I was pleased to attend the presentation by Assistant Treasurer Dr Andrew Leigh[1] of the Ted Evans[2] Public Policy Lecture – Rethinking economic foundations in an AI world on 17 March 2026 at Queensland University of Technology in Brisbane.[3]
It was hosted by the Economic Society of Australia. I am grateful for the invitation to attend from my colleague, Dr Amanda Bull of QUT.[4]
Informational shock
Dr Leigh’s theme was that the impact of artificial intelligence is such that it calls for an updating of several theories on which economists have relied. For economists, AI is not only a “productivity shock” but also an “informational shock”.
“It increases what economies can produce while also weakening many of the signals economists rely upon to interpret behaviour”.
Large language models and their 800 million to one billion weekly users
As Dr Leigh explained, recent estimates suggest that large language models (LLMs) now serve roughly 800 million to one billion weekly users, who collectively generate billions of prompts each day across professional and personal domains. Diffusion at this scale is unusual or perhaps unknown in past human endeavour.
Electricity was a hugely significant invention in the 19th century but it first required the reconfiguration of factories before it dramatically boosted productivity. In contrast, AI is being placed directly into the hands of individuals, who are using it in unexpected ways.
As examples, output has long served as an indicator of effort; credentials or qualifications have signaled skill; prices have conveyed scarcity; and choices have revealed preferences.
Those signals are changing such that some of our most familiar economic theories might need updating in response. Artificial intelligence may challenge standard assumptions and shift constraints.
Major assumptions of economic analysis being reshaped by AI
Dr Leigh then presented eight major assumptions of modern economic analysis and examined how artificial intelligence may reshape those assumptions. In each case, he sought to “outline the canonical idea, explain the source of the tension, and suggest a research question that might reward further inquiry”.
These assumptions included skill‑biased technical change: when cognition is no longer the scarce input, human capital theory: when learning and doing decouple – when to perform a task is to have learned it, and gained credentials, artificial intelligence upsets that premise by allowing individuals to execute complex tasks without fully internalising the underlying capabilities.
Then there is contract theory: delegation without humans – if capability can be augmented on demand, what happens to the boundaries of the firm and the nature of expertise within it? And expertise and professional markets: when advice becomes abundant, and today’s professional structures are challenged by artificial intelligence by unbundling the components of expertise.
Degrees
As to education and its traditional signaling role:
University degrees function partly because they certify that students have cleared cognitively demanding hurdles. If those hurdles become easier to surmount with assistance, institutions may need new ways to distinguish between mastery and orchestration. Greater use of monitored assessment is an attempt to produce a valid signal in an AI age.
This is also a question about the objective function of educational institutions. Is the objective to assess what students can recall unaided, what they can produce with tools, or their judgement in deciding when and how to rely on those tools? Each is a different conception of human capital”.
Dr Amanda Bull, QUT; Dr Andrew Leigh MP; Michael Murray
AI
Artificial intelligence challenges us to examine our assumptions, and update our theories, reminding us that economics advances not only through technical refinement, but through a willingness to revisit first principles.
“Artificial intelligence will test many institutions: firms, universities, governments, and labour markets. It will test economics as well. But if the history of the discipline is any guide, periods of structural change are also periods of theoretical renewal.
The foundations of economics are strong. AI asks us to build upon them – carefully, empirically, modestly and with the same intellectual seriousness that figures such as Ted Evans brought to the craft”.
Benefits and perils
As Dr Leigh further explains in his latest excellent book The Shortest History of Innovation, AI is not only having a broad beneficial impact, but it also has the potential for peril – to the extent that “AI itself might go rogue [when it] becomes smarter than humans”: [p 196]. Or as others have expressed it,
“if anyone builds it, everyone dies – the case against intelligent AI”.[5]
Even short of that dire outcome, the potential societal and economic impact of AI is huge and is creating waves of “creative destruction” which will and do need to be managed. The 19th century industrial revolution was a poor example in retrospect, and even at the time, of how society managed those waves.
The need for government to provide a safety net or even broader changes – a universal minimum income? – to address what can be the negative fall-out of job and human displacement is obvious. The task is to both harness the innovations introduced by AI but also manage their human consequences, which, on past efforts, humanity will have little chance of achieving, indeed will only manipulate. The law has its place here.
As Dr Leigh concludes in his book,
“innovation can open doors, but only public action ensures that everyone can walk through them”.[6]
The benefits of AI need to be guided by that public action.
Dr Leigh’s Ted Evans paper is a worthy example of the close and thoughtful attention that we need to give AI, with prompts for further research, Dr Leigh’s focus from the perspective of economics, but with other disciplines needing to be enlisted as well.
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[1] Assistant Minister for Productivity, Competition, Charities and Treasury, and Federal Member for Fenner in the ACT. Prior to being elected in 2010, Andrew was a professor of economics at the Australian National University. He holds a PhD in Public Policy from Harvard (‘Essays in Poverty and Inequality’ 2004), having graduated from the University of Sydney with first class honours in Arts and Law.
[2] “The lecture is in honour of the late, great Queensland economist Ted Evans AC, former Secretary to the Treasury”, from 1993 to 2001, working with treasurers John Dawkins, Ralph Willis and Peter Costello.
[3] Ted Evans Public Policy Lecture featuring Dr Andrew Leigh MP
[4] QUT – Academic profiles – Ms Amanda Bull
[5] Eliezer Yudkowsky and Nate Soares, Bodley Head, 2025.
