The problem with the AI bubble isn’t that it is bursting and bringing the market down—it’s that the hype will likely go on for a while and do much more damage in the process than experts are anticipating.
Economic analysts, consultants, and business leaders are desperate for anything that will lift productivity growth in the industrialized world. It has been disappointing in the information age, despite all of the glimmer and talk of revolutionary technologies. Total Factor Productivity (TFP)—economists’ favorite measure of macroeconomic productivity which estimates how much aggregate output is growing due to improvements in efficiency and technology—used to grow about 2% a year throughout the 1950s, 60s, and early 70s. Since the 1980s, its growth has been hovering around 0.5%. The promise of an AI-driven productivity boom is music to everyone’s ears.
