Logo

Artificial Intelligence and Data-Driven Policy in Economic Governance: Opportunities and Risks

zagaidze.png
Vasil Zagaidze

Master of Public Administration, MA Student (First Year), Economics, Ivane Javakhishvili Tbilisi State University

12.jpg
Loid Karchava

Doctor of Business Administration, Associate Professor, Caucasus International University

Abstract

Research Objective: Modern economic governance increasingly operates under conditions of heightened uncertainty, nonlinear dynamics, and rapidly expanding data environments. In such contexts, traditional econometric and statistical approaches often face limitations in delivering timely and actionable policy guidance. Against this backdrop, this paper examines how artificial intelligence (AI) and data-driven policy approaches can enhance economic decision-making while reshaping the institutional architecture of economic governance. The objective of the study is twofold: first, to assess AI’s role as an analytical capability within economic policy processes; and second, to identify governance risks arising from the structural integration of data-centric tools into public decision-making systems.

Methodological Approach: The study adopts a theoretical–conceptual research design. It synthesizes scholarly literature on artificial intelligence in economic analysis, bounded rationality, algorithmic governance, and evidence-based policymaking. Particular attention is paid to the shift from interpretation-centered models toward prediction- and pattern-oriented approaches enabled by machine learning. In addition, the paper conducts a comparative review of policy frameworks and governance guidelines developed by major international institutions, including the OECD, the European Union, and the World Bank, focusing on transparency, accountability, and human oversight.

Key Findings and Applications: The findings indicate that AI is most effective in economic policy when employed as a decision-support analytical layer rather than as a substitute for human judgment. In this role, AI enhances forecasting accuracy, strengthens real-time monitoring, and mitigates the constraints of bounded rationality by expanding the scale and speed of information processing. At the same time, the study demonstrates that data-driven policy is not value-neutral: AI systems may reproduce historical biases embedded in data and create governance risks related to opacity and accountability. Effective application therefore requires robust ethical, institutional, and legal safeguards to ensure legitimate, transparent, and equitable economic governance.

Keywords: artificial intelligence; data-driven policy; economic decision-making; algorithmic governance; ethics and economics.

