Peter Howitt, a 79-year-old Nobel Prize-winning economist and professor emeritus at Brown University, has issued a warning regarding the dangers posed by artificial intelligence (AI). Howitt, originally from Canada, is an originator in his field of economics. The Royal Swedish Academy of Sciences awarded him one of three joint prizes for his pioneering work on the theory of “creative destruction.” His research looks at how technology drives economic progress. It’s a question that is more topical than ever in the age of AI.
In a fireside chat that day, Howitt made a comparison between the current rise of AI and previous waves of technological innovation. He pointedly referred to the telecommunications boom of the 1990s and the early innovations in electricity and steam power. He understood as well as anyone the incredible power of AI to promote innovation, increase productivity and revolutionize entire industries. He cautioned that it will replace a large number of jobs. This double-edged sword of rapid technological change begs a host of important questions regarding the future of work and our overall economy.
The Foundation of Creative Destruction
So Howitt’s academic exploration of the theory of creative destruction was born in 1992. In this arena, he really made his mark — co-authoring the seminal paper with fellow economist Philippe Aghion. This seminal book theorized that innovation makes industries obsolete, disrupting established economies and creating new ones in the process. At the time, Aghion was very bullish on their research. He had the chutzpah to predict that their work would someday take them to a Nobel Prize.
Looking back on their work, Howitt said that Aghion was able to see the relevance of their work from 1987 on. Recognizing the forces of creative destruction Creative destruction is an uncomfortable process that drives economic progress by getting rid of outdated industries. In their stead, other industries move in, spurring innovation and creativity. This vicious cycle can lead to significant short-term job losses. Howitt explains that this effect is compounded in the realm of AI.
The Need for Regulation
These days AI technology is progressing at lightning speed. Howitt emphasizes the immediate need for regulatory structures to address its capacity to wipe out jobs. He worries that without thoughtful regulation, AI would drive up unemployment rates and increase economic inequality. Policymakers have a hefty challenge ahead. Innovation is critical, but so is protecting our workers, and federal regulators need to strike that balance as they continue down this incredibly innovative and disruptive path.
Howitt’s concerns are shared by many economists who support taking proactive steps to address the negative consequences of automation. He contends that it’s too soon to tell who the leaders in the AI space will be. This goes to show the unpredictability that comes with any technological advancement. The second-order effects on the creative destruction introduced by AI remain highly ambiguous, making the case for intelligent regulation more urgent.
The Future of Work in an AI-Driven World
The promises and perils of AI go far beyond economic measures, they will upend social order and life as we know it for those who work. As industries continue to change and shift in response to emerging technologies, workers will continue to need new skills—or risk being pushed out of the workforce entirely. Howitt’s recent Nobel insights should remind us that it’s technological innovation that can truly fuel growth. It also introduces very real and new challenges that require thoughtful policy development and appropriate action.
The debate over AI’s contribution to the economy has only started. In telling that story, economists like Howitt are vital to informing the public discourse and crafting the policies that will shape a new, better future of work. Their insights can lead us down the path of solutions that allow us to embrace technological progress while protecting the future of work.