The Economic Problem (Wasting Time on AI, 4 of 6)

Tom Barraclough
Oct 2
9 min read

This piece is part of a series where I outline four problems with the way we’re approaching AI regulation and the concept of Sovereign AI. In this piece, I touch on the economic factors driving inefficiencies in policy discussions, which also drive, and are driven by, the first two problems: the Information Problem and the Coordination Problem.

Introduction

In this piece, it might get awkward. I’m going to touch on some of the economic and financial drivers that, from my personal experience, and in my opinion, amplify the problems related to information and coordination covered in previous posts.

What follows is intended as a generalised, descriptive, empathetic and explanatory exercise, without any value judgement.

Effective regulation of AI and our broader national direction on AI policy requires a well-informed multi-sector approach. This is undermined by the Information Problem and the Coordination Problem. In my view, there is another problem contributing to those problems, which relates primarily to financial considerations, or what I refer to loosely as an “economic” problem.

The Economic Problem is that everyone needs to generate money to pay their bills and take care of their families and communities. In itself, that is not a problem, but it becomes a problem where different groups derive different economic benefits from their participation in AI policy discussions, because it impacts the pace of their work, the things they prioritise, and their ability to participate effectively in the discussion.

A chicken and egg problem

Addressing this economic problem requires raising money and having the institutional arrangements to inspire confidence among the people and organisations contributing those resources. But answering the necessary questions from those people or organisations requires information, coordination, and resourcing, creating a chicken and egg problem.

The economic context for different sectors

Here is my blunt assessment of the economic realities facing different sector groups and how this influences their participation.

Government and public sector

Government as a broader institution is funded to do valuable but uneconomic things that may not produce an immediate financial return. It funds these things through compulsory taxation on other participants. This has two implications for pacing and coordination.

Most people participating from government generally receive a salary – a dependable paycheck every week, independent of the time it takes to perform the work. They're also responsible for addressing important processes and requirements that other participants can't see, don't understand, and do not have to face. This takes time and energy. It also frequently means just having to wait while someone else reviews your work or decisions.
Aside from financial considerations, public media exposure and external critical comment are often the other strongest drivers of behaviour because of the incentives held by Ministers and elected politicians (described below).

This means that Government's incentives are generally to move slowly, unless some other non-financial factor is imposed to accelerate activity.

People working within the government find this frustrating too. I have yet to meet anyone in government who deliberately wants to move slowly just for the sake of it. There are some other important points to note.

The money that funds government activity is not endless. People in government are also accountable for how they spend it.
It would also be a mistake to ignore the recent and historic rounds of redundancies facing otherwise fantastic public servants.
People are also committed to their work as a matter of professional pride and public service, and this is a very real thing.

Given all this hedging, why raise this point? It’s relevant because the financial pressures government participants face are fundamentally different from those faced by the other groups. This has a corresponding impact on the information sharing and coordination problems.

Government participants have the resources to create and publish information for regulatory purposes, but may be reluctant to share it.
The financial situation of government participants influence the pressure (or lack of pressure) to coordinate with other parties, as well as the pace of their information production and coordination efforts.

Industry

Businesses fall on a spectrum. On one end of the spectrum are exceptionally well-funded businesses. These businesses often earn money from:

the technology being regulated (AI); and/or
advising those companies (or the agencies who regulate them) on how to comply with regulation (AI assurance and regulation).

On the other end of the spectrum are businesses who are barely surviving. Some of them want to become companies that work with and sell the technology, or want to establish a market position in advising those businesses (or the associated government agencies).

For all businesses, wherever they fall on the spectrum, they need to consider how the time and money they're applying can be justified from a financial perspective. The bigger the business, the more money can be allocated to this task, either in the name of business development or market competition.

Even for exceptionally well-funded businesses, the money (and staff time with it) doesn't come from nowhere. Revenue has to cover expenses. This sounds abstract to people who haven't faced this situation, but it's a very real issue for anyone who's borne the responsibility of paying staff and themselves each week.

Again, the point here is to note that the financial realities facing businesses are different from those facing other participants, which drives the problems above. Large and well-funded industry participants operate more like governments. Small, poorly funded industry participants have the incentive to work rapidly and establish a market position, whether through selective coordination, public activity, or competition.

Communities and real people

Communities are often the most affected by AI, but are completely under-resourced. Communities show up to policy and regulatory discussions facing the kinds of questions I raised under the Information Problem. They have none of the time, information or support required to meaningfully address them. The onus of justifying change is often put on them.

Everybody else in the policy discussion is speaking a completely different arcane language. Discussion seems to revolve exclusively around barriers to action, writing new documents, reading existing documents, or proposing non-specific things that can never realistically be implemented. Many of the real barriers to action are never actually spoken out loud – for example, “I’m not going to do that because it wouldn’t fly with the Minister”, or “Could you imagine how this is going to look on the front page?”, or “That doesn’t fit with our market strategy.”

Communities find all of the above incredibly frustrating. They are not monolithic, and can sometimes have better knowledge and skills than paid participants from other sectors. But their contributions are seldom compensated, even though the skills and experience they bring are often essential.

There is another growing group of people in New Zealand with a powerful interest in AI policy, significant personal resources and deep domain expertise. I suggest these people (or groups) could play a significant role in addressing the Economic, Information and Coordination problems.

Academia and researchers

The economics of academia are perhaps the most difficult of all. Anyone who's had to chase research funding or juggle teaching, research and service knows what I'm talking about. The academics are expected to have done the reading, or even to have written most of it, but they face most if not all of the same barriers as everyone else outlined above in terms of information and coordination.

