The AI Economy: Work, Wealth and Welfare in the Robot Age

Imagine a world where for thousands of years, the economic landscape barely moved — where the average person’s standard of living was virtually unchanged from generation to generation. This was human history for millennia. Despite remarkable inventions like the wheel, the domestication of animals, and the advent of agriculture, the output per person remained almost flat. The reasons were many: population growth absorbed gains in productivity, capital accumulation was limited, and social structures often stifled innovation. The Industrial Revolution was not just another technological advance; it was a singular event that shattered this long-standing stagnation.

Beginning in late 18th-century Britain, the introduction of steam engines, mechanized spinning, and new manufacturing processes set in motion an unprecedented wave of economic growth. Yet, this transformation was neither immediate nor smooth. For decades, many workers saw little improvement in their wages; in fact, some suffered as old skills became obsolete. This period, sometimes called the Engels pause, reminds us that progress often comes with hardship and adjustment.

One of the defining features of this era was the process known as creative destruction. As new machines replaced human labor in farming and manufacturing, entire industries declined. Horses, once essential for transport and agriculture, saw their numbers plummet as machines took over. However, new jobs arose in factories, services, and emerging sectors that previously did not exist. The economy was reshaped, and though painful for many, this process fueled rising productivity and living standards over time.

Understanding this historical backdrop is essential as we consider the present-day revolution brought about by artificial intelligence and robotics. Just as steam power transformed economies, AI promises to reshape work and wealth, but it too will bring disruption alongside opportunity. The lessons of the past teach us patience and the importance of adaptation in the face of change.

As we move forward, we will explore whether this AI revolution is truly different or a continuation of the patterns set in motion centuries ago. Let us now delve deeper into the nature of this technological wave and its unique characteristics.