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A simple model of AI-aided economic growth
Hraness wrote this summary from a saved copy of the source. Quotations are taken word for word from the source.
gist
Tyler Cowen replaces Solow growth with a two-factor story: Intelligence (formal smarts that AI just shocked upward) and Polanyi knowledge (local, inarticulable, custom-bound know-how humans still dominate). Because the factors are mostly complements, the AI intelligence boom raises marginal returns and wages in the scarce Polanyi sector slowly over years, while Centaur-style intelligence jobs fade. That frame fits strong tech, a fine job market, and robust but not explosive growth.
ideas
- Drop Solow for major AI shocks. Cowen argues Solow growth misses complementarity when Intelligence jumps far faster than tacit institutional knowledge.
- Intelligence plus Polanyi knowledge. Formal smarts (chess, theorems, evals) pair with time-and-place, custom, and inarticulable know-how; AI boosts the first much more than the second.
- Mostly complements, limited substitutability. Office-norm problems rarely yield to a technocratic AI dump and can even empower rent-seekers.
- Polanyi wages rise slowly. More Intelligence makes Polanyi inputs relatively scarce, so employment and real wages there climb over a long absorption period.
- Commandeering Intelligence buys less power than it looks. Without Polanyi complements, early social change stays limited; the model matches fine jobs, calm markets, and robust growth.
quotes
“Intelligence and Polanyi knowledge are not quite Leontief complements, but they are mostly complements.”
“The core prediction is that this increases marginal returns, employment, and real wages in the Polanyi knowledge sector.”
“The world does not change that much at first, because the necessary complements are lacking.”
“In the meantime, this is the best basic framework for understanding our current situation.”