Social Cost of Cognitive Displacement

When a factory produces steel, it also produces smoke. The smoke is a cost the factory does not pay—it is borne by the fishermen downstream, the families with asthmatic children, the municipalities whose infrastructure corrodes. Because the factory does not pay for the smoke, it produces more steel than is socially optimal. Arthur Cecil Pigou named this mechanism in 1920. William Nordhaus spent forty years turning Pigou's insight into the most consequential number in environmental economics: the social cost of carbon, a dollar figure per ton of CO⊂2; that makes the invisible cost of climate change visible and priceable. The social cost of cognitive displacement is the equivalent number for AI: the total damage that one AI-displaced cognitive task imposes on the parties who are not part of the market transaction—the displaced worker whose human capital has been stranded, the educational system whose investment has been partially