Artificial intelligence is emerging as a global radical power across the market in the 21st century, resulting in an unprecedented wave in technological developments. Important changes have been sparked by the inclusion of AI-based technologies into local economies through the production and design of goods like smartphones and wise speakers, which have resulted in higher efficiency, innovation, and economic growth.
Analysis has shown that the financial growth spurred by AI, like another high-tech waves, tends to focus on particular areas like the San Francisco Bay Area and the Washington-to-Boston Northeast Corridor, as well as Shenzhen, which is frequently referred to as China’s Silicon Valley.
In Silicon Valley, there are numerous AI startups in the cities of Shenzhen, Huawei and Tencent, and other leading global tech companies are located in lively technology ecosystems. The skill of AI-based technologies to enhance rather than replace individual features in these hubs has resulted in the creation of new job opportunities.
This suggests that areas that actively promote the development of these technologies are likely to experience a beneficial interaction between labor change and economic progress.
Systems and imagination
The industrial theorist Richard Florida makes two important points about provincial growth dynamics in relation to geographical growth that are related to AI-based technologies and local growth. Second, regions that want to grow economically need to get what he has coined the imaginative school: professionals, including but not limited to university professors, scientists and engineers.
Next, attracting those people is important because they possess creative money, or the ability to create new ideas, technologies, business models, social forms and whole new industries that can increase regional economies and lives. This implies that members of the artistic group are the primary force behind regional economic expansion and development.
How does AI fit into this well-established pattern of tech-led local creation that results in both winners and losers?
As local economy experts, my coworkers and I examined the application of AI-based systems and regional economic growth. By examining how AI-infused technologies benefit local economies and those producing creative goods over the long run, our analysis illuminates this crucial question.
AI and socioeconomic development
We focused on individuals using AI-based technology to create products like smartphones, automatic vehicles, and intelligent speakers in a fictional place that is representative of artistic hubs like Silicon Valley, Shenzhen, and the Toronto- Waterloo Corridor. These innovations enhance smartphones by including features like facial recognition, aid in the development of autonomous vehicles through AI-driven design and simulations, and make it possible for smart speakers and personal assistants to comprehend and respond to user commands using natural language processing and machine learning algorithms.
The use of AI-based technology enables creative people in a region to enhance the impact that their own creative capital, expertise, and talent have on the production of these goods. Our research indicates that a regional economy that is fueled by artificial intelligence will have a balanced growth trajectory, or the point where each creative person’s productivity is stable and positive.
How do initial variations in how creative regions use AI-based technologies affect long-term economic growth? What are the initial effects of the use of AI-based technologies in these cities on long-term economic growth, for instance, in San Francisco and Seattle?
Long- term growth
Consider two regions, A and B. Consider A as the Bay Area of San Francisco and B as Seattle. A and B can save twice as much as B does by investing in cutting-edge AI-based technology, and A also invests twice as much as B in developing its creative workforce’s skills.
Our research indicates that despite saving twice as much on AI and skill development as B, this small initial gap results in a 32-fold difference in long-term output per creative worker between the two regions. Simple put, even smallest variations in early savings rates can cause significant gaps in the creative person’s economic output over time.
Similar research also demonstrates that despite saving twice as much money as Creative Region B does to develop a more potent AI-based technology and skills, the two regions ‘ twofold differences in the long-run accumulation of skills per creative person are 64 fold different. Once again, the comparatively minor initial differences between the two savings rates result in a significantly greater impact on the long-term values of skills per creative person.
Some policy lessons
In terms of increased output and skills per creative person over the long run, taking steps now to create more powerful AI-based technologies is likely to result in significantly greater benefits for a given creative region like the Toronto- Waterloo Corridor in Canada.
Second, take into account a creative region that produces less and has less creative talent than another creative region. For such a region to advance, it will need to invest more in AI-based skills and technology.
Research shows that AI assets and capabilities in the US are concentrated in San Francisco, San Jose, New York, Los Angeles, Boston and Seattle. Without making specific investments in developing and improving AI-based technologies, the current highly skewed nature of US AI activity is likely to continue to result in significant amounts of high-skilled workers in some regions, while lower-skilled workers are likely to be left behind.
This influence is noteworthy, but it is also a double- edged sword. It promises to increase productivity and growth, but it also intends to widen the gap between creative regions that invest initial funds to advance AI-based technologies and skills ( currently coastal areas in the US) and those that do not in the vast American heartland.
Amitrajeet A. Batabyal is a renowned professor, the interim head of the Rochester Institute of Technology’s Department of Sustainability, and the Arthur J. Gosnell professor of economics.
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