A simple model of AI-aided economic growth (marginalrevolution.com)

A new economic model highlights the role of AI in driving growth by introducing two key factors of production: Intelligence and Polanyi knowledge. While Intelligence encompasses formal skills that AI can enhance, Polanyi knowledge refers to the nuanced, inarticulable insights humans possess, crucial for office cultures and practices. The model argues that while AI can boost output, the two factors are largely complementary rather than substitutable, meaning that issues rooted in human norms cannot be easily solved with AI alone. The significance of this model lies in its prediction that recent advancements in AI will positively influence employment and wages in sectors relying on Polanyi knowledge, despite a potential short-term transition unemployment in the Intelligence sector. The employment gains in the Polanyi sector may be slow to materialize due to the complex nature of human knowledge integration. This model offers a fresh perspective on the economic dynamics at play amidst technological advancements, providing a framework that aligns with current data and suggests that while AI's rapid evolution is transformative, it won't solely dictate societal change without the essential complementary human elements.