Multi-stakeholder bodies or professional associations

Organisations like professional associations or industry membership bodies represent multiple entities, or multiple types of entities. They play an essential and positive role in all of the above. They’re also deeply acquainted with the Information and Coordination problems and bring vital experience navigating those issues.

Economically speaking, these organisations are constantly being asked to justify why they should be funded, while also navigating the explicit or implicit objectives, preferences and incentives of their members. Many of the people who are the real engine-room of these organisations can be treated as falling into one of the categories above in terms of their immediate economic situation.

These groups and associations are thought to bring the resources of well-funded companies or governments, but frequently face conditions similar to the other participants. They face conflicting pressures to create, disclose and withhold information, and to initiate, avoid, or maintain coordination depending on the circumstances at hand.

Elected politicians

Ministers and elected politicians play a significant role in determining the economics and overall direction of all of the above. They’re oriented towards doing things and solving problems, but not at all costs. More than perhaps any other participant, elected politicians face the responsibility of taking a birds-eye view, where there are a number of equally important and urgent priorities which must be weighed against each other.

Key motivating factors that influence the Information and Coordination problems include media risk, political relationships, and election cycles (which draw in things related to numbers of votes, and political fund-raising). These can hamper information production and drive behaviours that undermine coordination. They can also be powerful contributors to completely resolving the Information and Coordination problems.

The public interest also drives Ministers and elected politicians, as well as their genuine commitment to serve their communities, empower industry, and support the public service to produce their best work. All I’m saying is that the financial reality facing Ministers and elected politicians is often out of step with other participants and this has an impact.

Why raise this issue?

The reason I’ve painted this picture is because the economic considerations driving participation in public policy discussions about AI are very influential. The economic factors drive a mismatch in pace and priorities between different stakeholder groups, which have a compounding impact on problems of information-sharing and coordination. They also have a downstream impact on the policy orientation we advocate for and operate around – more on that in the next post.

“Okay, well who should solve this problem?”

There are two complementary ways to solve this problem, which I see as two sides of the same coin. The first way is money, but a necessary foundation for that money is to have institutional arrangements that justify the trust and confidence of the people or organisations contributing that money.

Money

To be blunt, someone or some institution with money who wants to see effective activity on AI regulation should solve this problem. Another option is for multiple people or entities to set aside a contribution to a coordinated effort to solve the Economic Problem, the Information Problem, the Coordination Problem – and by extension, the Policy Problem.

In light of the comments I’ve made about the different sectors above, here are the key factors that complicate the task of simply giving up money to address these problems.

Government is expected to have internal competency that does not require external procurement. Government agencies are accountable for public funds, but often find selecting and designing initiatives to be performed beyond the public service to be a difficult exercise. Government faces significant procurement impediments to the rapid deployment of public funds.
Industry cannot spend money unless it drives a return of some kind, or serves a broader public interest objective which is in some way related to its commercial activity.
Communities and real people do not have the resources to contribute, but can contribute time. Some members of the community and real people do have significant economic resources, and could contribute those resources toward effective AI policy in the right circumstances without being accountable to anyone else.
Academia and researchers can secure research funding, but the fundraising cycle is slow, significant volume is taken up by administrative overheads. Funding is generally secured for named research personnel to perform specific research tasks.
Multi-stakeholder bodies can recruit economic resources from members or other sources, and distribute them with flexibility unavailable to other groups. Often they are not empowered to distribute those resources beyond their own control, and resource distributions have to serve the members or contributers to the relevant body.
Elected politicians can enable the provision of funds, or seek to raise funds independently of government, but they cannot realistically distribute those funds themselves. Their role as elected politicians also risks politicising the way the work is perceived, undermining trust and perhaps worsening the Coordination Problem.

Institutional design

Anyone being asked to contribute economic resources will ask the following questions, to themselves, or to the applicant – and not without justification. However, the task of answering them takes time, and they are difficult to answer because of the Information, Coordination and Economic problems. The questions are:

What are you going to do specifically?
Why would that help?
Are you sure that would help?
Wouldn’t an alternative set of actions help more instead?
Who’s going to pay for it?
Why should it be me?
Why not those other people?
Why hasn’t someone else already paid for this?
Do you really need all this money or just some of it?
What’s in it for me? How does it serve my objectives, or the objectives of people I'm accountable to?
What are the downsides or risks of me supporting this?
How far am I likely to be associated with or affected by what you eventually do?
Why you/these applicants?
Isn’t someone else already doing this?
Who’s accountable if you don’t deliver?

Again, these questions are justified, and should be accounted for in the institutional design necessary to build confidence in the deployment of economic resources. But people trying to answer them face a kind of chicken and egg problem, and may answer them all without ever receiving any funding. In those circumstances, it's frankly irrational to even start.

Conclusion on the economic problem

Most people reading this will self-identify as an exception to the generalisations about each sector group I’ve made above. For what it’s worth, they’re probably correct. By necessity, I’ve painted a broad-brush generalisation of the different sectors and groups which some may find offensive.

It's important to emphasise again that there's nothing inherently wrong with being driven by economic considerations or participating in public policy out of some level of self-interest. Being driven by those factors does not mean you are not also driven by factors like the public interest or a sense of community service. However, those things cannot pay for food and electricity. By being blunt about the economic dimension of this problem, I’m hoping to bring it out into the open as something that could be meaningfully addressed – through economic support, through institutional design, or through networks and relationships.

Without solving this problem, it’s difficult to imagine any progress on the other problems, which unfortunately means we are wasting time.