Chairman Kevin Warsh said Thursday that a series of special committees aimed at bringing outside thinking to the Federal Reserve will include “some of the brightest minds.” For a special committee on artificial intelligence that could have a particular impact on the Fed’s economic operations, everyone on the outside seems to be pointing in the same direction.
All members of Warsh’s AI task force seem to believe that AI will be a transformative technology with far-reaching implications for growth and productivity. That is consistent with Warsh’s own views. He personally selected the members of the special committee.
The AI task force was one of five the Fed deployed Thursday. Its official mission is to “evaluate the economic impact of emerging general-purpose technologies, including artificial intelligence, to inform Federal Reserve policy decisions.” It will be led by three outside advisors: venture capitalist Marc Andreessen, economist Charles I. Jones and Xbox CEO Asha Sharma.
All have recently spoken and written in very positive terms about the impact of AI on the economy.
The Fed chairman has long advocated the potential for AI to transform the economy. In June, at his first press conference as chairman, Warsh said the policy’s introduction was “probably the most significant economic, business and household change that I have experienced in my adult life.”
He said he believes advances in AI will encourage faster economic growth without increasing inflation, giving the Fed reason to cut interest rates in 2025.
Venture capitalist Marc Andreessen speaks at the TechCrunch Disrupt conference in San Francisco on September 13, 2016.
San Francisco Chronicle/Hearst Newspapers via Getty Images | Hearst Newspapers | Getty Images
Warsh has been a personal friend of Andreessen for decades. Mr. Warsh also made venture capital investments for investor Stanley Druckenmiller, who ended his time at the Fed in 2011. This expanded his Silicon Valley network and wealth.
Andreessen made his fortune creating some of the internet’s earliest web browsers and is now one of AI’s most vocal evangelists. “We turned sand into thought,” Andreessen told podcaster Joe Rogan in May, referring to silicon, the physical basis of AI chips.
Mr. Jones, the economist, has a lot of sympathy for Mr. Andreessen’s West Coast optimism. Jones recently took a leave of absence from Stanford University to join Anthropic Research Institute, part of major AI company Anthropic. Jones’ academic research has recently focused on the impact of AI on economic growth, making him a key voice in Warsh’s efforts to bring the Fed closer to his perspective.
In a recent paper, Jones pointed out that for most of the nation’s history, per capita growth in the United States consistently averaged 2%. “Yet, if AI eventually automates nearly all vulnerable parts of the economy, economic growth could accelerate significantly, with rates exceeding 5% per year,” he wrote.
The paper examines what Jones identified as weaknesses – aspects of the economy that are difficult to automate – and also considers the decline in potential growth. But Jones writes bluntly that AI “will likely be the most transformative technology of our time.”
Mr. Sharma, who was appointed CEO in February, microsoft‘s Xbox gaming business issued a strong statement in support of AI. But as the leader of the operational business, she made the unusual decision not to prioritize AI. Although Microsoft is building AI into every aspect of its products, Sharma said in a recent Bloomberg interview that the company chose not to put it at the heart of Xbox.
“Our console players are not excited about the experience,” Sharma said.
But that doesn’t mean she’s skeptical. “Now, do I believe in AI? Of course I do,” she said.
Three members of the special committee did not respond to requests for comment. The Fed declined to comment.
One place Warsh could run into skeptics is the Federal Open Market Committee, which has the authority to set interest rates. FOMC members discussed the question of whether AI can improve productivity at a June meeting, according to minutes of the discussion released this week. Some FOMC participants supported the idea that productivity would improve, according to minutes of the meeting.
But it wasn’t completely sold yet. “However, these participants noted that considerable uncertainty remains regarding both the timing and magnitude of potential productivity gains, which are expected to lag the continued acceleration of on-demand AI adoption.”
Meanwhile, head-on AI efforts by U.S. technology companies are starting to heat up the economy. New York Fed President William Williams said Thursday that he is concerned about rising power and semiconductor prices due to the AI boom.
Williams said prices have gone up like a “hockey stick,” doubling and even tripling for some parts. He said AI is a “demand shock,” adding that it is unclear whether the supply needed to curb inflation will increase along with it.
The Fed is expected to meet again at the end of July and keep interest rates on hold. The task force plans to complete its work by the end of the year.
