Complementarities, Weak Links, AI, and Economic Growth

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Recently, Brian wrote a long post examining some rather provocative claims about AI and economic growth. The post is long, but worth reading in detail. At the same time, it is important to recognize the underlying purpose of the post. When we start thinking about a speculative world, we need something to discipline our thinking. We need a model. Thus, what I want to do this week is to provide some very basic lessons for framing the debate around AI and economic growth.Complementary Tasks and ProductionProduction often requires a number of complementary tasks. Construction might require framers, carpenters, plumbers, electricians, and bricklayers. Restaurants produces meals that require cooks, servers, bartenders, and dishwashers. Manufacturing is often organized using an assembly line, in which each worker on the line is assigned a particular task. In these types of production, each task is important to the production of the final output good.Michael Kremer’s influential paper, “The O-Ring Theory of Economic Development,” is useful for organizing our thinking about these types of production. The motivation for that paper is to think about the explosion of the space shuttle Challenger. Although the space shuttle consisted of thousands of components, the failure of just one component, the O-rings, led to its explosion. As Kremer pointed out, this concept seems fairly generalizable to many different types of production. Furthermore, once we start thinking about production in this way, we can learn a lot of lessons.Consider a simple model. Suppose that every worker has a type. …