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AI Is Exposing The Limits Of Economics

Tyler Cowen’s latest work, The Marginal Revolution: Rise and Decline, and the Pending AI Revolution, is a surprisingly critical look at one of the foundational ideas of modern economics.

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There is a particular pleasure in watching a scholar dismantle the monument he has spent a career admiring. Tyler Cowen named his blog after the Marginal Revolution; he has spent decades explicating, celebrating, and applying marginalist thinking to every aspect of modern life. In Cowen’s compact and astringent book, The Marginal Revolution: Rise and Decline, and the Pending AI Revolution, he turns to survey the edifice and finds it, if not crumbling, then visibly retreating from the frontier where the real intellectual work gets done. The result is one of the more honest performances in recent economic writing: a love letter that doubles as an elegy, delivered without sentimentality.

The book’s method is itself something of a marginalist exercise. Rather than mounting a frontal assault on large questions about the future of economics, Cowen begins at the margin, with the history of a single idea, the doctrine that value is determined not by the total utility of a good but by the utility of an additional unit of it. Many readers arrive at this book knowing that definition. Cowen’s first service is to show how much that belief has concealed. Marginalism is not one thing but several: There is intuitive marginalism, tautological marginalism, engineering marginalism, and social marginalism. The further one presses into the concept, the more it ramifies. Even the ideas we think we understand resist the grip that holds them.

The historical reconstruction occupying the book’s middle sections is patient and illuminating. Jevons, Walras, and Menger published their founding texts within a few years of each other in the 1870s. Cowen is excellent on the question of why the marginalist insight had to wait so long, and why it........

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