An Economic Analysis of the Legal Issues of Artificial Intelligence

With the rapid growth of artificial intelligence (AI) technology, the risk of accidents caused by its use is also increasing. However, it is not clear who would assume the costs and legal liability caused by AI-related accidents. This legal uncertainty is introducing a chilling effect to the AI industry. In order to help the development of the AI industry in Japan, it is desirable to set up a consistent approach to the legal issues of AI in various fields. This paper employs a law-and-economics approach to solve the problem.

As long as an AI-related dispute occurs within AI-developers, AI-instrument-producers, and AI-users, the parties can arrange an optimal contract to achieve an efficient risk allocation and incentive mechanism. In contrast, if the use of AI causes damage to third parties, a contract arrangement is no longer of use. We need to evaluate the efficiency of the tort law system. Because AI technology cannot be perfect, AI-related accidents can be deterred effectively only through the efforts of all parties. Thus, the situation is so-called bilateral care, and negligent liability rule or strict liability rule with contributory negligence can achieve efficient outcomes. This paper shows that the present tort law and the product liability law in Japan are in accord with this line in principle, although there still exist some uncertainties. The AI industry does not need to fear the legal outcome seriously.