Living Faithfully in an Economic Revolution, Part I: Learning From The Past

Artificial Intelligence (AI) isn’t a hot new fad. It’s been advancing for a while and isn’t going away. It’s not just hype. Firms and investors are competing in a high-stakes winner-take-most AI race,[1] and many will lose, but change is happening and fortunes will be made by some. It’s not the end of the world, but it’s impossible to know what the world will look like in 10 years, much less in 100, and the threats abound alongside the immense opportunities. It’s an economic revolution.

AI may bring amazing new capabilities for harnessing information, enormous productivity gains, and new forms of work, but it may also displace workers from tasks that once provided meaning and income, intensify inequality, concentrate power in large tech firms, and reshape how we interact with each other in an increasingly digital and artificial world. How should we respond to the economic effects of AI as Christians? A good place to start is with some ideas that should sound familiar if you’ve been reading this series on AI: 1) we need to distinguish between what AI can truly deliver and what remains the unique call of humans made in God’s image; 2) we need to trust God and live faithfully as we avoid panic, careless enthusiasm, or willful obliviousness; 3) new tools brought to us with AI can be used for benefit or harm. With these three points in mind, let’s turn to the economics of AI.

There’s a lot we don’t know about what might come next, but economists do have useful models for assessing how AI might impact our production and labor. We can look to how the economy has changed in the past to learn lessons for the future, and that’s the focus of part one of this two-part essay. The forces that have made us richer and healthier than our ancestors operated through creative destruction: new jobs, firms, and industries replacing older, less efficient ones. Growth comes with growing pains. The great question ahead of us is how we can harness the economic opportunities of AI while mitigating its dangers, remembering that all economic activity should be pursued in right relationship with God and others.

The Economic Revolution of the Past

“This process of creative destruction is the essential fact about capitalism.” – Joseph Schumpeter

Economic growth is a fairly recent phenomenon. Technological advances have occurred since long ago, and many of these innovations (the discovery of agriculture or the invention of the printing press) fundamentally shaped life and culture. But while these advances allowed humanity to produce more and better things, the value of output barely or rarely grew faster than the population. Our best estimates[2] suggest that global real income per capita didn’t really grow at all before 1500, grew at around 0.07% per year from then to 1770, and 0.17% from 1770 to 1870. But then something dramatically shifted. From 1870 to now, global real income per capita has been growing at an annual rate of 1.5%. Maybe that sounds modest, but the compounding of exponential growth turns a 1.5% annual growth rate into a stunning increase over time. The economic value generated per person virtually didn’t change for thousands of years, and then over the last 150 years it increased almost tenfold!

It would be hard to overstate the impact of what has become known as the Industrial Revolution. We learned how to organize ourselves, work together, and trade with each other in such a way that we keep coming up with new ideas, turn ideas into new products, and build upon the innovations of the past.[3] Economist Brad DeLong says, "What changed after 1870 was that the most advanced North Atlantic economies had invented invention." The “First Industrial Revolution” started with coal in Britain, took off with the steam engine in the 1700s, and led to much more efficient production of textiles and iron. The “Second Industrial Revolution” is what took off around 1870, marked by electricity, steel, petroleum and the internal combustion engine, and wave after wave of new consumer goods and breakthroughs in medicine. The rise of industrial research labs, large bureaucratic corporations, and expanding networks of trade (eventually globalization) allowed us to discover and invent, to mass produce, to increasingly specialize, and to take advantage of all the efficiencies therein. The world we live in is built on that cascade of technological advancements, and the chain reaction has persisted to the present. We still take economic growth as a given—we keep making more and better stuff over time, and our standard of living keeps increasing.

The Industrial Revolution brought curses with its blessings: extreme working hours and horrible working conditions, the prevalence of child labor, the onset of anthropogenic climate change, and increasing inequality as the owners of capital reaped the lion’s share of the rewards. It led to what became known as “the social question”: how society should deal with labor exploitation, poverty, and class conflict after industrialization. It led to the Gilded Age and the rise of trusts like Rockefeller’s Standard Oil that accumulated massive market power. The backlash was embodied in Marx, Lenin, and all of the (quite destructive) socialist and communist movements of the 20^th century.

And yet, who of us would want to go back and undo industrialization? The world population went from 90% desperately poor to 10% desperately poor.[4] Look at infant mortality rates, life expectancy, percentage of time spent on menial household tasks, or our nearly boundless access to music[5] and information. The Industrial Revolution forced us to address difficult political and institutional questions. Labor unions rose to counter the power of the capitalists, labor laws were developed to improve working conditions, and environmental regulations like the Clean Air Act helped us mitigate things like sulfur dioxide emissions from power plants. Over the twentieth century, the U.S. gradually built a social safety net to protect the poor, elderly, and unemployed. I don’t mean to suggest this all happened quickly or these were all optimal policy responses, but we’ve found ways to embrace the blessings of industrialization while working to mitigate its curses.

