Fed Governor Highlights Economic Promise and Policy Challenges of AI
Federal Reserve Governor Christopher J. Waller offers historical perspective on technological change, characterizing artificial intelligence ("AI") as the newest wave of innovation that will challenge existing structures while driving long-term economic growth.
In remarks at DC Fintech Week, Mr. Waller highlighted three recurring patterns that define major technological shifts: ongoing disruption, shifts in power relationships, and long-term gains in productivity. He said technological change is a constant force that reshapes how people work and interact. He noted that past breakthroughs like the internet have historically redistributed power by democratizing information and expertise—a trend AI is likely to accelerate.
He said that, despite early disruption and fears of job loss, innovation has consistently raised productivity, economic growth, and overall living standards. Mr. Waller said that although AI will displace some types of work, it will also create new opportunities through a process of economic renewal. He noted that early signs of job losses are concentrated in administrative roles, but that most financial firms are adapting by retraining staff and redeploying workers rather than through large layoffs. He emphasized that technology and human labor tend to reinforce each other, not replace one another, and that AI's long-run benefits depend on whether it boosts overall productivity. He added that many of its advantages—such as efficiency gains and time savings in everyday tasks—may not appear in traditional economic data but still enhance well-being.
Mr. Waller also contrasted the U.S. approach to AI with Europe's more precautionary stance, arguing that America's tradition of openness, competition, and experimentation has historically allowed it to lead in past technological revolutions. He said the goal for policymakers is to manage risks such as fraud, bias, and misinformation without constraining innovation. He also described how the Federal Reserve is actively experimenting with AI applications, particularly in payments and data analysis, as part of its broader effort to understand and guide innovation responsibly.