Note for the file March 2025

The Economic Impact of Information and Communication Technologies (ICT): A Summary of the Ongoing Debate

The debate on the economic impact of information and communication technologies (ICT) on productivity, growth, and employment has gained significant attention. This discussion intensified following the publication of Robert Gordon’s paper on faltering innovation [1] and the release of an e-book by Erik Brynjolfsson and Andrew McAfee [2] arguing that the digital revolution is accelerating innovation.

Media Coverage – Selected Articles

• The Economist: “Has the ideas machine broken down?” [3]

• CBS 60 Minutes: “Are robots hurting job growth?” (January 13, 2013) (video and transcript) [4]

• Automation Industry Association: “March of the Machines” [5]

• Huffington Post: Paul Krugman: “Rise of Machines Partially to Blame for Income Inequality” (video) [6]

• Financial Times: “Obama must face the rise of robots” [7]

These perspectives represent two opposing views: Robert Gordon argues that the ICT revolution was short-lived, particularly when measured by productivity gains, while Erik Brynjolfsson and Andrew McAfee assert that technological innovation is accelerating.

Academic Perspectives: The Role of AI in Economic Growth

Philippe Aghion presents a higher-level academic approach that aligns with fundamental economic theories. Building on Robert Solow’s (1956) assertion that technological progress drives long-term economic growth, Aghion emphasizes the role of artificial intelligence (AI) in accelerating this progress. He argues that AI has the potential to automate and facilitate the generation of new ideas:

“AI could automate, or at least facilitate, the generation of new ideas (Aghion et al., 2018). It will thus help us generate new inventions and solve complex problems. (…) As AI tools gradually assist humans in identifying new hypotheses, designing protocols, and conducting experiments, the production of relevant ideas will increase. However, the time horizon of these effects remains highly uncertain.” [8]

AI and the Future of Business Models

AI is not only transforming innovation but also reshaping business models. AI-driven tools allow start-ups to operate more efficiently, leading to speculation about the future of entrepreneurship. OpenAI CEO Sam Altman predicts that AI may enable the emergence of billion-dollar companies run by a single person. Some start-ups are already planning to cap their hiring due to AI’s efficiency.

Investor Anish Jain compares this wave of AI-powered start-ups to the surge of businesses that emerged in the late 2000s when Amazon introduced affordable cloud computing services. This shift significantly lowered start-up costs, enabling more businesses to launch with minimal investment.

“Before this AI boom, start-ups generally burned $1 million to generate $1 million in revenue,” Jain explains. “Now, that cost has dropped to one-fifth and could eventually fall to one-tenth.” [9]

The Impact of AI on Programmers’ Jobs

A key concern is the effect of AI-powered code generation on software developers. Some liken this transformation to the machinery revolution in farming, where productivity skyrocketed while the number of farmers declined. While many programmers argue that AI-generated code is not yet error-free, the looming question remains: what happens when human-like artificial intelligence (HLAI) becomes a reality?

References

[1] Robert Gordon, Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, NBER Working Paper 18315, August 2012.

[2] Erik Brynjolfsson and Andrew McAfee, Race Against the Machine, http://raceagainstthemachine.com/

[3] The Economist: http://www.economist.com/news/briefing/21569381-idea-innovation-and-new-technology-have-stopped-driving-growth-getting-increasing

[4] CBS 60 Minutes: http://www.cbsnews.com/8301-18560_162-57563618/are-robots-hurting-job-growth/

[5] Automation Industry Association: http://www.robotics.org/content-detail.cfm/Industrial-Robotics-News/Automation-Industry-Association-Criticizes-60-Minutes-Segment-%E2%80%98March-of-the-Machines%E2%80%99/content_id/3864

[6] Huffington Post: http://www.huffingtonpost.com/2013/02/02/paul-krugman-rise-of-machines_n_2607346.html

[7] Financial Times: http://www.ft.com/intl/cms/s/0/f6f19228-6bbc-11e2-a17d-00144feab49a.html#axzz2Jv6M5wl7

[8] Philippe Aghion & Simon Bunel, AI and Growth: Where Do We Stand?, June 2024, https://www.frbsf.org/wp-content/uploads/AI-and-Growth-Aghion-Bunel.pdf

[9] Erin Griffith, A.I. is Changing How Silicon Valley Builds Start-ups, The New York Times, February 20, 2025.