The AI paradox: Innovation without economic gains

This post is from Policy Circle (https://www.policycircle.org/opinion/ai-artificial-intelligence-gdp/) Written by Rupesh Thakkar and Badri Narayanan Gopalakrishnan. 5 August 2025 AI is transforming knowledge work, but weak policy alignment and uneven adoption keep its benefits from translating into broader economic growth. Artificial Intelligence has begun delivering tangible productivity gains in knowledge work—automating coding, generating content, and enhancing service efficiency. Yet, these gains remain curiously absent from macroeconomic metrics such as GDP growth and employment. This paradox is not new. Like the steam engine or the personal computer before it, AI’s impact is being slowed not by the technology itself, but by the lag in adapting institutions, workflows, and policies. History offers instructive parallels. During the Industrial Revolution, productivity gains emerged not from the invention of machines but from the redesign of production systems around them. Early elec...