The AI Revolution Will Bring Prosperity

The growth of industry disrupted old economic patterns but produced undreamed-of wealth

By Phil Gramm and Michael Solon. Excerpts:

"From the colossal changes wrought by the Industrial Revolution to the Digital Revolution of the last quarter-century, improvements in technology have created an array of jobs that far exceeded—in quantity and quality—the ones eliminated, elevating standards of living."

"the Industrial Revolution in the U.K. unleashed a greater concentration of material blessings than ordinary people had ever experienced. From 1840 to 1900 real wages doubled, and the average lifespan increased by 22%, from roughly 41 years to 50. The population doubled, and employment rose by 80%."

"In America . . . From 1870 to 1900 real gross domestic product tripled, the population and labor force roughly doubled, and output in manufacturing grew sixfold. Real per capita income rose by 110% between 1865 and 1910, while real wages of manufacturing workers increased an estimated 173%. Life expectancy rose by a quarter as inflation-adjusted costs of food, clothing and shelter dropped by roughly 50%."

"During the Digital Revolution of the last quarter-century, U.S. real GDP rose by 66%."

"Since 2000 on average five million Americans have either been laid off or quit their job every month, but the economy has created 5.1 million better-paying jobs a month. This creative destruction isn’t new. In 1810, 81% of Americans worked in agriculture; today only 1.2% do. In 1953, 32% of Americans worked in factories. As real industrial production quadrupled, the share of the labor force in manufacturing declined to 7.8% in 2025."

"In America, mechanization, economies of scale and mass marketing gutted local competitors by providing lower prices and higher-quality products."

"trade adjustment assistance, extended unemployment and our welfare system were no doubt well-intended, they have impeded workers’ transition to new jobs."

"Europe makes it hard to lay people off, which constrains the ability to create jobs. In China, most industrial subsidies go to noncompetitive industries, not to the potential winners of the future."