The rapid advancement of artificial intelligence (AI) technologies has implications for every sector of society. While AI makes many things more productive, AI also has increased “rent-seeking” behaviors, that is, behaviors that aim to increase one person’s or firm’s wealth at the expense of others’. In particular, AI is driving innovation in criminal activity, making it easier to automate tasks, scale operations, and exploit vulnerabilities.  More subtly, not all AI investments made by firms may not be for the benefit of society. For instance, the broad technological advancements that facilitated financial market making were also exploited by high-frequency trading (HFT) firms to take advantage of clients looking to buy and sell securities.

AI advancement promotes socially productive activities, but they also increase rent-seeking activities, such as opportunistic trading by sophisticated firms that exploit the predictable trading patterns of large institutions, such as pension funds. Therefore, how good these AI advances are for society depends on how firms allocate their resources between productive activities like financial market making and socially wasteful rent-seeking activities like predatory trading.

Unfortunately for society, when AI facilitates rent-seeking activities, firms will tend to invest a relatively larger portion of their resources to defend themselves from others’ rent-seeking efforts. These are just socially wasteful activities because they waste resources that can be used for more productive output. AI advancements that improve economic productivity allows some people to get richer, it also makes it more attractive for others to try to extract resources from such rich people. Hopefully, the society does not end up dominated by socially wasteful activities aimed at appropriating the profits created by others’ efforts and resources.