An Economic Argument for Federal Preemption of State AI Laws

The rapid emergence of artificial intelligence technologies has prompted a familiar regulatory response: in the absence of a cohesive federal framework, states are rushing in to fill the void with a patchwork of local initiatives. But while some may argue that this patchwork is a noble fulfilment of federalism, the economics nonetheless argue for these state laws to be preempted and replaced with a single federal framework. We first looked at this problem back in 2008 when we published a paper entitled Developing a National Wireless Regulatory Framework: A Law and Economics Approach. In this paper, we demonstrated that extra-jurisdictional effects can render state regulation welfare-reducing even when individual jurisdictions act as efficient regulators within their own borders. Interestingly, even though we developed this framework for wireless regulation, the same analysis holds true for AI policy