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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.
    3. Lorenzo Caliendo & Esteban Rossi-Hansberg, 2012. "The Impact of Trade on Organization and Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1393-1467.
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    Citations

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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. Jovanovic, Boyan & Rousseau, Peter L., 2026. "AI and task efficiency," Journal of Monetary Economics, Elsevier, vol. 157(C).
    3. David Almog & Lucas Lippman & Daniel Martin, 2026. "When an AI Judges Your Work: The Hidden Costs of Algorithmic Assessment," Papers 2603.02076, arXiv.org.
    4. Ide, Enrique & Talamàs, Eduard, 2026. "The impact of AI on global knowledge work," Journal of Monetary Economics, Elsevier, vol. 157(C).
    5. Freund, Lukas & Mann, Lukas, 2026. "Job Transformation, Specialization, and the Labor Market Effects of AI," IZA Discussion Papers 18565, IZA Network @ LISER.
    6. 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, revised May 2026.
    7. Voloshchuk, Aleksey, 2026. "After Labor and Capital The Political Economy of the Transitional Period," SocArXiv 2xkdh_v1, Center for Open Science.
    8. Alex Farach, 2026. "AI as Coordination-Compressing Capital: Task Reallocation, Organizational Redesign, and the Regime Fork," Papers 2602.16078, arXiv.org, revised Mar 2026.
    9. Voloshchuk, Aleksey, 2026. "After Labor and Capital The Political Economy of the Transitional Period," MPRA Paper 128792, University Library of Munich, Germany.
    10. Aaron Chatterji & Daniel Rock & Eduard Talamas, 2025. "Transformative AI and Firms," NBER Chapters, in: The Economics of Transformative AI, National Bureau of Economic Research, Inc.
    11. Eric Gao, 2025. "Artificial or Human Intelligence?," Papers 2509.02879, arXiv.org.

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