The Data Center Chessboard Has No Pause Button
The whole country ostensibly wants America to win the artificial intelligence (AI) race. A striking number, however, would prefer someone else’s town to host the data centers, power plants, transmission lines, and cooling systems required to run it.
Adam Smith knew the type. In “The Theory of Moral Sentiments,” he warned against the “man of system,” who imagines society as a chessboard and believes he can move human beings as easily as pieces.
Today’s man of system has a data-center plan. Governors, legislators, regulators, and activists increasingly speak as though they can determine where enormous new electricity loads will locate, which power sources will serve them, how their owners will bargain with utilities, what labor terms they will accept, and how much support they will provide their communities—all while preserving low rates, grid reliability, environmental goals, and America’s lead in AI.
The chess pieces, it turns out, have a motion of their own.
In Pennsylvania, Gov. Josh Shapiro unveiled the Governor’s Responsible Infrastructure Development Standards, or GRID Standards, as the terms developers must meet to receive faster permitting, tax incentives, and coordinated state support. The Pennsylvania House voted 134-68 in June to codify them. When the Senate did not act, Shapiro told the Pittsburgh Business Times that he would consider executive action.
In Texas, Gov. Greg Abbott ordered regulators earlier this month to freeze approvals for data centers seeking grid connections until the state completes an audit. New York has imposed a one-year statewide moratorium on permits for the largest facilities.
The political pressure is clear. A July Quinnipiac poll found that 74% of Pennsylvania voters opposed an AI data center in their community. Republicans, Democrats, and independents agreed. The New York Times called the opposition perhaps “the most bipartisan issue since beer.”
Some of that resistance is exaggerated, emotional, and plainly hostile to growth. Other objections deserve a serious answer. Data centers are large industrial facilities, and residents are entitled to ask about noise, land use, water, air emissions, electricity bills, tax abatements, and the integrity of local decision-making. The secrecy surrounding some projects has deepened public distrust. A credible free-market case for data centers must acknowledge legitimate costs and concede that hyperscalers—companies that operate enormous networks of data centers—do not always strike defensible bargains.
Yet policymakers commit a grave error when they treat a project’s costs as grounds to stop an industry. That response treats scarcity as evidence of market failure, assumes public officials can identify the correct technical response in advance, and interrupts the decentralized adjustments already underway.
It also mistakes the visible building for the demand it serves. Demand for cloud computing, cybersecurity, medical research, financial services, logistics, streaming, and AI persists after a government prohibits a data center. The facility simply goes elsewhere and takes its investment, infrastructure, tax base, and accumulated knowledge with it.
Austrian economics focuses on how dispersed knowledge, prices, and entrepreneurial experimentation help people adapt to scarcity. Through that lens, the relevant question is whether moratoria and prescriptive mandates improve the process by which firms, utilities, communities, and consumers reconcile rapidly growing demand with limited supplies of electricity, water, land, labor, and capital. In reality, such policies obstruct that process.