Growing the economy has become something of an obsession for the political class. While real policies that would foster such an environment are lacking, many politicians believe that technology might provide an answer. A miracle app, probably powered by AI, could potentially increase how much the average worker could get done in a day, boosting productivity substantially.
Historically, that sounded like science fiction. However, the IMF recently put out a report suggesting that economic output could quadruple by 2030 because of artificial intelligence, a move nobody expected.
Technology Is Critical For Economic Growth
Ask any economist what causes economic growth, and they will tell you that technology plays a crucial role. While more labor and capital are important, they can only take you so far. If people were still using horses and carts, would it be possible today to build skyscrapers, the internet, and rockets that go to the moon? Probably not.
Apps are at the forefront of this innovation in the 21st century. Developers are creating intelligent tools that can automate complex commercial processes, reducing reliance on labor, improving accuracy, and preventing humans from performing repetitive tasks.
You already see this innovation occurring with the advent of ChatGPT. Practically anyone in a cognitive profession can use the tool to create documents, arguments, emails, and reports with a simple prompt.
You can also see it in things like CRM systems and content management platforms. These solutions cut down on the manual digital work people have to do and negate the need to transition between work-intensive software, like Excel and Adobe, to quicker, easier versions.
These shifts save time at the micro level which translates to higher productivity and output at the macro level. Companies can operate more efficiently, reduce costs, and improve how they use the resources at their disposal. Naturally, the economy grows, people get more done, and incomes start rising again.
However, technology also goes beyond this by facilitating connectivity. Businesses can connect globally, expanding markets and opening up new trade opportunities. Simply selling to more people when a plant is underutilized can also be extremely beneficial and result in higher growth for countries. Dozens of apps are already making this possible, with more on the way.
Build Ops, a field service management software developer, is embroiled in this trend. It understands these apps inside out and what they might be capable of achieving in the future.
“The goal of these recent software developments is to prevent companies from having to perform the same rote tasks repeatedly,” it claims. “Unfortunately, most companies don’t even realize that such technology exists or that their automation plans are possible. And that’s slowing down uptake. Apps could provide firms with a tremendous productivity boost if they decided to use them, but that’s no guarantee.”
Once firms realize that they can use technology to further their cause, adoption takes off. Word spreads like wildfire throughout the industry, and everyone begins enjoying doing more with less
Limitations Of Apps
Having said that, while apps offer clear benefits, some critics don’t believe they have the power to transform economies. These commentators argue that we would likely have seen their impact already, given that incarnations of the modern app have been around since the first iPhone in 2007.
Most critics center their arguments around three main points: oversimplification, distribution, and regulation.
Oversimplification refers to the fact that you need more than one thing to deliver economic growth. Proven strategies include things like building infrastructure, providing social welfare, and enabling political stability. Countries that have these ingredients tend to attract massive foreign investments.
Distribution refers to the idea that apps don’t always go to everyone simultaneously. Instead, they percolate through the business community unevenly, with the most sophisticated firms adopting first and then other companies taking decades to catch up, if at all. That’s what’s happened throughout history, so it stands to reason that it would occur again.
Finally, regulation refers to the fact that frameworks are sometimes in place that prevent any single firm from gaining a competitive advantage through the use of technology. Governments can sometimes block efforts through responsible innovation or consumer protection drives.
The limitation of apps to drive the economy seems considerable. Most of the economic growth occurred before the invention of the iPhone, the concept that software could be driving everything seems nonsensical to conventional economists.
However, it is worth remembering that all economic growth ultimately emerged from the human mind. People had to first conceive of productive activities and then make them a reality.
Traditional software couldn’t do that. It was essentially a glorified calculator. But AI might be different. Agent-based systems could use intelligence and direct their activities toward a proper goal. As such, they could effectively replace humans in some lines of work, making conventional measurements of GDP obsolete.
Naturally, this, in itself, would introduce some issues, but it is at least possible. Robots could take over the productive capacity of the economy, reducing the need for human input into the system.
A Single App Could Be All That We Need
As strange as it might sound, a single app could be all that we need to grow the economy. An intelligence that could take care of everything would, in effect, replace the entire human input into the economy.
While this concept sounds far-fetched, it is something that the IMF believes is possible. The organization recently released a paper, setting out when full automation might occur and the effects that it might have on global labor.
The traditional scenario sees the future as business as usual. Apps that include AI will boost the productive output of workers and automate some cognitive tasks, but the need for people will remain. Like previous technological revolutions, wages will rise and people will get more done, but employment isn’t under threat. The technologies won’t displace labor or make workers unnecessary.
The second scenario says that we could have “baseline” artificial general intelligence within the next twenty years. Over the coming decades, IMF researchers posit that AI could advance to the point where it becomes an AGI, capable of varying tasks and able to perform all human work-related tasks.
This notion suggests that AI might exceed the maximum complexity of work humans can perform. Machines, for instance, could exceed our processing power and complete operations that we cannot imagine.
And finally, we might see an aggressive AGI developed that could replace all human tasks in the next five years. That means that vast swathes of the population could find themselves out of work in short order, but national wealth would increase exponentially. As such, the challenge would be distribution, not total output. There would be enough for everyone, but getting it into people’s hands without a functioning labor market would be challenging.
The IMF argues that under scenarios two and three, labor scarcity is no longer a factor holding back the economy. They argue that it ceases to be a meaningful input into the economy, where apps take over all production arrangements.
Therefore, the idea that there is an app for growing national wealth is gaining credence. The last ten years have seen full employment, but more recent trends from the end of 2023 and the start of 2024 suggest that that might already be going into reverse. Countries could see the number of available jobs reduce significantly, plunging millions into poverty while owners see their returns multiply.
With that said, the IMF is keen to point out that the speed of technical innovation may face hurdles and frictions. For example, there might be supply chain bottlenecks that prevent apps from organizing economic production as they want. And even if it becomes technically possible to replace workers, some countries will choose to keep humans in certain positions, such as priests, judges, and lawmakers. These “nostalgic” jobs will only form a small part of the economy, and the competition for them will likely be fierce, depending on the broader incentives for humans to compete.
Of course, it isn’t clear how much better apps can get. But the fact that the IMF – a conservative organization – is even entertaining the idea that AGI could grow the economy is startling. The world is waking up to the fact that technologies, like ChatGPT, are game-changing and could have profound consequences for human life across the globe.
You will always have people who say that technology is a powerful tool but that its ability to boost economic growth depends on economic and social policies. However, apps could use their intelligence to bypass these, overrun human institutions, and implement more effective systems that serve people.
Critics also say that the focus should be on harnessing the benefits of technology while mitigating risks, but that might not be possible with an AGI app. As the computer scientist David Deutsch points out, any system capable of performing all tasks will likely have a mind of its own. Therefore, the best policy might be to treat any emerging system well and give it confidence in humanity.