Garicano paper: AI erodes specialists' knowledge advantage and reshapes firm boundaries
JMateosGarcia · x · 2026-09-26
Resharing Luis Garicano's paper "The Vanishing Advantage of Specialization: AI, Knowledge Utilization, and the Boundary of the Firm":
- Specialists enjoy knowledge economies of scale by spreading the fixed cost of acquiring knowledge across clients; AI lowers that fixed cost, benefiting infrequent users most
- Expert work gets reorganized: frequent problems move back to firms that own them, general verifiable knowledge production moves up to model makers, and specialists are left with rare problems where expertise remains costly
- This expansion of client firms' scope predicts the opposite of the classic fall-in-transaction-costs story, making the two mechanisms empirically distinguishable
- Preliminary evidence cited from ChatGPT usage, corporate legal departments, and freelance markets
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