Artificially created scarcity: How AI turns abundance into shortage

Milton Ayoki

MPRA Paper from University Library of Munich, Germany

Abstract: The diffusion of general-purpose artificial intelligence (AI) systems is collapsing the marginal cost of cognition, coordination, and capital formation. This abundance of intelligence is simultaneously re-pricing the three residual scarcities that still constrain human welfare: atmospheric carbon space, human labor hours, and irreversible time. Using a unified production–climate–welfare model, we show that (i) AI accelerates decarbonization by driving the cost curve of clean technologies below that of fossil fuels; (ii) labor markets bifurcate into a vanishing low-skill wage sector and an expanding high-skill rent sector, generating a transfer problem that can only be solved by AI dividends; and (iii) the option value of future consumption rises as AI compresses the calendar time needed to unlock large-scale decarbonization, longevity, and existential-risk mitigation. The conjunction of these effects drives the Ramsey rule for optimal climate policy to its mathematical limit: the social discount rate (SDR) must converge to zero. We provide empirical calibration using the latest IPCC scenarios, large-language-model energy-intensity data, and labor-share forecasts through 2100. A zero SDR reconciles inter-generational equity with intra-generational efficiency and unlocks a portfolio of “long-horizon public goods” (LHPGs)—from atmospheric restoration to asteroid defense—that markets at positive discount rates chronically under-supply.

Keywords: Artificial intelligence, abundance; scarcity; social discount rate; zero discounting; inter-generational equity; labor-market bifurcation; AI dividend; long-horizon public goods; existential risk, decarbonization; marginal cost of cognition; Ramsey rule; option value of time. (search for similar items in EconPapers)
JEL-codes: D63 E24 H23 O33 Q54 Q55 (search for similar items in EconPapers)
Date: 2025-09-03
New Economics Papers: this item is included in nep-ain, nep-ene and nep-env
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