AI Boom: Analysing the Austrian School's Economic Ideas

Abstract

The swift growth of artificial intelligence technologies has instigated significant structural transformations in global markets, leading to a resurgence of interest in theoretical frameworks that elucidate entrepreneurial discovery, capital reallocation, and innovation cycles. This article examines the current AI boom using the economic theories of the Austrian School, referencing the contributions of Mises, Hayek, Kirzner, and Schumpeter. It contends that the AI surge exhibits decentralised knowledge processes, wherein entrepreneurial entities assess fragmented information and vie to predict unpredictable future wants. The research examines the emergence of malinvestment hazards due to misleading pricing signals in exuberant investment environments, alongside the capacity of spontaneous market adjustments to reallocate resources towards sustainable applications. By using Austrian ideas like subjective value, capital heterogeneity, and entrepreneurial awareness, the research gives us a way to think about both the creative energy and possible weaknesses of the AI revolution that is happening right now. The research finds that an Austrian viewpoint provides significant understanding of the catalysts, trends, and enduring consequences of AI-fuelled economic change.