References

  1. Arnold, M., Goldschmitt, M., & Rigotti, T. (2023). Dealing with information overload: A comprehensive review. Frontiers in Psychology, 14, Article 1122200. https://doi.org/10.3389/fpsyg.2023.1122200
  2. Australian Government, Department of Veterans’ Affairs. (2020). Department of Veterans’ Affairs annual report 2019–20. Canberra, Australia. https://www.transparency.gov.au/publications/veterans-affairs/department-of-veterans-affairs/department-of-veterans-affairs-annual-report-2019-2
  3. Business and Technology University. (2023). Strengthening digital governance: Electronic governance and the future of public administration. Tbilisi, Georgia. [In Georgian]
  4. Castelluccia, C., & Le Métayer, D. (2019). Understanding algorithmic decision-making: Opportunities and challenges (EPRS Study PE 624.261). European Parliamentary Research Service. https://www.europarl.europa.eu/RegData/etudes/STUD/2019/624261/EPRS_STU(2019)624261_EN.pdf
  5. Center for Effective Global Action. (n.d.). Using AI and digital data to target cash transfers in Togo. Retrieved December 22, 2025, from https://cega.berkeley.edu/collection/ai-assisted-cash-transfers-togo/
  6. Chanturía, N. (2025, August 14). Artificial intelligence in the workplace: What companies should consider when adopting automated decision-making. Business Insider Georgia. https://businessinsider.ge/Businessadvisor/khelovnuri-inteleqti-samushao-adgilas-ra-unda-gaitvalistsinon-kompaniebma-avtomatizebuli-gadatskvetilebebis-mighebisas-27142 [In Georgian]
  7. Cipollone, P. (2024, July 4). Artificial intelligence: A central bank’s view [Keynote speech]. European Central Bank. https://www.ecb.europa.eu/press/key/date/2024/html/ecb.sp240704_1~e348c05894.en.html
  8. Chu, C. Y., Chang, J.-J., & Lin, C.-C. (2025). Why does AI hinder democratization? PNAS, 122(19), e2423266122. https://doi.org/10.1073/pnas.2423266122
  9. Craig, L., & Walch, K. (2025, March 18). Data quality in AI: 9 common issues and best practices. SearchEnterpriseAI. https://www.techtarget.com/searchenterpriseai/feature/9-data-quality-issues-that-can-sideline-AI-projects
  10. de Pedraza, P., & Vollbracht, I. (2023). General theory of data, artificial intelligence and governance. Humanities and Social Sciences Communications, 10(1), Article 607. https://doi.org/10.1057/s41599-023-02096-w
  11. Demetrashvili, K., et al. (2004). Framework program for the development of information and communication technologies in Georgia. https://shorturl.at/d98BE [In Georgian]
  12. Dhanaraj, R. K., Maragatharajan, M., Sureshkumar, A., & Balakannan, S. P. (2025). On-device AI for climate-resilient farming… Scientific Reports, 15, 31195. https://doi.org/10.1038/s41598-025-16014-4
  13. Emagia Staff. (2025, August 7). AI in finance: Revolutionizing financial services with intelligence and innovation. https://www.emagia.com/resources/glossary/ai-in-finance/
  14. European Commission. (n.d.). AI Watch – Public sector. https://ai-watch.ec.europa.eu/topics/public-sector_en
  15. Frost, N. (2024). The impoverished publicness of algorithmic decision making. Oxford Journal of Legal Studies, 44(4), 780–807. https://doi.org/10.1093/ojls/gqae027
  16. Fuentes Nettel, P., et al. (2024). Government AI Readiness Index 2024. Oxford Insights. https://oxfordinsights.com/wp-content/uploads/2024/12/2024-Government-AI-Readiness-Index-2.pdf
  17. Gabisonia, Z. (2021). National strategy of artificial intelligence for Georgia. Comparative Law Journal, 8, 22–30. [In Georgian]
  18. Government of Georgia, Ministry of Economy and Sustainable Development. (2024). National strategy for the development of Georgia’s digital economy and information society 2025–2030. [In Georgian]
  19. Giest, S., McBride, K., Nikiforova, A., & Sikder, S. K. (2025). Digital & data-driven transformations in governance. Data & Policy, 7, e21. https://doi.org/10.1017/dap.2024.47
  20. Harari, Y. N. (2018). Why technology favors tyranny. The Atlantic. https://www.theatlantic.com/magazine/archive/2018/10/yuval-noah-harari-technology-tyranny/568330/
  21. Hill, A. C., & McCormick, C. (2025, January 24). The world faces a sharp rise in extreme weather. Can AI help? CFR. https://www.cfr.org/article/world-faces-sharp-rise-extreme-weather-can-ai-help
  22. Institute for Development of Freedom of Information. (2021). The use of artificial intelligence systems in Georgia: Legislation and practice. https://idfi.ge/public/upload/Article/ENG%20The%20Use%20of%20Artificial% 20Intelligence%20Systems%20in%20Georgia_Legislation%20and%20Practice_19_02_2021.pdf
