Analysis: Data Center Moratoriums Reflect Economic Friction, Slower Growth

Allison Schrager, a Bloomberg Opinion columnist and senior fellow at the Manhattan Institute, posits that New York's one-year moratorium on new data centers serves as a prime example of economic "friction." Schrager argues that this friction, largely fueled by public apprehension regarding the environmental impact and increased electricity prices associated with data centers, represents a deliberate societal effort to decelerate technological advancement. She predicts that similar restrictions are likely to emerge in other states, driven by a perceived governmental ability to regulate technology, even though she contends such control is often an illusion.

From a pro-growth economic perspective, Schrager asserts that such friction inherently curtails economic expansion. She draws parallels with land and labor regulations that impede development, citing housing as a specific instance. While acknowledging that certain frictions (like those in legal or administrative sectors) can offer value, she emphasizes that the resistance against data centers, intensified by fears of AI's rapid progress and its potential to eliminate established societal "frictions," signals a public preference for controlled, slower growth over unbridled advancement.

Schrager critically assesses the optimistic view that society can selectively retain beneficial frictions while discarding detrimental ones, describing it as an unrealistic approach to innovation. She concludes by questioning the nation's capacity to manage a transformative technology like AI, or even data center development, given its struggles with fundamental issues such as local zoning. The author suggests that the public's acceptance of data center restrictions might stem from a desire for the perception of control, even if it entails sacrificing economic dynamism.