CFJ Essay: The Data Center Chessboard Has No Pause Button
- Jeffrey Depp
- Aug 13
- 4 min read
Committee for Justice Senior Counsel for Law and Policy Jeffrey E. Depp has published a new essay at Truth on the Market examining the growing political backlash against artificial-intelligence data centers.
In “The Data Center Chessboard Has No Pause Button,” Depp argues that state and federal officials should resist calls for moratoria, technology mandates, and special permission systems targeting AI infrastructure.
The essay is the latest installment in Depp’s continuing work applying Austrian economics and Public Choice to contemporary questions involving artificial intelligence, innovation, energy, and industrial policy.
Legitimate Concerns—and a Dangerous Conclusion
Data centers are large industrial facilities. Communities have legitimate reasons to ask about their effects on electricity rates, water supplies, noise, land use, tax revenues, and public infrastructure. Developers should not be permitted to shift the costs of their projects onto residential ratepayers or surrounding communities.
But acknowledging those concerns does not justify stopping an entire industry.
As he explains, the political debate often begins at the end of the story: data centers arrive, electricity prices increase, and officials conclude that the new demand must be restrained. That account overlooks the generation retirements, transmission constraints, permitting delays, equipment shortages, interconnection backlogs, and policy decisions that limited the ability of electricity supply to respond.
Data centers did not create every weakness in America’s electricity system. Their arrival has made many of those weaknesses impossible to ignore.
A moratorium does nothing to repair them. It does not build a generator, manufacture a transformer, expand transmission capacity, or improve an interconnection queue. It suppresses one visible source of demand while leaving the underlying supply problem intact.
Scarcity Is a Signal, Not a License to Ban
A central insight of Austrian economics is that prices communicate dispersed knowledge. A rising electricity price, a lengthy interconnection delay, or an expensive water right tells market participants that a resource has become scarce.
That signal does not prescribe a single response. It invites discovery.
A developer might finance new generation, choose another location, redesign its cooling system, shift deferrable computing to off-peak hours, negotiate a long-term power agreement, or abandon a project that cannot justify its resource use. Different firms will reach different answers because they confront different technologies, costs, locations, and customers.
A political moratorium replaces all those marginal decisions with a single command: wait.
The result is not better coordination. It is the suppression of the process through which better solutions are discovered.
The Market Is Already Adapting
The essay documents how firms, utilities, and investors are responding to the AI sector’s extraordinary demand for electricity.
Utilities are developing specialized large-load tariffs with minimum-payment obligations, collateral requirements, exit fees, and protections against speculative projects. Technology companies are negotiating long-term power-purchase agreements, supporting nuclear restarts, investing in advanced reactors, exploring on-site generation, and experimenting with arrangements that colocate computing facilities with power plants.
These developments illustrate what Austrian economists call spontaneous order. No government agency designed the emerging combination of tariffs, contracts, joint ventures, nuclear agreements, flexible computing loads, and behind-the-meter generation. The pattern is emerging from many participants responding to prices, local constraints, and one another.
Some experiments will fail. Some projects should be rejected. Some contracts will require revision. That is not a defect in the discovery process. It is how the process produces knowledge.
General Rules, Not Political Permission
Opposing moratoria does not mean opposing all government action.
Governments should enforce property rights and contracts, require truthful disclosures, protect residential ratepayers from cost-shifting, and apply neutral rules governing noise, traffic, emissions, wastewater, lighting, setbacks, and emergency services.
The important distinction is between rules addressing measurable effects and mandates dictating production methods.
A general rule can require a large electricity customer to bear the incremental costs it creates. A technology mandate instead instructs that customer which generation source to use. The first protects others while leaving room for discovery. The second substitutes a political forecast for entrepreneurial judgment.
As Depp puts it, government should police cost-shifting—not choose the power plant.
An Applied Austrian Economics Agenda
The new essay extends a common argument developed across Depp’s recent writing.
In “Powering AI: Why Markets Matter More Than Mandates,” he argued that America’s AI ambitions require abundant, reliable, and affordable electricity—and that government should enable additional supply rather than politically direct it.
In “Pennsylvania’s GRID Standards and the Fatal Conceit of AI Industrial Policy,” he applied Hayek’s knowledge problem to Gov. Josh Shapiro’s attempt to prescribe energy, labor, and community-benefit conditions for data-center projects receiving state support.
His earlier Truth on the Market essays have applied the same framework to proposed federal AI “term sheets”, the limits of federal and state AI regulation, and legislation that would transfer ownership of major AI companies to a federally managed sovereign wealth fund.
Together, these pieces advance an applied Austrian approach to technology policy. Markets do not merely allocate resources more efficiently than government agencies. They generate knowledge through experimentation, competition, profit, loss, contracting, and consumer choice. Regulation can therefore do more than raise costs: it can obstruct the process through which society discovers what works.
The Bottom Line
Communities need not approve every proposed data center, and developers should bear the demonstrable costs their projects create. But moratoria and prescriptive mandates are no substitute for functioning prices, enforceable contracts, neutral rules, and open competition.
AI demand will not disappear because one state or community prohibits the infrastructure needed to serve it. The investment—and the accompanying generation, supply chains, tax base, and technological learning—will move elsewhere.
You can ban the data center. You cannot ban the demand.
