The Tragedy of Productivity: A Unified Framework for Diagnosing Coordination Failures in Labor Markets and AI Governance
Ali Dasdan
TL;DR
The paper identifies a universal structural mechanism behind persistent productivity-welfare gaps and rapid AI capability races: coordination failures arising from five core conditions in a decentralized, externally-influenced game. It presents a formal five-condition framework, proves sufficiency and necessity, and extends it with condition intensities via a Tragedy Index. The productivity case formalizes an N-Firm game showing universal output expansion as the unique Nash equilibrium despite Pareto-superior restraint, with empirical European evidence supporting partial, costly coordination. In AI governance, the framework predicts even stronger coordination barriers than historical arms control, validated by the Russia-Ukraine drone dynamics, and emphasizes that only structural interventions altering the underlying conditions can meaningfully improve outcomes.
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.