Nobel laureate Christopher Pissarides states that AI will not bring back a period of fast growth.

      A Nobel Prize-winning economist has cast doubt on the notion that artificial intelligence will propel Western economies back to a time of rapid productivity growth, cautioning that those fast-growth years may be permanently behind us. Christopher Pissarides, who was awarded the Nobel Memorial Prize in Economics in 2010 and is a professor at the London School of Economics, told Bloomberg News that there has been little evidence of an productivity increase resulting from AI thus far.

      His skepticism stands in contrast to much of the tech sector and the policy arena, where discussions about AI’s expected productivity benefits are prevalent, from central bank meetings to corporate forecasts. Pissarides, who specializes in the effects of automation on employment, believes that nearly four out of ten jobs in the US and UK will remain largely unaffected by AI. He pointed out certain industries, such as nursing and hospitality, where the technology is unlikely to yield the significant improvements that its proponents anticipate.

      “There are up to 40%, or at least a large number of jobs in the UK, which are not exposed to AI, so they will not experience productivity gains due to AI,” he remarked. He also expressed caution about the potential productivity advancements AI might bring in other areas. He referenced the last significant technological leap, the personal computing revolution of the late 20th century, which is often credited with a genuine but temporary surge in productivity.

      “I doubt there will be a new computer boom equivalent to what we experienced in the 1980s and 1990s,” Pissarides stated, noting that “based on what we know now and what we observe, I don’t foresee productivity growth reaching those levels.” He highlighted the uncertainty surrounding the development of the technology.

      This perspective places him in opposition to figures like Nvidia CEO Jensen Huang and OpenAI’s Sam Altman, both of whom assert that AI will dramatically transform labor and productivity on a large scale.

      Speaking on July 6 at the Royal Economic Society conference in Newcastle, Pissarides went further. To achieve the robust growth rates predicted by optimists, he argued that the sectors most affected by AI, such as finance, would need to show substantial productivity gains, which he considers unrealistic. “It's simply not practical to discuss high productivity growth,” he explained at the conference. “I believe we must accept that the era of rapid productivity growth is over, regardless of our efforts.”

      The implications of this debate are significant. Both tech companies and governments have placed their hopes on AI to revive growth rates that have significantly decreased in recent decades. The sluggish economic performance across the West, particularly in Europe, has limited policymakers' options and resulted in minimal increases in real wages, creating a context that has heightened political tensions and made difficult trade-offs even more challenging. Thus, it's unsurprising that the promise of AI delivering a productivity boost has been so enthusiastically embraced.

      Not everyone agrees with Pissarides’s bleak outlook, however. Bank of England Governor Andrew Bailey has described AI as a potentially transformative technology for growth, warning that it may take time to materialize in economic data but suggesting it “may well come to the rescue.”

      This disagreement reflects a broader debate about whether the soaring valuations associated with AI are based on sturdy foundations. Critics have drawn parallels to the dot-com bubble, and concerns linger that the technology can produce as much corporate “workslop” as genuine output, leaving many companies yet to see tangible returns on their investments.

      Pissarides himself is not inherently pessimistic about AI. He has previously indicated that the technology could facilitate a four-day workweek by increasing productivity during working hours. However, his current assertion is more specific: while AI may prove to be beneficial, it is unlikely to take us back to the growth rates experienced in the late 20th century.