  23. Institute for Development of Freedom of Information. (2022, November 22). Georgia’s challenges in terms of open data management… https://idfi.ge/ge/georgias_challenges_in_terms_of_open_data_management_and_international_good_practices [In Georgian]
  24. International Telecommunication Union. (2021a). Georgia – Digital development country profile. https://www.itu.int/.../Digital%20Development%20Country%20Profile_Georgia_29.10.21.pdf
  25. International Telecommunication Union. (2021b). Investing in innovation: Georgia’s digital development journey. https://www.itu.int/hub/2021/11/investing-in-innovation-georgias-digital-development-journey/
  26. Ji, J. (2025). The impact of artificial intelligence on commercial big data. https://doi.org/10.54254/2754-1169/2025.GL27475
  27. Kvelaidze, N. (2022, November 2). Use of artificial intelligence and its legal aspects. Forbes Georgia. https://forbes.ge/blogs/khelovnuri-inteleqtis-gamoqheneba-da-misi-samarthlebrivi-aspeqtebi/ [In Georgian]
  28. Karchava, L., Nanuashvili, I., Zoidze, G., & Veshapidze, S. (2025). Georgia’s Strategic Role in Eurasian Transport and Digital Logistics Transformation. The New Economist, 20(2), 40-53.
  29. Karchava, L., Veshapidze, S., & Tsikelashvili, S. (2025). Georgia's Perspective in the Context of Developing Economic Relations between China and the European Union. The New Economist, 20(1), 8-23.
  30. Karchava, L., Chiabrishvili, K., Goroshidze, G., Mgeladze, L., & Veshapidze, S. (2026). Indicators of effective use of the rich experience of academic staff. The New Economist, 20(4), 21-35.
  31. Veshapidze, S., & Karchava, L. (2022). Contradictions of Globalization under the COVID-19 Pandemic. Bull. Georg. Natl. Acad. Sci, 16(4), 152-157.
  32. Chigladze, G. and Karchava, L., 2025. The revolutionary impact of digital technologies on financial architecture. The New Economist, 20(2), pp.92-104. (In Georgian)
  33. Love, P., & Stockdale-Otarola, J. (Eds.). (2017). Debate the issues: Complexity and policy making. OECD Publishing. https://doi.org/10.1787/9789264271531-en
  34. Lomia, E., 2020. Political realism in international relations: classical realism, neo-realism, and neo-classical realism. International Journal of Social, Political and Economic Research, 7(3), pp.591-600.
  35. Lomia, T. and Lomia, E., 2020. Economic and Political Support of the European Union to Georgia: Retrospective Analysis of the EU-Georgia Relations. Vallis Aurea, 6(1), pp.35-43.
  36. Lomia, E., 2020. The Evaluation of Russia's foreign policy towards Georgia following the ‘Rose Revolution’. Journal of Liberty and International affairs, 6(1), pp.112-128.
  37. Lomia, E., 2021. China’s belt and road initiative and Georgia: A short overview. Journal of Liberty and International Affairs, 7(3), pp.373-385.
  38. Lomia, E. and Karchava, L., 2021. Georgian ethnopolitical conflict as a subject of confrontation between the USA and Russia. Journal of Liberty and International Affairs, 7(2), pp.90-102.
  39. Machovec, C., Rieley, M., & Rolen, E. (2025, February). Incorporating AI impacts in BLS employment projections. Monthly Labor Review. https://www.bls.gov/opub/mlr/2025/article/incorporating-ai-impacts-in-bls-employment-projections.htm
  40. Manheim, K. M., & Kaplan, L. (2019). Artificial intelligence: Risks to privacy and democracy. Yale Journal of Law & Technology, 21, 106–188. https://yjolt.org/sites/default/files/21_yale_j.l._tech._106_0.pdf
  41. Maslej, N., et al. (2025). Artificial Intelligence Index Report 2025. https://doi.org/10.48550/arXiv.2504.07139
  42. MindTitan. (n.d.). AI use cases for government: How Estonia is leading the way. https://mindtitan.com/resources/industry-use-cases/ai-use-cases-in-government/
  43. Mullainathan, S., & Spiess, J. (2017). Machine learning: An applied econometric approach. Journal of Economic Perspectives, 31(2), 87–106. https://doi.org/10.1257/jep.31.2.87
  44. Murphy, B., & BouKaram, F. (2025, September 19). Governing with AI: The new face of tax authorities. Grant Thornton Ireland. https://www.grantthornton.ie/insights/factsheets/governing-ai-tax-authorities/
  45. National Bank of Georgia, President. (2020, August 18). Regulation on risk management of data-driven statistical, artificial intelligence and machine learning models (Decree No. 151/04). https://matsne.gov.ge/ka/document/view/4964423?publication=0 [In Georgian]
  46. OECD. (2025). Governing with artificial intelligence: The state of play and way forward in core government functions. https://doi.org/10.1787/795de142-en
