Can Smith's ideas explain AI growth?

Dwarkesh Patel has discussed Adam Smith's ideas and their relevance to understanding the growth potential of technologies like AI. In the conversation with Tyler Cowen, Patel brings up Smith's extrapolative thinking from historical economic growth rates to the potential high growth rates that could be achieved with AI. Here, Smith's principles of increasing returns, division of labor, and mechanization — crucial for boosting productivity and economic growth — are applied theoretically to the burgeoning AI economy.

Patel and Cowen speculate on how Smith might react: understanding the potential for drastically higher growth rates due to the scale of change brought by AI but also acknowledging that Smith would likely be shocked by modern growth predictions, such as a 10% annual growth rate due to AI, as such growth rates exceed historical precedents that Smith could have possibly imagined 1.

This conversation indicates a theoretical application of Smith’s economic principles to AI growth, suggesting that while Smith's frameworks can provide insights, the actual dynamics of AI may add new dimensions that require additional economic principles or an update to existing ones.