Today, John Cochrane reassures us that AI’s introduction into workplaces, just like so many other past technological developments, will lead to more jobs, not fewer. Next, Steven J. Davis and coauthors ask thousands of corporate directors in four countries about that same issue. David Neumark explains why higher minimum wages do not improve income inequality. And Šumit Ganguly tells us why a new trade agreement between India and the US will do little to restore trust lost in Delhi this past year.
The Economy
Artificial intelligence has revived an old question: Are machines coming for our jobs? In this week’s Grumpy Economist Weekly Rant, John Cochrane places AI in historical perspective, arguing that today’s anxieties echo past reactions to transformative innovations—from the printing press to tractors to the internet. Each wave of technological change eliminated specific tasks yet expanded productivity, incomes, and new forms of employment. Cochrane explains that AI is more likely to replace tasks than entire jobs, freeing workers from routine activities and enabling higher-value output. Like previous general-purpose technologies, AI will follow an S-shaped diffusion curve, requiring time for firms to adapt and reorganize. Rather than signaling economic decline, AI represents a new productivity-enhancing breakthrough—particularly in sectors such as health—at a moment when growth has slowed and the working age population is shrinking. Watch his rant here.
In a new working paper, Senior Fellow Steven J. Davis and 12 coauthors surveyed nearly 6,000 senior executives from firms in four countries about their views on how AI will improve productivity. They find that while many firms and their leaders are regularly using AI, there has not yet been a marked increase in productivity as a result. However, these corporate leaders say they expect future output and productivity to increase as a result of generative AI use. “Firms predict sizable impacts over the next 3 years, forecasting AI will boost productivity by 1.4%, increase output by 0.8% and cut employment by 0.7%,” Davis and his coauthors write. Meanwhile, a survey of frontline workers at those same firms found they expect AI to increase employment going forward. Read more here.
Clamor for higher minimum wages is on the rise among both major US political parties as a strategy to win over voters worried about “affordability.” Unfortunately, the minimum wage is a poor tool to influence inequality, and even worse at reducing poverty, writes Visiting Fellow David Neumark. The problem is that minimum wages in many states are implicated in job losses and reduced hours, outweighing any individual benefits, the economist says. Moreover, small business owners are disproportionately harmed by having to pay higher wages and raise their prices, while such laws have no impact at all on higher earners. As for poverty, despite decades of political praise, the minimum wage seems to have nearly zero impact, Neumark writes. What would a better tool look like? Perhaps like the earned income tax credit, he suggests, which increases poor workers’ income while expanding the incentive to work and thus boosting long-term earnings. Read about it in Freedom Frequency.
Determining America’s Role in the World
After a year of friction in the budding US-India relationship, argues Senior Fellow Šumit Ganguly in Foreign Policy, a tentative trade agreement will stop the friendship from hemorrhaging further but do little else. Following scuffles between Indian Prime Minister Modi and President Trump on imports of Russian oil, which leader did more to end the short Pakistan-India air war in May 2025, and the US imposition of blanket 26% tariffs on Indian exports the month before, there is little enthusiasm in deepening ties. Ganguly writes that the Indians will likely ratify a draft trade deal with the US, but doubts and concerns will linger. “The trade deal may, at best, limit the US-India relationship from plummeting to unknown depths. However, Indian mistrust and misgivings about US foreign-policy choices have returned to the fore.” Read more here. [Subscription required.]
Reforming K–12 Education
On the latest episode of Today’s Battlegrounds, Ian Rowe, cofounder of Vertex Partnership Academies and senior fellow at the American Enterprise Institute, and Hoover Senior Fellow H.R. McMaster discuss education reform and the importance of cultivating agency, character, and civic understanding in young people. Recorded at Vertex Partnership Academies in the Bronx, their conversation explores how education can help students develop responsibility, meaning, and moral discernment. Watch or listen to their conversation here.
In The Wall Street Journal, Distinguished Visiting Fellow Daniel Lipinski writes about the governors who have refused to opt into a new federal tax credit for donations to nonprofits that provide scholarships toward K–12 education costs. The tax credit offers up to $1,700 per person who donates to an education nonprofit and is restricted to programming that supports students in households earning less than 300% of the area’s median income. So, why would any state leader ever say no to such a thing, as governors in Wisconsin, New Mexico, and Oregon already have? Lipinski says teachers’ unions are the culprit. “It seems they so abhor the idea that a scholarship might help parents choose which school their child goes to that they are willing to reject support for students in their own members’ classrooms,” he writes. Read more here. [Subscription required.]
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