Nirvana AI Governance: How AI Policymaking Is Committing Three Old Fallacies

Abstract: This research applies Harold Demsetz's concept of the nirvana approach to the realm of AI governance and debunks three common fallacies in various AI policy proposals--"the grass is always greener on the other side," "free lunch," and "the people could be different." Through this, I expose fundamental flaws in the current AI regulatory proposal. First, some commentators intuitively believe that people are more reliable than machines and that government works better in risk control than companies' self-regulation, but they do not fully compare the differences between the status quo and the proposed replacements. Second, when proposing some regulatory tools, some policymakers and researchers do not realize and even gloss over the fact that harms and costs are also inherent in their proposals. Third, some policy proposals are initiated based on a false comparison between the AI-driven world, where AI does lead to some risks, and an entirely idealized world, where no risk exists at all. However, the appropriate approach is to compare the world where AI causes risks to the real world where risks are everywhere, but people can live well with these risks. The prevalence of these fallacies in AI governance underscores a broader issue: the tendency to idealize potential solutions without fully considering their real-world implications. This idealization can lead to regulatory proposals that are not only impractical but potentially harmful to innovation and societal progress.