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The Economics of Bicycles for the Mind

Citation. Agrawal, A. K., Gans, J. S., & Goldfarb, A. (2025). The Economics of Bicycles for the Mind (NBER Working Paper No. 34034).

Summary. This theoretical working paper models computers and AI as cognitive tools in iterative task improvement, distinguishing implementation skill, opportunity judgment, and payoff judgment to interpret effects on productivity, inequality, automation, and decision authority.

Key claims

• Cognitive tools substitute for implementation skill and complement opportunity judgment, while their relation to payoff judgment depends on how effort savings compare with productivity gains.
• The model predicts that improving tools can change incentives to automate and reallocate decision authority, and can reconcile differing observed inequality effects of computers and AI.

Evidence & limitations

• The paper develops a formal economic model and synthesizes prior empirical literature; it is an NBER working paper circulated for discussion and has not been peer reviewed.

Feeds

• human-ai-task-allocation
• automation-and-substitution
• Proposed new topic: cognitive-tools-and-judgment — a dedicated home for how cognitive technologies differentially complement opportunity and payoff judgment.