Fed Gov Questions AI Productivity Boost as EU Readies to Start Work on Guidelines

Federal Reserve Governor Lisa Cook is tempering expectations of an artificial intelligence (AI) productivity impact, while Malaysia unveiled ambitious plans to become an AI hub and the European Commission assembled experts to craft AI guidelines. These developments highlighted the complex landscape of AI adoption, balancing enthusiasm with practical challenges as nations and organizations navigated the potential of this transformative technology.

Despite widespread enthusiasm for AI, Federal Reserve Governor Lisa Cook tempered expectations that it will prompt an immediate productivity surge. At an Atlanta Fed conference, Cook highlighted the disconnect between artificial intelligence innovations and current productivity gains.

“Although I share the view that AI could lift productivity out of this period of low growth, it bears emphasis that recent productivity gains have been modest despite rather impressive changes in information technology,” Cook said, according to CFO Dive.

While investors are channeling billions into generative AI, with the market projected to reach $1.3 trillion by 2033, tangible economic benefits remain elusive. U.S. productivity rose 2.7% during the second quarter compared with the same period last year but has otherwise gained on average about 1.5% annually since early this century, said Cook.

Nevertheless, she is optimistic about AI’s long-term potential, noting it “is likely to become a general-purpose technology — one that spreads throughout the economy, sparks downstream innovation, and continues to improve over time.”

In terms of the technology’s broader implications, Cook said, “As firms deploy these technologies and workers discover ways to make use of them, such developments can create the conditions for greater productivity and thus higher wage growth consistent with stable prices.”

As businesses cautiously explore AI applications, the jury is still out on whether it will significantly transform productivity or represent a more gradual technological evolution. Cook’s measured approach suggests that while AI’s real-world impact may take time to materialize.

Malaysia is gearing up for a tech bounce, announcing plans for a national cloud policy and AI regulations. Prime Minister Anwar Ibrahim revealed the ambitious strategy during Google’s $2 billion data center groundbreaking ceremony on Tuesday, Reuters reported.

The cloud policy targets four key areas: public service innovation, economic competitiveness, data security and digital inclusivity. Anwar emphasized the nation’s commitment to AI development, stating, “We aim to position Malaysia as a hub for generative artificial intelligence.”

To spearhead this initiative, a national AI office will be established, tasked with coordinating AI efforts and developing a regulatory framework within a year. This move aligns with Malaysia’s five-year technology action plan, focusing on ethical and sustainable AI adoption.

The announcement comes amid a surge of tech investments in the country. “Investments from tech partners will be critical in building a robust and secure digital infrastructure,” Anwar said.

With Google’s significant investment and Malaysia’s proactive stance on AI and cloud technology, the nation is positioning itself as a player in the global tech landscape.

The European Commission has appointed 13 independent experts to lead the development of a Code of Practice for General Purpose Artificial Intelligence (GPAI), Euronews reported. The selected experts from the European Union, United States and Canada will work on guidelines for AI systems such as large language models.

The code, which will be completed by August 2025, aims to facilitate the application of the EU’s AI Act for GPAI providers. It will address areas such as transparency, copyright rules, risk assessment and mitigation measures.

The expert panel includes Rishi Bommasani from Stanford University, former MEP Marietje Schaake and Yoshua Bengio, recipient of the 2018 A.M. Turing Award.

According to the Commission’s statement, “The Code of Practice, aimed to give clarity to providers of General Purpose AI systems, should be ready by August 2025.”

This initiative follows the recent enforcement of the EU’s AI Act. The Commission reports that approximately 1,000 stakeholders, including AI providers, industry representatives and academics, will participate in the initial online plenary to contribute to the code’s development.

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