Bailey: AI as next general-purpose technology

Bank of England Governor Andrew Bailey highlighted the significant slowdown in UK economic growth since the Financial Crisis.

Before 2006, potential supply grew at 2.8% annually, with productivity contributing 2.4 percentage points.

Post-crisis, this fell to 1.3%, with productivity at a mere 0.4 percentage points, directly impacting living standards.

Bailey introduced Artificial Intelligence (AI) as the likely next "General Purpose Technology" (GPT), akin to the steam engine or the internet, which drives cycles of technology-led growth.

He noted that such technologies have broad, economy-wide applicability, improve over time, and enable complementary innovations across many sectors, forming the heart of creative destruction.

Bailey delved into the nature of AI, particularly reinforcement learning, where machines learn through trial and error, applying judgment based on their own experience.

This process, he argued, could significantly accelerate the sequence of steps from invention to implementation, leading to substantial productivity gains.

However, he cautioned that the full impact of GPTs often takes considerable time to materialize.

Citing historical examples like the steam engine and electricity, Bailey referenced the "Solow Paradox," where technological advancements are not immediately reflected in productivity statistics.

He attributed this lag to the need for complementary innovations, an initial experimentation phase, and measurement challenges.