The AI Revolution is Here. So Where's the Economic Boom?

Executive Summary 

• OpenAI steps into defence sector.

• Usage of LLMs poses a risk of reducing the critical thinking.

• Successful brain implant case was recorded in China.

• Discussion: Actual economic impact of AI might be very modest for the near future.

News

 🇺🇸 OpenAI Awarded $200 Million US Defense Contract. Link

• OpenAI has secured a major contract worth up to $200 million to provide the U.S. Department of Defense with advanced artificial intelligence tools.

• The deal, part of the new "OpenAI for Government" initiative, will see the company develop prototype AI capabilities to address "critical national security challenges" in areas like administrative operations and proactive cyber defense.

• This contract marks a significant step for OpenAI into the defense sector, highlighting the growing integration of frontier AI into national security missions, though the company states all use must adhere to its policy against developing weapons.

 🧠 AI Use Reduces Brain Activity and Learning, MIT Study. Link

• A new MIT study suggests that using AI chatbots like ChatGPT for writing tasks significantly reduces brain activity and may impair learning and memory retention.

• Researchers used EEG headsets to monitor students writing essays and found that the AI-assisted group showed up to 55% less neural connectivity and cognitive engagement than those who worked unaided, and later struggled to recall what they had written.

• While the findings are preliminary and await peer review, they raise urgent questions about the cognitive cost of relying on AI, suggesting it may lead to "shallow storage" of information and reduce the development of critical thinking.

 🇨🇳 China Joins The Brain Implant Race. Link

• China has successfully conducted its first-in-human clinical trial of an invasive brain-computer interface (BCI), becoming the second country after the US to reach this advanced stage.

• In the trial, a patient who received a wireless brain implant in March 2025 was able to control a computer to play chess and racing games using only their mind a few weeks after the surgery.

• The milestone, a collaboration between the Chinese Academy of Sciences and Huashan Hospital, accelerates the global race to commercialise BCI technology, with plans for larger trials in China aimed at helping patients with spinal cord injuries and other conditions.

Discussion

The AI Revolution is Here. So Where's the Economic Boom?

While artificial intelligence dominates headlines with promises of unprecedented productivity gains, evidence suggests that AI's economic impact may be more modest than media articles would have us believe.

Contemporary AI research presents solid productivity gains at the individual level. Studies show that generative AI can boost worker performance anywhere from 14% to 55%. However, these impressive micro-level gains haven't translated into broad economic transformation yet.

There are several reasons to that.

First is the overall low adoption of AI tools. The U.S. Census Bureau found that only 9.2% of businesses adopted AI to produce goods and services, representing a 6% growth over a 2-year period.

Besides, due to the nature of the overall corporate work environment, actual productivity change is very difficult to capture. A comprehensive research from Denmark tracking 25,000 workers across AI-exposed occupations found that despite widespread adoption and firm investments, AI chatbots have had "minimal impact on adopters' economic outcomes," with earnings and hours effects estimated as "precise zeros".

On average, users of AI at work experienced a time savings of 3%, which roughly represents a savings of 1 hour in a 40-hour work week.

In addition, here comes the economic viability of AI technology. MIT researchers found that while AI could perform many visual inspection tasks, it was only profitable to automate only 23% of them at current costs. For a small business, the expense of implementing an AI system often significantly outpaces the labor savings.

On a macroeconomic level, AI requires substantial complementary investments, including business process redesign, co-invention of new products, and human capital development to actually be useful. That creates what researchers call a "Productivity J-Curve".

Even electricity, often cited as history's most transformative technology, required 30 years after becoming practical before half of US manufacturers had electrified their operations.

As of now, there is no sign of a strong macroeconomic gains of AI, and future predictions vary significantly, from optimistic McKinsey projections of $4.4 trillion in productivity gains to conservative academic estimates of 0.53% total factor productivity growth over ten years.

The AI revolution might indeed be impactful and transformative for the economy, but it’s not the overnight event we were led to believe. The dramatic economic shift is not yet here, and the data suggests we may be waiting for a long time.

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