AI Chip Regulation Is Not A Dystopian Surveillance State

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AI Chip Regulation Is Not A Dystopian Surveillance State<br>...

Scott Alexander<br>Jul 15, 2026

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This was one of the most common objections to Plan A . The plan proposes AI chip regulation to ensure that both China and America know where all the chips are, making their deal to regulate AI together “trustless” (ie neither side can defect even if they want to). Several people argued that this kind of regulation amounted to some kind of “Orwellian dystopia” or “global panopticon”.<br>I’m reminded of a story I heard - I can’t find it, maybe one of you can - from a DC insider who said it was enraging to work with Silicon Valley, because he would bring up what he thought was the obvious regulatory framework, the tech people would launch into jeremiads on how it could only be enforced by world dictatorship, and he would have to interrupt and say that no, this was how eggs or milk or something had been regulated for fifty years.<br>What regulations does Plan A propose on AI chips?<br>Factories that produce them need to register with the government and submit to inspections.

Customers who buy them (eg Google) need to register with the government and submit to inspections. If they resell them, they need further government permission to do so.

Data centers that host them need to register with the government and submit to inspections. To pass these inspections, they will need to be very secure against cyber-attack.

The chips in the data centers eventually have cryptographic software that lets either China or the US halt their work at any time1.

Any data center that trains AIs need to be transparent (writing basic information about their operations, like the size of their training runs, to a public database) and verifiable (someone needs to be able to prove they’re running the code they claim to be running).

How bad are these regulations?<br>Regulations can be bad in at least two ways.<br>First, they can directly affect the thing they’re regulating. For example, if the government bans cocaine, people who enjoy cocaine can’t get it.<br>Second, their enforcement can indirectly justify a general expansion of government power and reduction of liberty, or provoke evasion attempts with dangerous side effects. For example, government bans on cocaine led to no-knock DEA raids, stop-and-frisk searches, and drug-sniffing dogs at airports, and to Mexican drug cartels and Colombian paramilitaries.<br>The direct effect of Plan A’s AI chip regulations is probably to raise the price of AI chips. How much? I don’t know, a few percent? Relatedly, the general march of technology makes chip price per FLOP falls 30% every year, and AI inference price per token fall by 98% every year (this is not an error, they actually get 40x cheaper every year). The neoliberal in me admits that it is in some sense a tragedy any time we raise the price of a good, but this seems like one of the more innocuous examples.<br>When people talk about Orwellian dystopias or global surveillance states, they presumably mean the indirect effects. But why should making chip factories and hyperscalers do more paperwork have such outsized costs, totally unlike those which we encounter in the regulation of other industries?<br>Plan A’s regulations on chips bear more than a passing resemblance to the way the United States currently regulates “controlled substances” - potentially addictive medications like Xanax or Adderall. Factories that produce them need to register with the government and submit to inspections. Customers who buy them (eg pharmacies) need similar levels of registration and inspection; to pass these inspections, they must prove themselves secure against various forms of attack. Whenever the pharmacies sell to a customer, they need to enter it into a database accessible by every doctor in the state.<br>How burdensome are controlled substance regulations? By traditional metrics, not very. They don’t drive up costs too much: Xanax, a Schedule IV controlled substance, costs $14 at market price for a 30 day supply. They don’t seem to slow innovation - a substantial portion of drugs approved by the FDA in the past ten years have been trivial pointless modifications to Schedule II stimulants. By the alternative metric of how much doctor and patient aggravation they produce, extremely burdensome - we have to fill out more forms, argue with more pharmacists, frequently miss prescriptions because something went wrong, and suffer occasional crippling shortages.<br>But has the existence of controlled substance regulations caused the entire world to be plunged into an Orwellian dystopia? Has it turned life into a global panopticon? I wouldn’t say so. The government exerted some pre-existing state capacity to yoke Xanax factories to its will, and most people who were not Xanax factories weren’t affected in any way. Imposing regulations on AI chip factories is even easier than imposing...