Tyler Cowen's Simple Model of AI-Aided Growth: Intelligence Meets Polanyi Knowledge
sebkrier · x · 2026-09-14
Economist Tyler Cowen proposes a new framework replacing the Solow model for AI's economic impact:
- Two factors: Intelligence (formal smarts, now massively boosted by AI) and Polanyi knowledge (tacit, context-specific know-how humans specialize in, which AI can't yet embed in an office).
- The two are strong complements, not substitutes — injecting AI-style technocratic knowledge rarely fixes organizational norms problems and can empower rent-seekers.
- Core prediction: the huge positive shock to Intelligence raises marginal returns, employment, and real wages in the Polanyi knowledge sector, whose inputs are now relatively scarce.
- Transitional frictions remain.
Takeaway: in the AI era, people who understand specific contexts may be the scarcest resource.
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