Supply-Side vs Demand-Side AI Regulation

Supply-side regulation addresses genuine risks — the potential for AI systems to perpetuate bias, produce harmful outputs, compromise privacy, concentrate market power — and its development is both necessary and inevitable. But it is also the form of regulation most susceptible to capture, because it directly affects the competitive dynamics of the AI industry. The parties with the largest financial stakes in the outcome of supply-side regulation are also the parties with the greatest resources to invest in shaping the regulatory outcome. Demand-side regulation — investment in citizen capability, educational reform, transition support, information infrastructure — does not directly affect the competitive dynamics of the AI industry, which means it attracts less lobbying and is less susceptible to capture. But it directly affects the capacity of the broader society to benefit from the deployment phase.