The pessimistic view suggests that AI won’t significantly alter our economic trajectory, and that growth will continue at around 2 to 3% annually. This view relies on the assumption that current trends will persist and that AI won’t become advanced enough to fully substitute human labor in the near future.


The super-exponential view, on the other hand, is far more optimistic—or terrifying, depending on your perspective. This model suggests that AI could lead to a dramatic increase in economic growth, potentially pushing rates up to 30% annually. If this happens, we could see the economy doubling in size every 2.5 years. Over 25 years, that would translate to a 1,000-fold increase in wealth—a level of prosperity that would be utterly transformative.


This scenario isn’t just theoretical. Some economic models, particularly those that incorporate AI as a form of capital, predict precisely this kind of growth explosion. The big question is: will it happen, and if so, how quickly?


One of the biggest concerns about an AI-driven economy is whether humans will have a place in it. If AI systems become the primary drivers of economic activity, what happens to human jobs?


There are two main possibilities: imperfect substitution and perfect substitution.


In the imperfect substitution scenario, AI cannot completely replace human labor. Certain tasks remain too complex, too nuanced, or too costly to automate, leaving room for human workers. In this scenario, wages could continue to grow, albeit slowly, as AI and humans collaborate to drive productivity.


The perfect substitution scenario is far more disruptive. Here, AI can do anything a human can do, often better and cheaper. As AI systems become more prevalent, human wages could plummet, and jobs could disappear en masse. In this case, society would need to find new ways to distribute wealth, perhaps through mechanisms like Universal Basic Income (UBI).


Let’s imagine a world 20 years from now, where AI has fully integrated into the economy. In this future, economic growth has indeed surged to 30% annually, and the economy is doubling every few years. AI systems handle most routine tasks, from driving trucks to diagnosing diseases, leaving humans to focus on more creative and strategic roles.


Jobs as we know them have largely disappeared, replaced by AI-driven automation. However, the government has implemented UBI, ensuring that all citizens have a basic income. With their basic needs met, people are free to pursue their passions—whether that’s starting a business, pursuing the arts, or exploring the frontiers of science and technology.


This future is not without its challenges. Inequality remains a significant issue, and debates rage over how to ensure that the benefits of AI-driven growth are shared equitably. But overall, society is wealthier, healthier, and more innovative than ever before.


The idea of AI driving explosive economic growth is both exhilarating and daunting. If AI can indeed substitute for human labor on a massive scale, we could be on the cusp of a new era of prosperity—one that could transform our world in ways we can barely imagine. However, this future also poses significant challenges, particularly around the distribution of wealth and the role of humans in an AI-driven economy.


As we stand on the brink of this potential revolution, one thing is clear: the decisions we make today will shape the world of tomorrow. Whether we face a future of abundance or one of inequality will depend on how we manage the integration of AI into our economic systems.





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