Generative AI at the Crossroads: Light Bulb, Dynamo, or Microscope?

Martin Baily, David Byrne, Aidan Kane and Paul Soto

Papers from arXiv.org

Abstract: With the advent of generative AI (genAI), the potential scope of artificial intelligence has increased dramatically, but the future effect of genAI on productivity remains uncertain with the effect of the technology on the innovation process a crucial open question. Some inventions, such as the light bulb, temporarily raise productivity growth as adoption spreads, but the effect fades when the market is saturated; that is, the level of output per hour is permanently higher but the growth rate is not. In contrast, two types of technologies stand out as having longer-lived effects on productivity growth. First, there are technologies known as general-purpose technologies (GPTs). GPTs (1) are widely adopted, (2) spur abundant knock-on innovations (new goods and services, process efficiencies, and business reorganization), and (3) show continual improvement, refreshing this innovation cycle; the electric dynamo is an example. Second, there are inventions of methods of invention (IMIs). IMIs increase the efficiency of the research and development process via improvements to observation, analysis, communication, or organization; the compound microscope is an example. We show that GenAI has the characteristics of both a GPT and an IMI -- an encouraging sign. Even so, for genAI to boost productivity growth, its contribution will have to exceed the fading growth effects of the past IT innovations baked into the trend, including predecessor AI technologies.

Date: 2025-05, Revised 2025-06
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