The Tragedy of Productivity: A Unified Framework for Diagnosing Coordination Failures in Labor Markets and AI Governance

TL;DR

This paper presents a unified game-theoretic framework for diagnosing coordination failures in labor productivity and AI governance, revealing structural barriers that hinder collective progress despite individual incentives.

Contribution

It introduces five conditions characterizing coordination failures and applies this framework to analyze productivity and AI governance, highlighting their structural similarities and differences.

Findings

Coordination failures are structurally similar in productivity and AI governance.

AI governance faces significantly higher coordination difficulty than nuclear arms control.

Empirical evidence shows persistent productivity-welfare decoupling in Europe.

Abstract

Despite productivity increasing eightfold since Keynes's 1930 prediction of 15-hour workweeks, workers globally still work roughly double these hours. Separately, AI development accelerates despite existential risk warnings from leading researchers. We demonstrate these failures share identical game-theoretic structure: coordination failures where individually rational choices produce collectively suboptimal outcomes. We synthesize five necessary and sufficient conditions characterizing such coordination failures as structural tragedies: N-player structure, binary choices with negative externalities, dominance where defection yields higher payoffs, Pareto-inefficiency where cooperation dominates mutual defection, and enforcement difficulty from structural barriers. We validate this framework across canonical cases and extend it through condition intensities, introducing a Tragedy Index revealing governance of transformative AI breakthroughs faces orders-of-magnitude greater coordination difficulty than climate change or nuclear weapons. Applied to productivity competition, we prove firms face coordination failure preventing productivity gains from translating to worker welfare. European evidence shows that even under favorable conditions, productivity-welfare decoupling persists. Applied to AI governance, we demonstrate development faces the same structure but with amplified intensity across eight dimensions compared to successful arms control, making coordination structurally more difficult than for nuclear weapons. The Russia-Ukraine drone war validates this: both sides escalated from dozens to thousands of drones monthly within two years despite prior governance dialogue. The analysis is diagnostic rather than prescriptive, identifying structural barriers to coordination rather than proposing solutions.