Chad Syverson, a distinguished service professor of economics at the University of Chicago Booth, dives into the intricacies of productivity. He discusses why productivity is vital for economic health and shares insights on how technology, particularly AI, may shape its future. Syverson contrasts productivity trends across regions, delves into the impacts of rising inflation on growth, and explores the implications of de-globalization. His thoughts on nurturing relationships highlight the human element in fostering a productive society.
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Quick takeaways
Artificial intelligence is poised to significantly enhance productivity growth by transforming sectors through improved efficiency and output.
Maintaining productivity is crucial for economic health, as it directly influences business success and long-term GDP growth.
Deep dives
The Role of AI and Automation in Productivity
Artificial intelligence (AI) and automation are expected to be significant drivers of productivity growth in the coming years. These technologies have the potential to transform various sectors by enhancing efficiency and output. The discussion highlights AI as a candidate for a new general-purpose technology that could help end the ongoing productivity slowdown. The optimism surrounding AI stems from its demonstrated capacity to deliver considerable gains when integrated with complementary investments and managerial skills.
Understanding Productivity's Importance
Productivity plays a crucial role at both micro and macroeconomic levels, influencing the success of businesses and the overall economy. More productive companies are shown to survive better, grow faster, and pay their employees higher wages, while consumers benefit from lower prices on goods. On a macro scale, sustained productivity growth is necessary for long-term increases in GDP per capita, making it essential for national economic health. A decline in productivity is directly tied to slower GDP growth, highlighting the importance of maintaining productivity levels.
Recent Productivity Trends and Their Implications
Recent data indicates a slowdown in productivity growth globally, particularly in advanced economies since the mid-2000s. While emerging economies experienced significant productivity gains, advanced economies have faced stagnation, leading to concerns about future economic growth. The historical average of productivity growth has dropped, with estimates suggesting a potential impact wherein GDP could be 35% higher if productivity had not slowed. This trend raises questions about the underlying causes, which might include challenges in fully utilizing new technologies.
Dynamism and Innovations as Catalysts for Growth
Encouraging signs have emerged post-COVID, with an uptick in labor market dynamism, business formation, and innovation. These changes may signal a potential end to the productivity slowdown, with new businesses being established at an accelerated rate. Current optimism is linked to advancements in AI, biotech, and other innovative sectors that could drive productivity gains in the coming years. However, while optimism abounds, the full impact of these shifts will unfold over time, requiring continuous assessment and support for emerging technologies.
Leading economist Chad Syverson speculates about the ingredients in productivity’s secret sauce.
In this episode of the McKinsey Global Institute’s Forward thinking podcast, co-host Janet Bush talks with Chad Syverson. Syverson is George C. Tiao Distinguished Service Professor of Economics at the University of Chicago Booth School of Business. His work focuses on the interactions between firm structure, market structure, and productivity.
In this podcast, he covers topics including the following:
Why productivity is important
How the world economy is doing on productivity
What major themes of our age, from the path to net zero to trade fragmentation and aging, could impact productivity
The potential role of AI to change the game for productivity