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The AI Regulation Trade-off: Market Growth Vs Red Tape

The global shift to widespread use of generative AI highlights its immense value. This limelight has not come without critics, with leading figures in AI discussing the risks associated and how AI may pose a threat to humanity. Some pundits have gone as far as stating that “mitigating the risk of extinction from AI should be a global priority”, referencing other dangers such as pandemics and nuclear war.

Policymakers and industry players can agree that this emerging technology requires regulation. The key questions of ‘How?’ and ‘To what extent?’ then arise. Over-regulation has the potential to create large barriers to growth, where increased costs and bureaucracy make it difficult for new entrants to break into the market. However, industry experts including Elon Musk and Steve Wozniak have publicly called for a halt to the “out of control” development of AI, where developers create models even they cannot fully comprehend or predict. A balance must be struck.

Some proposed regulations will restrict new entrants and, consequently, market growth. The EU has drafted tough measures on topics including copyrighted material and facial recognition. Adversaries claim the rules already baked into regulations will stifle the technology’s evolution.

The UK is leveraging its non-EU status to be more ‘pro-industry’, along with the US, by instead providing a relatively flexible regime, regulating AI usage by sector rather than the underlying software. China is expected to establish the most stringent set of rules to control the information generated by AI models, while attempting to allow emerging companies some freedom to explore new models to compete in the technology race with the US.

These differing approaches to the AI threat are likely to create a market surrounded by red tape in which the use and development of AI models are held back significantly. Equally, the industry is not location-restrictive, and ways around specific regulatory bodies may be possible. To foster a safe and predictable environment, regulators would benefit from coordinating a unified approach.

The foundations of the AI sector are well in place, but its future remains uncertain. McKinsey predicts that the generative AI market alone could contribute up to $4.4 trillion in economic value across several use cases. The AI industry holds significant potential, making it worthy of close monitoring. However, one must proceed with caution as regulatory hurdles and bureaucratic red tape may hinder growth.

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