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Artificial Intelligence in the Knowledge Economy

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  • Enrique Ide
  • Eduard Talamas

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.

Suggested Citation

  • Enrique Ide & Eduard Talamas, 2023. "Artificial Intelligence in the Knowledge Economy," Papers 2312.05481, arXiv.org, revised May 2025.
    • Handle: RePEc:arx:papers:2312.05481
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    References listed on IDEAS

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    1. Ajay Agrawal & Joshua Gans & Avi Goldfarb, 2019. "The Economics of Artificial Intelligence: An Agenda," NBER Books, National Bureau of Economic Research, Inc, number agra-1, January.
    2. Daron Acemoglu & Jonas Loebbing, 2022. "Automation and Polarization," NBER Working Papers 30528, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Fasheng Xu & Xiaoyu Wang & Wei Chen & Karen Xie, 2025. "The Economics of AI Foundation Models: Openness, Competition, and Governance," Papers 2510.15200, arXiv.org.
    2. Sharique Hasan & Alexander Oettl & Sampsa Samila, 2025. "From Model Design to Organizational Design: Complexity Redistribution and Trade-Offs in Generative AI," Papers 2506.22440, arXiv.org.
    3. Aaron Chatterji & Daniel Rock & Eduard Talamàs, 2025. "Transformative AI and Firms," NBER Chapters, in: The Economics of Transformative AI, National Bureau of Economic Research, Inc.
    4. Eric Gao, 2025. "Artificial or Human Intelligence?," Papers 2509.02879, arXiv.org.

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