The baseline Anthropic estimate of 1.8pp would return US productivity growth to late-1990s levels—the last time America experienced a sustained productivity boom.
The Elasticity Question
The economic variable σ (sigma) measures whether AI tasks complement or substitute for human tasks:
If σ < 1 (Complements): Productivity constrained to 0.6-0.8pp
AI makes certain tasks faster, but humans still do the rest
Time savings don’t translate to headcount reduction or output increase
Example: AI makes lesson planning 12x faster, but teachers still spend the same time in classrooms
If σ = 1 (Baseline): Productivity reaches 1.8pp
AI time savings translate proportionally to productivity gains
Organizations capture the efficiency
If σ > 1 (Substitutes): Productivity rises to 2.2-2.6pp
AI handles entire task chains end-to-end
Humans freed for other work or headcount reduced
Approaches late-1990s productivity boom levels
The Complement Trap
The teacher example matters. Faster lesson planning doesn’t automatically mean fewer teachers or more students per teacher. The time savings might just disappear into the existing structure.
Whether we’re in complement or substitute territory will determine if this is a modest productivity boost or a structural economic transformation.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
