Economists, hey?

The Washington Post has an article that says there is now some debate over the basic question of whether the US economy has only grown because of massive AI spending.   Some economist apparently say it hasn't contributed at all - which sounds rather implausible.   

It’s clear that the huge spending on AI is adding to the U.S. economy, but the available economic data doesn’t neatly capture its effects. The debating economists and the slippery data suggest that if the technology does start to reshape the economy, it may be challenging to detect and clearly measure. That may leave political and corporate leaders to choose the numbers that fit their preferred narratives on how AI is changing American life and work.

The struggle to even measure what is happening today suggests there may be years of bickering ahead over whether AI is creating a golden age of prosperity or a path to mass unemployment and impoverishment.

The high-stakes quibbling over AI’s current economic impact largely hinges on how to account for the foreign-made computing equipment and components inside the expensive data centers that AI companies are building across the nation.

Economists who argue that AI’s contribution to U.S. growth is overstated calculate that much of the money spent to equip AI data centers drags down economic growth rather than boosting it. 

That’s because the $31 trillion in yearly U.S. gross domestic product, the widest measure of the economy, tallies only the final value of products and services produced domestically. Spending on imports and foreign made components is subtracted because it boosts the economies of other countries, not that of the United States.

If a U.S. store paid $500 for a sofa made in China and sells it for $1,000, U.S. GDP mostly records the $500 difference, said Hannah Rubinton, an economist at the Federal Reserve Bank of St. Louis. The sale of a $50,000 American-made truck with $10,000 worth of foreign parts counts as a $40,000 lift to the U.S. economy.

Roughly three-quarters of the cost of an AI data center is for the computer gear and parts such as computer chips that go inside of it, technology analysts estimate. America’s AI champions, including the computer chip pioneer Nvidia, manufacture many of their products in Asia — despite efforts by the Biden and Trump administrations to reduce U.S. dependence on essential chips made overseas.

Other economists say the contrarians are too pedantic and looking too narrowly at AI’s contribution to the economy. And some forecasters say that the U.S. government’s economic data is a poor measure of the impact of AI and that alternative calculations show the current boom is an even bigger boost to economic growth.

But even some of those not in the AI-zero camp agree that the narrative of the technology propping up the economy was overblown.