Venkatesh Raoβs latest essay, "Cognitive Mercantilism," posits that the current wave of AI panic is not a novel phenomenon but a historical echo of the fears that plagued early modern Europe. Drawing on Joyce Applebyβs *The Relentless Revolution*, Rao argues that our anxiety over artificial intelligence mirrors the mercantilist belief that wealth was a finite resource to be hoarded. For builders and developers, this reframing suggests that the debate should shift from protecting jobs to unlocking demand for cognitive products.
The Mercantilist Mindset in the AI Era
Rao identifies four core tenets of mercantilism that have been transplanted into AI discourse. First is the belief that intelligence is a scarce, fixed resource, leading to a zero-sum competition where strategists want to hoard intelligence and its products like bullion. Second is the distrust of ordinary people, implying they need elite governance to handle complex tools. Third is a supply-side obsession with controlling knowledge production rather than recognizing aggregate demand. Finally, there is the assumption that most humans are intellectually useless if not engaged in traditional cognitive labor, a parallel to the belief that peasants were useless if not farming.
The Industrious Revolution and Voluntary Demand
The historical counterpoint to mercantilism was the emergence of a consumer culture where ordinary people voluntarily increased their labor to access new goods. Rao cites the "industrious revolution," where annual working days in Britain rose from roughly 250 to 300 as people sought tobacco, tea, sugar, and colorful Indian cottons. This was not coercion but a response to expanding possibilities. Similarly, the availability of AI tools may trigger a "cognitive industrious revolution," where developers and creators willingly invest more mental effort because the returns on attentionβsuch as building software or exploring new domainsβhave suddenly skyrocketed.
From Supply-Side Scarcity to Demand-Side Abundance
The crucial insight for the dev-tool ecosystem is that AI is undermining the assumption that intelligence is expensive and must be rationed. Just as agricultural productivity gains did not create "useless mouths" but rather freed people to pursue other interests, AI abundance allows ordinary users to command intelligence without being producers themselves. The political and economic question shifts from preserving cognitive jobs to securing a fair share of cognitive consumption opportunities. Rao notes that people might cut back on streaming subscriptions to afford a coding agent, just as they once cut back on groceries to buy TVs. He points out that it is perhaps not a coincidence that both Claude Code and Netflix Standard cost around $20/month today.
Key Takeaways
- AI panic is a form of "cognitive mercantilism," treating intelligence as a scarce, hoardable resource rather than a generative one. Historical precedent suggests that technological abundance creates new demands rather than eliminating utility, as seen in the agricultural revolution. The "cognitive industrious revolution" implies that developers will voluntarily work harder when AI tools unlock new, high-value creative possibilities. Policy and product development should focus on expanding access to intelligence consumption, not just protecting existing production roles.
The Bottom Line
Stop treating AI as a threat to be regulated by elites and start building tools that empower the voluntary cognitive effort of ordinary builders. The future belongs to those who facilitate demand for intelligence, not those who try to hoard its supply.