Nobel Prize-winning economist Philippe Aghion discusses how Europe can address its AI development gap compared to the US through better research funding, venture capital, and specialized applications.

Nobel laureate Philippe Aghion, an expert in economic growth and creative destruction, warns that Europe risks falling behind in the AI revolution as it did during the IT era. While the US and China currently lead in large language model development, Aghion suggests Europe should leverage its strengths in health data and regulation to remain competitive. He emphasizes the need for structural changes to improve research environments and startup financing.

Bridging the AI Investment Gap

Europe faces significant hurdles in scaling AI startups and attracting venture capital compared to the US. Experts suggest that harmonizing bankruptcy laws across EU member states and mobilizing household savings—estimated at €12 trillion—could improve the investment climate. The European Commission is currently pursuing the Savings and Investment Union to better integrate capital markets, though past efforts have faced resistance from countries reluctant to relinquish control over financial markets.

Strategic Focus and Institutional Reform

Aghion advocates for Europe to focus on specialized AI applications, particularly in the health sector, where the continent possesses high-quality data. To foster innovation, he proposes the creation of a European equivalent to the US Defense Advanced Research Projects Agency (DARPA), potentially starting with a joint initiative between France and Germany. Additionally, he stresses that governments must prioritize education and retraining to mitigate the social risks associated with job displacement caused by AI.