AI, Tractors, and the Productivity Paradox

This article explores why AI's impact is not yet reflected in productivity statistics, drawing historical parallels to the computer and automobile revolutions. It introduces the concept of the 'kit stage' in technology adoption, where amateur tinkering and user creativity drive innovation before being formalized by firms. The article argues that AI is currently in such a lag period, with falling transaction costs and rising internal integration costs leading to a bifurcation of firms into large enterprises and small operators.