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AI and Industrial Organization (Varian 2018)
Varian's 2018 NBER paper applying information-economics frameworks to artificial intelligence — the foundational analytical document for understanding AI as a general-purpose technology whose industrial structure tends toward concentration.
In 2018, Hal Varian published Artificial Intelligence, Economics, and Industrial Organization, a paper that applied his career's analytical frameworks to the emerging AI industry. The paper's central claim was that AI should be understood as a general-purpose technology — one whose economic impact extends far beyond the sector that produces it — and that general-purpose technologies exhibit characteristic industrial structures: concentration on the production side, distribution on the consumption side, and specific pricing dynamics that follow from cost asymmetries. The paper was measured in tone and specific in its predictions. Some have aged remarkably well; others, as Sebastian Galiani observed in his 2026 retrospective, were "somewhat more relaxed about switching and lock-in than today's environment might suggest."
In The You On AI Field Guide
The paper was written at a moment when AI was still largely a research curiosity rather than a commercial force. GPT-3 would not arrive for two years. ChatGPT was four years away. Varian's decision