  47. OECD Observatory of Public Sector Innovation. (2022, November 16). The AuroraAI… https://oecd-opsi.org/innovations/auroraai/
  48. Organisation for Economic Co-operation and Development. (n.d.). OECD AI Principles. https://www.oecd.org/en/topics/sub-issues/ai-principles.html
  49. Palavandishvili, B. (2020, May 21). Data economy and new opportunities [GC Analysis]. https://www.geocase.ge/media/517/Data-Economy---B.-Palavandishvili.pdf [In Georgian]
  50. Talakvadze, G., & Archvadze, I. (2023). Integral Resources of Georgia: Research, Analysis, Prospects. Tbilisi: Mtsignobari, p. 369. (in Georgian)
  51. https://shromebi.gtu.ge/admin/uploads/2(536)/06-Talakvadze.pdf UDC 004 UAK SCOPUS Code 1405 https://doi.org/10.36073/1512-0996-2025-2-55-80 Givi Talakvadze and Joseph Archvadze, “Development of Digital Technologies and the Potential of Integral Resources as a Determining Factor of Georgia’s Sustainable Development.” Proceedings of the Georgian Technical University, 2025, No. 2, p.55–80. (in Georgian)
  52. Parliamentary Budget Office of Georgia. (2021, June 30). Evidence-based policy: Essence and importance. https://pbo.parliament.ge/... [In Georgian]
  53. Personal Data Protection Service of Georgia. (2024). 2024 activity report of the Personal Data Protection Service of Georgia.
  54. Personal Data Protection Service of Georgia. (n.d.-a). Artificial intelligence (“AI”) and associated risks. https://pdps.ge/... [In Georgian]
  55. Personal Data Protection Service of Georgia. (n.d.-b). EU “Artificial Intelligence Act”. https://pdps.ge/... [In Georgian]
  56. PMC Research Center. (2021). Georgia – Fit for the age of artificial intelligence? https://www.pmcresearch.org/policypapers_file/cbd96050fe3956d32.pdf
  57. Policy and Management Consulting Group. (2025, October 2). Launching the readiness assessment methodology in Georgia… https://pmcg-i.com/...
  58. Portulans Institute. (2024). Network Readiness Index 2024: Georgia. https://download.networkreadinessindex.org/reports/countries/2024/georgia.pdf
  59. Public Defender of Georgia. (2025, June 24). Artificial intelligence as a threat… https://www.ombudsman.ge/res/docs/2025062413595059351.pdf [In Georgian]
  60. Rees, C. (2019, November 3). Artificial intelligence: Ethical issues. Georgian Bar Association. https://shorturl.at/wy6k4 [In Georgian]
  61. Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024. Official Journal of the European Union. https://eur-lex.europa.eu/eli/reg/2024/1689/oj/eng/
  62. Saura García, C. (2024). Datafeudalism: The domination of modern societies by Big Tech Companies. Philosophy & Technology, 37, 90. https://doi.org/10.1007/s13347-024-00777-1
  63. Saltelli, A., & Giampietro, M. (2015). The fallacy of evidence-based policy. https://doi.org/10.48550/arXiv.1607.07398
  64. Shengelia, K. (2024). The role of artificial intelligence in the future of business education. Economics, 106(1–2), 22–28. [In Georgian]
  65. Symbio6. (n.d.). AI readiness map – global country comparison. https://symbio6.nl/en/apps/ai-readiness-map.html
  66. Veshapidze, S. (2023). New developments in the global world: challenges and opportunities for Georgia. The New Economist, 18(3), 44-2. [In Georgian]
  67. Veshapidze, S., Bakhtadze, L., Putkaradze, R., Kharitonashvili, J., Danelia, I., Lominashvili, M., & Chantladze, N. (2024). Modern International Economic Relations of Georgia: Monograph. Tbilisi: Smarty. [In Georgian]
  68. Ugwudike, P. (2022). Predictive algorithms in justice systems and the limits of tech-reformism. International Journal for Crime, Justice and Social Democracy, 11(1), 85–99. https://doi.org/10.5204/ijcjsd.2189
  69. van Ooijen, C., Ubaldi, B., & Welby, B. (2019). A data-driven public sector. OECD Working Papers on Public Governance No. 33. https://doi.org/10.1787/09ab162c-en
  70. Varian, H. R. (2014). Big data: New tricks for econometrics. Journal of Economic Perspectives, 28(2), 3–28. https://doi.org/10.1257/jep.28.2.3
  71. The World Bank. (2021). World Development Report 2021: Data for better lives. https://wdr2021.worldbank.org/
  72. World Bank Group. (n.d.). DIME Artificial Intelligence. https://www.worldbank.org/en/about/unit/unit-dec/impactevaluation/ai

Share on social media:

The New Economist, N1, 2026, Vol. 21, Issue 1.

01-2026 .jpg
pdf
Published Date:

04/04/2026

Copyright (c) 2026 Vasil Zagaidze, Loid Karchava

Creative Commons

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Article Views: 11