The Economic Institutions of Artificial Intelligence

17 Pages Posted: 25 May 2023 Last revised: 15 Jun 2023

Date Written: June 14, 2023


This paper explores the role of artificial intelligence (AI) within economic institutions, focusing on bounded rationality as understood by Herbert Simon. Artificial Intelligence can do many things in the economy, such as increasing productivity, enhancing innovation, creating new sectors and jobs, and improving living standards. One of the ways that AI can disrupt the economy is by reducing the problem of bounded rationality. AI can help overcome this problem by processing large amounts of data, finding patterns and insights, and making predictions and recommendations. This insight raises the question: can AI overcome planning problems – could it be that central planning is now a viable option? This paper argues that AI does not make central planning viable, simply because AI cannot resolve the information problem as described by Ludwig von Mises and Friedrich Hayek.

Keywords: Artificial Intelligence, Bounded Rationality, Information Problem

JEL Classification: D23, D80, P11

Suggested Citation

Davidson, Sinclair, The Economic Institutions of Artificial Intelligence (June 14, 2023). Available at SSRN: or

Sinclair Davidson (Contact Author)

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics