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Economist William Nordhaus once calculated that our ancestors spent approximately 58 hours of labour to generate the same amount of light that’s now produced by a modern lightbulb in an instant. By the 1700s, oil lamps cut that figure to five hours of work for one hour of usable light. A significant jump in productivity, but activities like working or reading at night were still reserved for the wealthy.
Today, a single hour of work buys decades of light. The jump has been staggering. In money terms, the price of lighting has fallen 14,000-fold since the 1300s – an hour of light today costs well under a second of labour. That’s what productivity looks like.
And yet, even this enormous leap may pale compared to what’s coming. Artificial intelligence promises to do for productivity what electricity, the steam engine and the light bulb once did. Except this time, it will be faster, broader and even more disruptive. Some researchers believe AI will propel us into prosperity so vast we can barely imagine it. Others warn it could end the story altogether. Alarmingly, a survey of key AI researchers returned a 5% chance that superintelligence could wipe us out entirely. That’s a one-in-twenty chance that its development will trigger “extremely bad outcomes, including human extinction”.
The paradox is fascinating. Artificial intelligence may be the invention that frees us from drudgery forevermore – or it could be our final mistake.
Wellbeing is About Productivity
It’s not just about whether robots take over the world. What comes next with AI is more about how it boosts productivity and alters our economy, and ultimately whether it improves human wellbeing.
For Andrew Leigh – economist, Australian MP, and the author of The Shortest History of Economics – the story of light is about the improvement in quality of life, not about money. “Economics is no more about money than architecture is about feet and inches… it’s the study of wellbeing; money is just the yardstick.”
The bee that adorns his book’s cover symbolises industry and cooperation, which he identifies as the essence of modern economies. Just as no bee builds a hive alone, no person or country thrives without trade, specialisation and collaboration.
Part of the incoming revolution is about the continuation of global cooperation, and part is about the inevitable boom in productivity. But it all comes with warnings.
Stagnation Then Explosion: Are We Ready?
Estimates by the Maddison Project show that Japan’s average real income remained unchanged for seven whole centuries between year 1000 to 1700. Generations lived under the same economic ceiling, and people were born, raised and died in a world where nothing improved for anyone.
Suddenly, the Industrial Revolution in Britain changed the world. Living standards doubled in a single lifetime, and the expectation that your children would live a better life than you became the new normal. The revolution is what ended the centuries-long trance of economic stagnation.
Despite what many think, the escalator has slowed in recent decades. In the US, intergenerational income mobility – the belief that children would earn more than their parents – was at 90% for those born in 1940, and is now less than 50% for people born in 1980. The conveyor belt of generational upgrades is grinding towards a halt. In steps AI, not as a marginal improvement, but as a potential turbocharger, just like the Industrial Revolution.
Promise and Peril of AI
Today, we’re at a fork in history’s road. Leigh tells us that “artificial intelligence now has the chance to do for us what electricity, the steam engine and lighting did for previous generations” – quantum leaps for living standards – “AI has massive potential and the likeliest case is it delivers prosperity levels we can barely imagine right now”
Meanwhile, mathematicians and philosophers call AI’s perils “existential for a reason”. In a 2023-2024 survey of more than 2,700 AI researchers, the median estimate assigned a 5% chance to extremely bad outcomes – including human extinction. For some, it seems low. But in real terms: would you get on a plane with a 5% chance of crashing?
We built regulations for planes and bridges after they fell from the sky, or crumbled. AI is different; its sheer power demands the guardrails are built before the highway opens. The scale of risk, disruption and potential is phenomenal.
Who Wins in the AI Race?
AI might be the greatest productivity engine yet, but who gets the gains? Leigh cautions that it depends on policy: “Competition laws must prevent monopolies in artificial intelligence. Think of internet search: once sprawling, now nearly monopolised. AI could follow that path unless stopped.”
The UK’s Digital Markets Act and similar proposals elsewhere aim to designate mega-platforms as “gatekeepers” who become subject to stricter rules. Because power unchallenged often turns into capture, and capture turns innovation into exclusion. Regulation, says Leigh, is not about choking innovation, but rather allowing it to breathe.
Future Generations: Education in the Age of AI
Should we bother teaching kids to read the classics, or instead be training them to prompt AI effectively? It’s somewhere in the middle. Our predecessors insisted it was essential to read a physical map or do mental mathematics, not knowing that Google Maps would remove the need and we’d carry calculators in our pockets our whole lives.
Leigh argues both sides. Thinking about London’s legendary black cab drivers who need to memorise 25,000 city streets in order to pass “the Knowledge” (even in 2025 with GPS services available) is one way to consider how we may go forwards despite having AI that could do a lot of thinking for us. Studies show the mental maps that the drivers’ brains developed have lasting cognitive benefits that improve functionality far beyond just navigation.
In the school system, should we still be getting students to read novels and academic papers, when AI models can instantly read a thousand and summarise the key points? Why read Pride and Prejudice if ChatGPT can tell you the main themes and draft an essay in seconds? Reading it ourselves and pondering nuance, context and empathy is what keeps us human, and the exercise is about more than simply getting to a logical conclusion.
Even if artificial intelligence can summarise whole libraries in seconds, the act of reading still trains the mind in ways machines can’t replicate. Education, Leigh insists, must preserve critical thinking and rigour, otherwise we risk losing the ability to identify when it produces something not quite right.
Global Competition, Local Changes
The AI race feels like a game of superpowers with the top few companies either dominating progress themselves, or using their capital to hoover up promising start-ups and their engineers. However, it’s not only about who produces the models and from where, but also about how the technology is utilised.
For example, in Australia where the big language models and data centres are not being built, they are already seeing huge gains. Law companies, insurance, coding, design – firms everywhere are unlocking faster, smarter services behind the scenes, which improve productivity and quality of life in small, but noticeable, doses.
We are destined for another labour market shift just like with every other major revolution. Some jobs will vanish; new ones will be created. At least that’s the idea. Will humanity benefit overall, or will the gains accrue to asset holders and algorithm owners, further worsening the current state of wealth inequality in the world?
Inequality: An Old Story with a New Twist
Thomas Pikkety’s “r > g” warns us that when returns on capital (r) exceed economic growth (g), inequality grows. So, if assets appreciate at a greater rate than the economy itself, the wealthier pull further away from wage earners. Adding to this, the gap between high- and low-paid workers has widened in many major countries too.
With AI exponentially improving productivity, we can imagine two very different futures in terms of wealth inequality. The trend will either be reversed or reinforced. If AI is utilised to lift GDP growth, and if that growth reaches wages and public services rather than just shareholders and those already rich, then inequality will shrink. But, if benefits are limited to capital holders, the divide itself will grow exponentially.
Final Thought
From candlelight to electric glow, and from centuries of economic stasis to explosive innovation, economics is always about how humanity adapts and innovates. AI looks like it will be the most transformative yet. Perhaps it will bring an age of unimaginable abundance, or end the game once and for all. In the meantime, the clock continues ticking on who will see the upside, and whether we can build the necessary safety measures in time.
Join the Conversation
Will AI be humanity’s greatest ally, or its final folly? What will happen with regulation and the education system? We’re undeniably at a critical crossroads in our history. Add your thoughts below.
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Categories: Did You Know?, World News