On the Shoulders of Others: The Importance of Regulatory Learning in the Age of AI


Paper by Urs Gasser and Viktor Mayer-Schonberger: “…International harmonization of regulation is the right strategy when the appropriate regulatory ends and means are sufficiently clear to reap efficiencies of scale and scope. When this is not the case, a push for efficiency through uniformity is premature and may lead to a suboptimal regulatory lock-in: the establishment of a rule framework that is either inefficient in the use of its means to reach the intended goal, or furthers the wrong goal, or both.


A century ago, economist Joseph Schumpeter suggested that companies have two distinct strategies to achieve success. The first is to employ economies of scale and scope to lower their cost. It’s essentially a push for improved efficiency. The other strategy is to invent a new product (or production process) that may not, at least initially, be hugely efficient, but is nevertheless advantageous because demand for the new product is price inelastic. For Schumpeter this was the essence of innovation. But, as Schumpeter also argued, innovation is not a simple, linear, and predictable process. Often, it happens in fits and starts, and can’t be easily commandeered or engineered.


As innovation is hard to foresee and plan, the best way to facilitate it is to enable a wide variety of different approaches and solutions. Public policies in many countries to foster startups and entrepreneurship stems from this view. Take, for instance, the policy of regulatory sandboxing, i.e. the idea that for a limited time certain sectors should not or only lightly be regulated…(More)”.