AI, explained by economics. A short book by Allan Pedersen.
Companion live dashboard: The Return on Thinking tracks the book's bubble questions from public data.
The confusing parts of the AI story (the half-trillion-dollar spending spree, the hype, the job fears, the chip wars) become legible through the ordinary tools of a first economics course: supply and demand, production, cost, competition, externalities. Each of the fifteen short chapters opens with one concrete puzzle from the news and resolves it with one economic tool, ending with a “What to watch” list of indicators you can check yourself and a “Dig deeper” list of sources. The numbers (marked “as of mid-2026”) will date; the way of thinking, we believe, will not.
This book was written with substantial AI assistance under the author's direction and editorial control. See the disclosure in the front matter.
How to cite: Pedersen, A. (2026). The Price of Thinking: AI, Explained by Economics. Independent Researcher. https://doi.org/10.5281/zenodo.20686703
Contents
- · Front matter
- Foundations
- 1 Why economics explains AI better than computer science does
- 2 Supply, demand and the price of thinking
- 3 The AI production function: compute, data, talent, power
- 4 Costs: why intelligence is expensive to make and almost free to copy
- Markets & strategy
- 5 Market structure: from one chipmaker to a handful of model-makers
- 6 Strategy and game theory: the race
- 7 Work: tasks, not jobs
- 8 Productivity and growth: the trillion-dollar question
- 9 The boom: investment, bubbles and what is left after one
- Society & the state
- 10 Who wins: distribution and inequality
- 11 Information: markets in the age of infinite content
- 12 Who pays? Externalities, commons and public goods
- 13 Regulating a moving target
- The frontier
- 14 Trade, chips and the new mercantilism
- 15 The far horizon: economics when machines can do everything
- · Appendix: From anecdote to accounting