The Economics of AI vs AI and the Economy

The paper is organised around two poles and structured on two main sections (2 and 3), while the remaining sections are devoted to a brief introduction, some remarks on policy implications, and conclusions. The first section concerns how basic economics may be a useful guide to understanding how AI works and what are the most important principles, mechanisms and “rules” that might be useful in comprehending such a rapidly changing phenomenon. I am convinced that AI is transforming at such a rapid rate, that any detailed description is doomed to obsolescence in a very short period. For this reason, I believe that framing AI in basic economic principles can uncover certain regularities and reveal some long-term trends, thus contributing to a more fruitful understanding of this phenomenon. The second section deals with the effect of the AI revolution on economic systems and, specifically, four main topics: productivity, the labour market, income distribution, and industrial concentration. These, in my opinion, are the most crucial aspects of the structure and dynamics of any economic system, and should be monitored to provide clues to the effect of the diffusion of any radical technological innovation such as AI.