Joseph Schumpeter coined the term “creative destruction” in 1942, and two of the winners of the most recent Nobel Prize in Economics (Aghion and Howitt) built a model that helps explain how it works. Firms innovate to create products that customers prefer to existing products, providing them with high profits (at least temporarily), and this continues in a never-ending race that aggregates to economic growth. People fear jobs becoming obsolete with new technologies, and there’s a real pain that comes when jobs are replaced. But this is also precisely how economic growth works and “how the world became rich,” in the words of two economic historians.[6] In 1790, 90% of the US labor force worked on farms. This fell to around 50% by 1870, 26% by 1920, and it’s less than 2% today. Is this a tragedy? No. We figured out how to produce much more food with much fewer people, and redirected labor to new productive pursuits. We replaced skilled artisans with mass production in factories. Something real was lost, but we traded old ways of life for unprecedented abundance in the long run.

From One Economic Revolution to the Next

Maybe it’s strange to talk so much about the Industrial Revolution when people want to know about AI. But the past is much easier to study than the future, and we can spend a long time fruitfully learning from it (research on the Industrial Revolution and how modern economic growth works led to a Nobel Prize just this year). And even if history doesn’t repeat itself, it often rhymes (as the saying goes).

The Industrial Revolution brought machines that could take on much of our physical work much more productively. The AI Revolution brings machines that may take on much of our cognitive work much more productively. The Industrial Revolution made our physical production more efficient, more transactional, more mobile, and less relational. None of us would truly want to undo it all. Yet our bodies are often sedentary and stuffed with junk food. The AI Revolution is likely to make our cognitive production more efficient, more transactional, more mobile, and less relational. I don’t know if we’ll regret it. Maybe our minds will grow sedentary and stuffed with junk food (if they aren’t already). Productivity is a gift, but nothing we produce can replace our need for healthy relationships with God, others, and the earth.

So what can we learn from the Industrial Revolution as we look to the AI Revolution?

First, economic growth is the compounding of innovative ideas and products. We’re always building on the past—the Second Industrial Revolution was built on the First Industrial Revolution, and the Age of AI builds on the Information Age. And though it takes time, these changes make a big difference in the long run.

Second, this growth is a process of creative destruction. Our work changes as new jobs arise, old jobs disappear, and remaining jobs incorporate different tools and tasks. Labor-saving efficiencies allow us to produce more and better things, and it would be foolish to halt this process even if we could.

And third, society must reckon with the growing pains of growth and mitigate the harms that may arise. For Christians, this means embracing economic growth as a response to the cultural mandate, redeeming growth as we direct it towards shalom, and caring for those who may otherwise be left behind or exploited in the process. Economic progress is a gift of common grace: God allows even fallen humanity to develop knowledge, institutions, and technologies that genuinely improve life. Yet because of sin, these developments often bring new forms of injustice and idolatry. So like the saints of the 19^th and 20^th centuries, we work in Christ’s name and wait for Christ’s return amidst an economic revolution.

Footnotes:

[1] Some in finance argue that we’re in an AI “bubble”, where AI-related stock prices are unsustainably high. But Alex Imas says “In winner-take-all innovation markets, parallel investments looks wasteful ex post but is what purchases speed ex ante.” So maybe a lot of the AI stocks will crash, but one or two are likely to skyrocket. He points to this canonical model: Loury, Glenn C. "Market structure and innovation." The Quarterly Journal of Economics 93.3 (1979): 395-410.

[2] I take these numbers from Brad DeLong, an economic historian: https://braddelong.substack.com/p/draft-talk-on-grand-narratives-and. We also use his book in my Economic History of the US course: DeLong, J. B. (2022). Slouching towards Utopia: An economic history of the Twentieth Century. Basic Books.

[3] Recent Nobel laureate Joel Mokyr helped explain the Industrial Revolution by showing how economic growth took off when science and practical applications began to reinforce each other. https://www.nobelprize.org/prizes/economic-sciences/2025/press-release/

[4] https://ourworldindata.org/grapher/world-population-in-extreme-poverty-absolute?stackMode=relative

[5] “If we [in the 1800s] could have devised an arrangement for providing everybody with music in their homes, perfect in quality, unlimited in quantity, suited to every mood, and beginning and ceasing at will, we should have considered the limit of human felicity already attained,” said Edward Bellamy’s narrator-protagonist in the novel Looking Backward, 2000-1887, published in 1888; quoted in DeLong’s Slouching Towards Utopia.

[6] Koyama, Mark, and Jared Rubin. How the world became rich: The historical origins of economic growth. John Wiley & Sons, 2022.