Digital Economics and Artificial Intelligence - NBER Summer Institute

Digital Economics and Artificial Intelligence - NBER Summer Institute

Introduction

The intersection of digital economics and artificial intelligence (AI) is increasingly becoming a major focus of research and discussion. The NBER Summer Institute explored numerous aspects of this intersection, from decision-making with AI to the economic limits of cryptocurrencies and blockchains. This article highlights key presentations, discussions, and insights from the event.

Session Highlights

Decision-Making with Machine Prediction

Adam Harris's presentation on decision-making with machine prediction focused on predictive maintenance in trucking, examining how AI tools assist human decision-makers. Key findings include:

• Economic Value Added by AI: The predictive AI tool reduced maintenance expenditures by $ 240-$ 480 per truck annually.
• Cost Savings: These savings represent 85% of potential improvements in decision-making quality.
• Human-Machine Interaction: AI-assisted technicians showed improved decision-making by avoiding unnecessary repairs.

Social Media and Consumer Welfare

Rafael's presentation on social media platforms like TikTok and Instagram examined consumer welfare in the presence of negative externalities to non-users. Key findings include:

• Individual Consumer Surplus: Social media users revealed substantial surplus, around $ 50-$ 55 monthly.
• Network Effects: Large positive network effects were observed, indicating the value users place on the size of the network.
• Product Market Trap: Many users would prefer a world without these platforms, suggesting negative welfare impacts when consumption externalities are considered.

Economic Limits of Cryptocurrencies and Blockchains

Eric Budish's discussion on the economic limits of cryptocurrencies delved into the challenges of Nakamoto trust and permissionless consensus. Key insights include:

• High Cost of Trust: The trust produced by permissionless consensus is costly, scaling linearly with the stakes involved.
• Security Issues: Majority attacks present significant vulnerabilities, questioning the economic stability of these systems.
• Specialized Capital and Collapse: The effectiveness of blockchain security also depends on specialized capital and the potential collapse of cryptocurrency values.

Keywords

• Predictive Maintenance
• AI-assisted Decision Making
• Social Media Welfare
• Network Effects
• Cryptocurrencies
• Nakamoto Trust
• Permissionless Consensus
• Economic Limits
• Blockchain Security
• Cost of Trust

FAQ

Q: What is the main contribution of Adam Harris's presentation? A: Adam Harris discussed how AI tools assist human decision-makers in the trucking industry, highlighting AI's economic value and the improved decision-making quality by avoiding unnecessary repairs.

Q: What did Rafael's study find about social media user welfare? A: Rafael's study found that while individuals revealed substantial consumer surplus from platforms like TikTok and Instagram, many users preferred a world without these platforms, indicating negative welfare impacts due to negative consumption externalities.

Q: What are the economic limits of cryptocurrencies according to Eric Budish? A: Eric Budish argued that cryptocurrencies based on Nakamoto trust face high trust costs that scale linearly with associated stakes. These increases make maintaining economic stability challenging, especially against majority attacks.

Q: What role do specialized capital and collapse play in blockchain security? A: Specialized capital and potential collapse play crucial roles in maintaining blockchain security. The threat of a cryptocurrency's value collapse helps prevent majority attacks, although this is not part of the protocol itself.

Q: How do social media network effects impact consumer welfare? A: Large positive network effects suggest that users place significant value on the size of the network, although the presence of negative externalities can lead to scenarios where users experience negative welfare impacts despite their revealed consumer surplus.