We consider an environment in which there is substantial uncertainty about the potential negative external effects of AI algorithms. We find that subjecting algorithm implementation to regulatory approval or mandating testing is insufficient to implement the social optimum. When testing costs...

"The best predictor of current investment at the firm level is lagged investment. This lagged-investment effect is empirically more important than the cash-flow and Q effects combined. We show that the specification of investment adjustment costs proposed by Christiano, Eichenbaum and Evans...