Everyone’s terribly excited about the Prime Minister’s conversion to the joys of Artificial Intelligence. As long as everyone remembers how technology actually works then so are we. But that support does depend upon everyone remembering.

The value of a new technology comes not from producing it. Yes, obviously, being the best producer of it will come with some value add, some profits and all that. But that’s not the point, not at all. Rather, the real value addition is in being able to use it.

Another version of the same lesson is that it’s not invention which is important. It’s innovation.

The plan, the man and so on. Billy Hague is already getting things at least partially wrong, marvelling at how much is to be spent - concentrating on the cost, not the benefit.

The one single paper necessary to understand all of this is Schumpeterian Profits in the American Economy by William Nordhaus. Yes, the deployment of a new technology produces value add. That’s good - GDP is value add so new techs lead to economic growth. But it is consumers who end up with 97% of the value. The inventors, the entrepreneurs, end up with only 3% or so.

The value is not in owning the companies that do this. It is in what benefits consumers gain by being able to use it. It is not in producing the new tech, it is in consuming it.

The thing we must avoid, therefore, is Mazzonomics. That idea that government must have a stake, that government should profit from whatever support it gives. Even that such a stake, profit, should come at some risk to the deployment of the new whatever it is. This is wholly wrong - the benefit so overwhelmingly comes to us out here that shouting about who gets 10 or 20% of the 3% the capitalists keep is simply an irrelevance.

We can make that Mazzonomics point another way too. We institute government in order to gain public goods. If government then produces a public good - an environment amenable to the creation and deployment of AI, say - then why does government get a second bite at the cherry for merely doing what government is instituted to do in the first place?

The point of AI - as with any other technology, canals, the wheel, computers, whatever - is to be able to use it. As long as we all remember that then sure, if government clears out of the way some of the things government currently does to prevent AI from being used then great. Any more than that though, that would be to go thoroughly Mazzo.

Tim Worstall