Mechanism Design on AI Regulation? | AI Regulation Series
WSJ Opinion: The Economics of Regulating AI by Roland Fryer, March 20: (One of) the key challenges of AI regulation is asymmetric information. Regulators can’t observe firms’ true risk profiles or day-to-day behavior. Current AI rules (IL’s disclosure mandate, NY’s RAISE Act, EU AI Act) collapse into uniform compliance burdens that generate paperwork but zero information revelation. Worse, they create perverse, distorted incentives — as Fryer notes after IL’s ban on discriminatory AI used in hiring, firms are scrapping hiring algorithms that outperformed human judgment on meritocratic outcomes because the legal exposure under vague, overbroad statutes isn’t worth it. The regulation meant to reduce discrimination is increasing it. ...