Europe and the Global Race to Regulate AI - Why the EU should focus on data quality and liability rules

The EU wants to set the global rule book for AI. This blog explains the complex “risk hierarchy” that pervades the proposed AI Act, currently in the final stages of trilogue negotiation. This contrasts with the US focus on “national security risks”. We point out shortcomings of the EU approach requiring comprehensive risk assessments (ex ante), at the level of technology development. Using economic analysis, we distinguish exogenous and endogenous sources of potential AI harm arising from input data. We are sceptical that legislators can anticipate the future of a general purpose technology, such as AI. We propose that from the perspective of encouraging ongoing innovation, (ex post) liability rules can provide the right incentives to improve data quality and AI safety.