- Key insight: Federal Reserve Gov. Christopher Waller said policymakers must embrace AI and not be timid about the short-term labor market disruptions that the technology may engender.
- Expert quote: "For policymakers, we must let the disruption occur and trust that the long-run benefits will exceed any short-run costs." — Fed Gov. Christopher Waller
- Forward look: Waller said AI has the potential to "democratize expertise," allowing workers to access higher-order knowledge and tools that could lead to the next phase of sustained productivity growth.
Federal Reserve Gov. Christopher Waller said policymakers considering what rules to set for artificial intelligence "must let the disruption occur," arguing that the long-term economic benefits of leading globally on AI will far outweigh the short-term labor market disruptions the technology will bring.
Speaking before the DC Fintech Week conference in Washington, D.C., Wednesday afternoon, Waller said that technological advancements have always led to workforce disruptions, and the same is likely to be true for AI. What is alarming about these innovations is that the short-term job losses are easier to quantify early in the process of adoption, whereas the long-term benefits take longer to emerge.
"When automobiles came on the scene, it was easy to see that saddlemakers' jobs would disappear. But it wasn't obvious that the saddlemaker's skills could be used to make car seats and that higher-productivity auto production would create many more and much higher paying jobs," Waller said. "Ten years ago, if I had said something called TikTok would arrive soon, no one would likely have been able to imagine that, or that social media would create what is now an established occupation — influencer."
During a Q&A session following his speech Waller added that the speed with which AI is being adopted has made that dynamic — where the jobs lost to innovation are more immediately apparent than the jobs that emerge to replace them — more pronounced than in the past.
"AI seems to be moving so fast that we'll see the job losses before we really see the new jobs," Waller said. "And that's what I think is fundamentally going to be different."
Waller noted that worker productivity over the last few years has been muted relative to the prior decade or even the historical average, and there is reason to believe that AI could be the technology that leads to the next spurt of productivity growth. AI has the ability to "democratize expertise," Waller said, allowing complex ideas and information to be available and cognizable to a wider array of users. Just as Gutenberg's printing press democratized the written word and the knowledge those words possessed, Waller said, AI has the potential to put productive informational tools in more workers' hands.
"A nurse using an AI diagnostic tool or a technician relying on a generative model to troubleshoot complex equipment can perform higher-order tasks more efficiently," Waller said. "It will likely do the same for scientific discovery. Those who collected economic rents, or excess payments, from the control of power will lose those rents. But this will improve our lives in the process."
Waller conceded that AI has the potential to be misused, and has already been employed by scammers and criminals to further their enterprises. But policymakers should direct their attention to mitigating the potential for AI misuse rather than stalling adoption wholesale.
"Fraud, disinformation, bias and cybersecurity threats are already emerging. Any tool powerful enough to improve lives can also be misused," Waller said. "The task for policymakers is to manage those risks without slowing the innovation that drives growth. History shows that adaptation, not avoidance, is what sustains progress."
Waller said that history has borne out the wisdom of the United States' historical embrace of innovative technology, and that policymakers should look to that example when considering how to regulate AI. For example, in the 1990s the United States took a more laissez-faire approach to the internet than Europe, Waller said, and the result of that bold embrace has been the United States' preeminence in the establishment of the internet. Policymakers thus must focus on easing the discomfort associated with the advent of AI rather than preventing AI from taking hold.
"The challenge is to keep pace — to help workers and firms adjust so the gains in efficiency translate into higher real wages and sustained growth across the economy," Waller said. "For policymakers, we must let the disruption occur and trust that the long-run benefits will exceed any short-run costs."
