Marx, Keynes, and A.I

The paper demonstrates that firms adopting labor-saving AI capture cost savings while only partially bearing the resulting consumer-demand loss, which shifts to competitors and triggers an automation arms race beyond the socially optimal level. It shows wage adjustments, free entry, capital taxes, equity, universal basic income, upskilling, and Coasean bargaining fail to curb excess displacement, whereas a Pigouvian automation tax can internalize the demand externality, linking the mechanism to Marx’s coercive competition and Keynes’s aggregate-demand concerns.