“You can see the computer age everywhere but in the productivity statistics.” This now-famous observation by Nobel Prize-winning economist Robert Solow, made in 1987 in response to the so-called IT productivity paradox, captured one of the most perplexing economic puzzles of the late 20th century. Despite billions invested in IT and computers throughout the 1970s and 1980s, no aggregate productivity effects had shown up in national accounts.
Today, artificial intelligence is everywhere, and the world is again investing (many) billions. As Treasurer Jim Chalmers sets out to host an economic reform roundtable focused on rekindling sluggish productivity growth, with AI firmly on the agenda, we had better learn from history.
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