Prediction Machines: The Simple Economics of Artificial Intelligence

by Ajay Agrawal

Economics provides a well-established foundation for understanding uncertainty and what it means for decision making. As better prediction reduces uncertainty, we use economics to tell you what AI means for the decisions you make in the course of your business. This, in turn, provides insight into which AI tools are likely to deliver the highest return on investment for the work flows inside your business. This then leads to a framework for designing business strategies, such as how you might rethink the scale and scope of your business to exploit the new economic realities predicated on cheap prediction. Finally, we lay out the major trade-offs associated with AI on jobs, on the concentration of corporate power, on privacy, and on geopolitics.