Rational Surrender Economy: Market Selection, AI Capital Reinforcement, and the Demand Constraint

Abstract

Delegation to artificial intelligence can be locally instrumentally rational for a firm whenever the expected gains in cost, speed, quality, availability, or scalability exceed the all-in cost of retaining the same function on the human side. Evolutionary political economy makes the population consequence of this decision analytically visible. Firms differ in routines and technological adoption, and market selection reallocates shares toward firms with superior fitness. This paper develops the Rational Surrender Economy as a theoretical structure in which firm-level AI delegation becomes self-reinforcing through market selection. A minimal replicator-style representation separates two channels: selection among firms with different delegation intensities and within-firm increases in delegation. When delegation intensity is positively associated with competitive fitness, both channels can raise economy-wide AI delegation without any actor choosing economy-wide automation as an objective. The resulting profits can finance additional compute, AI agents, data, and research, linking market selection to economic and technological feedback. Downstream distribution depends on ownership, task creation, resource constraints, and the demand regime. Where AI substitution reduces labor income and the lost household demand is insufficiently offset by investment, government demand, net exports, or capital income accruing to households, income reinjection can become compatible with firms’ own revenue objectives. A simple condition identifies when the additional margin earned from transfer-supported consumption exceeds the firm’s fiscal incidence. The framework connects evolutionary firm selection, automation, AI growth feedback, and effective-demand theory into one causal sequence and specifies observables for later empirical and computational testing.