# Economics of Human and AI Collaboration: When is Partial Automation More Attractive than Full Automation?

arXiv: https://arxiv.org/abs/2603.29121 · HTML: https://mlsanity.com/paper/2603.29121/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 13 of its 54 references that are in the map.
- First posted on arXiv 31 Mar 2026.

## Builds on (most cited first, 13 of 13)

- [Microsoft COCO: Common Objects in Context](https://mlsanity.com/paper/1405.0312/) (2014)
- [ImageNet Large Scale Visual Recognition Challenge](https://mlsanity.com/paper/1409.0575/) (2014)
- [Scaling Laws for Neural Language Models](https://mlsanity.com/paper/2001.08361/) (2020)
- [Training Compute-Optimal Large Language Models](https://mlsanity.com/paper/2203.15556/) (2022)
- [Deep Learning Scaling is Predictable, Empirically](https://mlsanity.com/paper/1712.00409/) (2017)
- [Scaling Laws for Autoregressive Generative Modeling](https://mlsanity.com/paper/2010.14701/) (2020)
- [A Constructive Prediction of the Generalization Error Across Scales](https://mlsanity.com/paper/1909.12673/) (2019)
- [The Computational Limits of Deep Learning](https://mlsanity.com/paper/2007.05558/) (2020)
- [Which Economic Tasks are Performed with AI? Evidence from Millions of Claude Conversations](https://mlsanity.com/paper/2503.04761/) (2025)
- [Future of Work with AI Agents: Auditing Automation and Augmentation Potential across the U.S. Workforce](https://mlsanity.com/paper/2506.06576/) (2025)
- [Scaling Laws for Deep Learning](https://mlsanity.com/paper/2108.07686/) (2021)
- [Benchmarking Object Detectors with COCO: A New Path Forward](https://mlsanity.com/paper/2403.18819/) (2024)
- [A Scaling Law for Synthetic-to-Real Transfer: How Much Is Your Pre-training Effective?](https://mlsanity.com/paper/2108.11018/) (2021)

## Abstract (arXiv)

This paper develops a unified framework for evaluating the optimal degree of task automation. Moving beyond binary automate-or-not assessments, we model automation intensity as a continuous choice in which firms minimize costs by selecting an AI accuracy level, from no automation through partial human-AI collaboration to full automation. On the supply side, we estimate an AI production function via scaling-law experiments linking performance to data, compute, and model size. Because AI systems exhibit predictable but diminishing returns to these inputs, the cost of higher accuracy is convex: good performance may be inexpensive, but near-perfect accuracy is disproportionately costly. Full automation is therefore often not cost-minimizing; partial automation, where firms retain human workers for residual tasks, frequently emerges as the equilibrium. On the demand side, we introduce an entropy-based measure of task complexity that maps model accuracy into a labor substitution ratio, quantifying human labor displacement at each accuracy level. We calibrate the framework with O*NET task data, a survey of 3,778 domain experts, and GPT-4o-derived task decompositions, implementing it in computer vision. Task complexity shapes substitution: low-complexity tasks see high substitution, while high-complexity tasks favor limited partial automation. Scale of deployment is a key determinant: AI-as-a-Service and AI agents spread fixed costs across users, sharply expanding economically viable tasks. At the firm level, cost-effective automation captures approximately 11% of computer-vision-exposed labor compensation; under economy-wide deployment, this share rises sharply. Since other AI systems exhibit similar scaling-law economics, our mechanisms extend beyond computer vision, reinforcing that partial automation is often the economically rational long-run outcome, not merely a transitional phase.