Artificial Intelligence in the Knowledge Economy

Abstract

Artificial Intelligence (AI) can transform the knowledge economy by automating non-codifiable work. To analyze this transformation, we incorporate AI into an economy where humans form hierarchical organizations: Less knowledgeable individuals become "workers" doing routine work, while others become "solvers" handling exceptions. We model AI as a technology that converts computational resources into "AI agents" that operate autonomously (as co-workers and solvers/co-pilots) or non-autonomously (solely as co-pilots). Autonomous AI primarily benefits the most knowledgeable individuals; non-autonomous AI benefits the least knowledgeable. However, output is higher with autonomous AI. These findings reconcile contradictory empirical evidence and reveal tradeoffs when regulating AI autonomy.