Epistemic Scarcity: The Economics of Unresolvable Unknowns

TL;DR

This paper argues that AI systems are fundamentally incapable of performing core economic functions and critiques current ethical AI frameworks, emphasizing the importance of human autonomy and spontaneous order in governance.

Contribution

It introduces a praxeological analysis based on Austrian economics to challenge assumptions about AI's role in economic and epistemic order, highlighting epistemic scarcity and human-centric governance.

Findings

AI cannot perform economic coordination functions.

Current ethical AI frameworks conflict with liberal order principles.

Information abundance can undermine truth and enable totalitarian tendencies.

Abstract

This paper presents a praxeological analysis of artificial intelligence and algorithmic governance, challenging assumptions about the capacity of machine systems to sustain economic and epistemic order. Drawing on Misesian a priori reasoning and Austrian theories of entrepreneurship, we argue that AI systems are incapable of performing the core functions of economic coordination: interpreting ends, discovering means, and communicating subjective value through prices. Where neoclassical and behavioural models treat decisions as optimisation under constraint, we frame them as purposive actions under uncertainty. We critique dominant ethical AI frameworks such as Fairness, Accountability, and Transparency (FAT) as extensions of constructivist rationalism, which conflict with a liberal order grounded in voluntary action and property rights. Attempts to encode moral reasoning in algorithms reflect a misunderstanding of ethics and economics. However complex, AI systems cannot originate norms, interpret institutions, or bear responsibility. They remain opaque, misaligned, and inert. Using the concept of epistemic scarcity, we explore how information abundance degrades truth discernment, enabling both entrepreneurial insight and soft totalitarianism. Our analysis ends with a civilisational claim: the debate over AI concerns the future of human autonomy, institutional evolution, and reasoned choice. The Austrian tradition, focused on action, subjectivity, and spontaneous order, offers the only coherent alternative to rising computational social control.