IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/126550.html

Artificially created scarcity: How AI turns abundance into shortage

Author

Listed:
  • Ayoki, Milton

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.

Suggested Citation

  • Ayoki, Milton, 2025. "Artificially created scarcity: How AI turns abundance into shortage," MPRA Paper 126550, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126550
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/126550/1/MPRA_paper_126550.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, January.
    2. Gollier, Christian, 2018. "The cost-efficiency carbon pricing puzzle," TSE Working Papers 18-952, Toulouse School of Economics (TSE), revised May 2024.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Daron Acemoglu & Pascual Restrepo, 2022. "Tasks, Automation, and the Rise in U.S. Wage Inequality," Econometrica, Econometric Society, vol. 90(5), pages 1973-2016, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olijslagers, Stan & van der Ploeg, Frederick & van Wijnbergen, Sweder, 2023. "On current and future carbon prices in a risky world," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    2. Klaus Mittenzwei & David S. Bullock & Klaus Salhofer, 2012. "Towards a theory of policy timing," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(4), pages 583-596, October.
    3. Frederick Ploeg, 2021. "Carbon pricing under uncertainty," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1122-1142, October.
    4. Guest, Ross, 2010. "The economics of sustainability in the context of climate change: An overview," Journal of World Business, Elsevier, vol. 45(4), pages 326-335, October.
    5. Dobes Leo & Jotzo Frank & Stern David I., 2014. "The Economics of Global Climate Change: A Historical Literature Review," Review of Economics, De Gruyter, vol. 65(3), pages 281-320, December.
    6. Adrien Bilal & James H. Stock, 2025. "A Guide to Macroeconomics and Climate Change," NBER Working Papers 33567, National Bureau of Economic Research, Inc.
    7. Stefanie Engel & Charles Palmer & Luca Taschini & Simon Urech, 2015. "Conservation Payments under Uncertainty," Land Economics, University of Wisconsin Press, vol. 91(1), pages 36-56.
    8. Grimes, Arthur, 2010. "The Economics of Infrastructure Investment: Beyond Simple Cost Benefit Analysis," Motu Working Papers 292610, Motu Economic and Public Policy Research.
    9. David Martimort & Stéphane Straub, 2016. "How To Design Infrastructure Contracts In A Warming World: A Critical Appraisal Of Public–Private Partnerships," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 61-88, February.
    10. Eckhause, Jeremy & Herold, Johannes, 2014. "Using real options to determine optimal funding strategies for CO2 capture, transport and storage projects in the European Union," Energy Policy, Elsevier, vol. 66(C), pages 115-134.
    11. Chen, Yu-Fu & Funke, Michael, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," SIRE Discussion Papers 2010-48, Scottish Institute for Research in Economics (SIRE).
    12. Elmar Lukas & Andreas Welling, 2012. "vestment Timing and Eco(nomic)-Efficiency of Climate-Friendly Investments in Supply Chains," FEMM Working Papers 120026, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    13. Dittrich, Ruth & Wreford, Anita & Moran, Dominic, 2016. "A survey of decision-making approaches for climate change adaptation: Are robust methods the way forward?," Ecological Economics, Elsevier, vol. 122(C), pages 79-89.
    14. Simon Dietz & Alec Morton, 2009. "Strategic appraisal of environmental risks: a contrast between the UK�s Stern Review on the Economics of Climate Change and its Committee on Radioactive Waste Management," GRI Working Papers 5, Grantham Research Institute on Climate Change and the Environment.
    15. Eisenack, Klaus & Paschen, Marius, 2022. "Adapting long-lived investments under climate change uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    16. Charles Sims & David Finnoff, 2016. "Opposing Irreversibilities and Tipping Point Uncertainty," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 985-1022.
    17. Keloharju, Matti & Keluharju, Roope, 2025. "Accounting Research in the Age of AI," Working Paper Series 1528, Research Institute of Industrial Economics, revised 29 Jul 2025.
    18. Moritz A. Drupp & Frikk Nesje & Robert C. Schmidt & Robert Christian Schmidt, 2022. "Pricing Carbon," CESifo Working Paper Series 9608, CESifo.
    19. Richard A. Bradley, 2012. "Energy and Climate Change Policy: Perspectives from the International Energy Agency," Chapters, in: Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), Responding to Climate Change, chapter 4, Edward Elgar Publishing.
    20. Anda, Jon & Golub, Alexander & Strukova, Elena, 2009. "Economics of climate change under uncertainty: Benefits of flexibility," Energy Policy, Elsevier, vol. 37(4), pages 1345-1355, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:126550. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.