The Economics of Artificial Intelligence

A Conversation with Ajay Agrawal

As artificial intelligence drives the cost of prediction toward zero, Ajay Agrawal emphasizes the growing importance of human judgment. In a conversation with Jim Euchner, he explains that while machines excel at prediction, only people can weigh values, preferences, and trade-offs. The article highlights the difference between point solutions, where AI replaces existing tools, and system-level solutions, where AI enables a full redesign of industries and business models, as seen with Uber. Agrawal argues that the true barrier is not the technology itself but change management and incentive alignment. Looking ahead, he suggests that cheap, genius-level AI will reshape economies much like electrification did, requiring a wholesale rethinking of work design, governance, and business strategy.