What does the German steam engine teach us about AI's future?

The steam engine is still shaping Germany's economy long after its invention with a new study saying areas that adopted the technology early still carry advantages, suggesting that early adoption of AI could bring similar benefits.

Regions where steam engines were particularly widespread at the end of the 19th century still have average wages that are 4.3% higher than elsewhere, according to research by the ROCKWOOL Foundation Berlin (RFBerlin), which was shared with Reuters ahead of its publication on Wednesday.

Around 150 years on, those areas also have a larger share of workers with technical training and university degrees, the study found, and are home to more productive firms and higher numbers of patent filings.

"The steam engine didn't just power factories; it also changed technology and the development of skills across entire regions over generations," said Christian Dustmann, director of RFBerlin and a professor at University College London.

Early AI adoption can have long-term positive effects

Dustmann said the findings could hold lessons for policymakers today as economies grapple with the rise of artificial intelligence.

Sascha Becker, the project lead at RFBerlin, said the steam engine helped trigger a self-reinforcing cycle in which technological change spurred skills acquisition, supporting further innovation and growth in turn.

"These historical lessons suggest - although it is still very early - that rapid adoption of AI could once again help determine which regions and countries will benefit in the long term from the advantages of change," he added.

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