The 21st century has witnessed an unprecedented wave of technological advancement, with artificial intelligence emerging as a global transformative force across the economy. The integration of AI-based technologies into regional economies through the production and design of goods such as smartphones and smart speakers has led to significant changes, driving greater efficiency, innovation and economic growth.
So far, analyzes by urban theorist Richard Florida and others have shown that AI-driven economic development, like other waves of high technology, tends to be concentrated in specific areas, such as the San Francisco Bay Area and the Washington to -Washington region. Boston’s Northeast Corridor, as well as Shenzhen, often referred to as China’s Silicon Valley.
They are all centers of innovation with vibrant tech ecosystems and home to leading global technology companies, such as Google, Apple and many AI startups in the case of Silicon Valley, and Huawei and Tencent in the case of Shenzhen. The ability of AI-based technologies to augment rather than replace human capabilities in such hubs has led to the creation of new job opportunities. This suggests that regions that actively support the development of these technologies are likely to witness a positive relationship between workforce transformation and economic growth.
Technology and creativity
There are two important points that Florida makes about the regional growth dynamics associated with AI-based technologies and regional growth. First, regions that want to prosper economically must attract what he has called the creative class: professionals, including but not limited to university professors, scientists and engineers.
Second, attracting these individuals is important because they have creative capital, or the ability to create new ideas, technologies, business models, cultural forms, and entirely new industries that can improve regional economies and lives. This means that members of the creative class are a fundamental driver of regional economic growth and development.
How does AI play into this established dynamic of technology-led regional development that produces winners and losers?
As an expert in regional economics, I and my colleagues studied the use of AI-based technologies and regional economic growth. Our analysis sheds light on this critical question by examining how AI-infused technologies benefit regional economies and those that produce creative goods in the short and long term.
AI and economic growth
We examined a hypothetical region that reflects creative hubs like Silicon Valley, Shenzhen, and the Toronto-Waterloo Corridor, focusing on individuals using AI-based technology to create products such as smartphones, autonomous vehicles, and smart speakers. These technologies enhance smartphones with features such as facial recognition, aid in the production of autonomous vehicles through AI-driven design and simulations, and enable smart speakers and personal assistants to understand and respond to user commands through natural language processing and machine learning algorithms.
The use of AI-based technology allows creative people in a region to increase the impact that their own creative capital, knowledge and skills have on the production of these goods. Our research shows that an AI-powered regional economy will reach a balanced growth path, or the point where the productivity of every creative person is positive and stable.
How do the initial differences between creative regions in the use of AI-based technologies affect long-term economic growth? What effects do initial differences in the use of AI-based technologies between, say, San Francisco and Seattle have on long-term economic growth in the same cities?
Long-term growth
Consider two regions, A and B. Think of A as the San Francisco Bay Area and B as Seattle. A can save double the amount B invests in an advanced AI-based technology, and A also invests twice as much as B in improving the skills of its creative workforce.
Our research shows that while A saved twice as much as B on AI and skills development, this small initial difference results in a 32-fold difference in long-term output per creative worker between the two regions. Simply put, even small differences in savings rates early on can lead to significant differences in economic output per creative individual.
Similarly, our research also shows that while Creative Region A saves twice as much as Creative Region B to create more powerful AI-based technology and skills, this two-fold initial difference between the two regions leads to a 64-fold difference in the long-term accumulation of skills per creative person between the same two regions. Again, the relatively small initial differences in the two savings rates translate into a greatly magnified impact on the long-term values of skills per creative person.
Some policy lessons
For a given creative region such as the Toronto-Waterloo Corridor in Canada, taking steps now to generate more powerful AI-based technologies will likely result in significantly greater benefits in the long term in terms of increased output and skills per creative person.
Second, consider a creative region that lags behind another creative region in terms of output and skills per creative person. For such a region to move forward, it will need to increase its investments in AI-based technology and skills.
Research shows that AI resources and capabilities in the US are concentrated in San Francisco, San Jose, New York, Los Angeles, Boston and Seattle. Without targeted investments in building and improving AI-based technologies, the current highly skewed nature of AI activity in the US will likely continue to create large pools of highly skilled workers in some regions, while other regions suffer a “brain drain ” leaving less educated workers behind them.
This influence is notable, but it is also a double-edged sword. It promises to increase productivity and growth, but also widen the divide between creative regions that make initial investments to advance AI-based technologies and skills – currently coastal regions in the US – and regions in the vast US interior that do not.
This article is republished from The Conversation, an independent nonprofit organization providing facts and trusted analysis to help you understand our complex world. It is written by: Amitrajeet A. Batabyal, Rochester Institute of Technology
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Amitrajeet A. Batabyal does not work for, consult with, own shares in, or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.