Google AI expert warns of massive uptick in productivity growth: No problems with Social Security
from Dean Baker
We have long known that people in policy debates have difficulty with arithmetic and basic logic. We got yet another example today in the New York Times.
The NYT profiled Geoffrey Hinton, who recently resigned as head of AI technology at Google. The piece identified him as “the godfather of AI.” The piece reports on Hinton’s concerns about the risks of AI, one of which is its implications for the job market.
“He is also worried that A.I. technologies will in time upend the job market. Today, chatbots like ChatGPT tend to complement human workers, but they could replace paralegals, personal assistants, translators and others who handle rote tasks. ‘It takes away the drudge work,’ he said. ‘It might take away more than that.’”
The implication of this paragraph is that AI will lead to a massive uptick in productivity growth. That would be great news from the standpoint of the economic problems that have been featured prominently in public debates in recent years.
Most immediately, soaring productivity would hugely reduce the risks of inflation. Costs would plummet as fewer workers would be needed in large sectors of the economy, which presumably would mean downward pressure on prices as well. (Prices have generally followed costs. Most of the upward redistribution of the last four decades has been within the wage distribution, not from labor to capital.)
A massive surge in productivity would also mean that we don’t have to worry at all about the Social Security “crisis.” The drop in the ratio of workers to retirees would be hugely offset by the increased productivity of each worker. (The impact of recent and projected future productivity growth already swamps the impact of demographics, but a surge in productivity growth would make the impact of demographics laughably trivial.)
It is also worth noting that any concerns about the technology leading to more inequality are wrongheaded. If AI does lead to more inequality it will be due to how we have chosen to regulate AI, not AI itself.
People gain from technology as a result of how we set rules on intellectual products, like granting patent and copyright monopolies and allowing non-disclosure agreements to be enforceable contracts. If we had a world without these sorts of restrictions it is almost impossible to imagine a scenario in which AI, or other recent technologies, would lead to inequality. (Imagine all Microsoft software was free. How rich is Bill Gates?)
If AI leads to more inequality, it will be because of the rules we have put in place surrounding AI, not AI itself. It is understandable that the people who gain from this inequality would like to blame the technology, not rules which can be changed, but it is not true. Unfortunately, people involved in policy debates don’t seem able to recognize this point.
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Real-World Economics Review Blog 
1. One thing I don’t follow in this argument is how a massive surge in productivity means we don’t have to worry about Social Security.
Social Security is based on contributions. Contributions are based on workers’ wages. For AI not to cause problems for SS, there needs to be a surge in contributions by remaining workers in excess of the contributions lost from those whose jobs are displaced by AI.
Say we start with N workers earning average wage W, and contributing to SS at rate r (<1). The productivity increase means that the work of Z ( 0.
Now suppose the wages of the remaining Z workers are at some rate (1+q)W, where again we presume q > 0. We require that the aggregate augmented per capita contributions with fewer workers equal or exceed the aggregate per capita original contributions, i.e., NWr ≤ ZW(1+q)r .
Then N ≤ Z(1+q), so (N/Z) – 1 ≤ q. In the case of equality, (N/Z) – 1 = q = p, the productivity increase from above. In other words, *at least* the amount of the productivity increase must be reflected in an increase in wages.
Yet it’s very unlikely that the productivity rate increases are going to be 100% reflected in wages, much less > 100%. Since the 1980s, real wages have increased at much lower rates than productivity. See this 2021 report from the Economic Policy Institute:
https://www.epi.org/blog/growing-inequalities-reflecting-growing-employer-power-have-generated-a-productivity-pay-gap-since-1979-productivity-has-grown-3-5-times-as-much-as-pay-for-the-typical-worker/
If that trend continues, contributions don’t seem poised to do so well – in fact, just the opposite.
2. The above calculation *doesn’t have anything to do with the regulation of AI.* It only relies on historical trends in how productivity increases are shared with labor.
What am I missing?
3. In any case, an “uptick in productivity growth” is unlikely to be the biggest impact of AI. A new arms race, an erosion of trust throughout society, an unparalleled facilitation of terrorism and criminal activity, and possible existential threats from “unaligned” AI loom rather larger.
There is the point you are probably missing:
“Social Security is based on contributions. Contributions are based on workers’ wages. For AI not to cause problems for SS, there needs to be a surge in contributions by remaining workers in excess of the contributions lost from those whose jobs are displaced by AI.”
Contributions to SocSec do not have to be based on workers’ wages. In the end, it all boils down to how the increase in overall social productivity (productive power), which is represented in an improved input-output ratio as more use value relative to a given quantum of labour, is distributed. The mechanism of distribution is therefore the crux of the matter.
Sorry, the 3rd paragraph above should read as follows:
Say we start with N workers earning average wage W, and contributing to SS at rate r (<1). The productivity increase means that the work of Z ( 0.
Sorry, I am having difficulty in correcting ¶3 above. It should read as follows:
Say we start with N workers earning average wage W, and contributing to SS at rate r (<1). The productivity increase means that the work of Z ( 0.
I’ll try one more time, splitting the paragraph sentence by sentence:
Say we start with N workers earning average wage W, and contributing to SS at rate r (<1).
The productivity increase means that the work of Z ( 0.
5th time’s a charm?: ¶3 replaced by two paragraphs:
Say we start with N workers earning average wage W, and contributing to SS at rate r < 1. The productivity increase means that the work of Z 0.
For ¶ 3 please read:
Say we start with N workers earning average wage W, and contributing to SS at rate r < 1. The productivity increase means that the work of Z < N workers is equivalent to the original N’s.
Each of those Z workers has a productivity of (1+p) compared to the original N workers — here, presumably thanks to AI. Then in terms of output, N = Z(1+p), so p = (N/Z) -1. Since Z < N, we get p = 0, as expected.