The economics of AI

Complements and substitutes


Artificial Intelligence Eyes

Economists are good at taking the fun and wizardry out of technology and leaving us with this dry but illuminating question. The answer reveals why AI is so important relative to many other exciting technologies. AI can be recast as causing a drop in the cost of a first-order input into many activities in business and our lives — prediction.


Three main AI (and prediction) complements that will become more valuable:

  1. Data

  2. Judgement

  3. Action

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