AI regulation answers the wrong question

Attend almost any AI conference today and the conversation turns to regulation. Governments are drafting AI legislation (Opens in new window) while commentators warn of deepfakes and existential risk. It is easy to conclude that AI's central policy challenge is regulation.

History suggests we should begin with a different question.

What enduring functions is AI transforming?

To illustrate the point, go back to industrialisation and the transformation of Britain’s economy. Governments initially focused on protecting existing economic interests, such as via the Corn Laws (Opens in new window). Only gradually did attention shift towards institutions, including factory inspectorates and public health authorities.

Responding to the revolution of AI will likewise depend on two forms of innovation. The technological innovation creates new possibilities. Institutional innovation determines whether and when those possibilities translate into lasting prosperity.

Concern over the consequence for labour offers another example. With every major technological revolution, the demand for labour has changed. Workers acquire new skills, firms reorganise production and occupations evolve. This is an inherent feature of economic development rather than institutional failure.

The relevant policy question is not whether AI changes jobs, but whether it creates new collective action problems that existing labour market institutions cannot address. If not, the appropriate response is to strengthen education, training and labour market institutions rather than treat AI as a fundamentally new employment problem.