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News Link • Robots and Artificial Intelligence

Another View: What Will AI Do To The Economy?

• https://www.technocracy.news, By: Ian Flethcher

I can't claim greater insight on these topics, so I won't elaborate on them. But I do think the long-term economics of AI hasn't been well analyzed yet (unless someone I'm unaware of has done it), so I'd like to address this topic.

Right now, people seem split between four views:

Panic epitomized by Bernie Sanders's call for a moratorium on constructing data centers.
People like Rob Atkinson who believe AI's impact will be like any other technology: unpleasant for some, but overall raising productivity and therefore real wages.

People like Andrew Yang who think that AI is shortly going to do all the work, so humans should be given free money to just sit back and enjoy it.

Consulting firms offering estimates of which jobs and which industries will feel the greatest impact.
These are either talking only about specifics, obsessing over one aspect of what AI is likely to do, or simply assuming that the future will resemble the past. (It may or it may not, but this should be established by argument, not just be assumed.) Nobody is trying to give an economic theory of the whole.

I believe the correct way to analyze the long-term impact of AI is as follows:

It will produce a radical shift in the relative scarcities of goods.

This will, in turn, produce a radical re-politicization of the social order.

The first dynamic derives from the fact that AI will make the cognitive aspects, broadly defined, of tasks now done by humans very cheap. By this, I mean its galloping ability to write code, answer phones, et cetera, closely followed by its ability to drive cars today, trucks soon, and so forth. So the part of any task, blue-collar or white-collar, that is done by a human brain can soon be done by a machine, and cheaper.

It follows that AI will generate an unevenly distributed negative cost shock throughout the economy. Most of its consequences in the intermediate term, i.e., until AI is fully deployed to the limits of its capability, will turn on how this tsunami rolls unevenly through the economy, affecting certain areas harder and sooner than others.

In the long run, the real key is that while brain-based operations, as a factor of production, will become cheap, certain other things won't. For example, even if automobiles can be wholly built by robots that are themselves built by robots, cars will still be made out of raw materials like steel, plastic, and glass. Even if houses are built by robots, there is no good reason for lumber and cement to became cheaper (and if the zoning laws that determine the scarcity of land change, that's a whole other issue).

Indeed, these other inputs are quite likely to become more expensive, definitely in relative but possibly even in absolute terms, precisely because the brain-substituting inputs have gotten so cheap. Right now, the housing industry cannot demand more lumber and land than the number of houses people buy, which is constrained by the price of houses, which is partly a function of the labor that goes into building them. If the labor portion of producing a house gets cheaper, then, other things being equal, the price of houses will go down, more houses will be demanded, and therefore more lumber and land will be demanded and their price will rise.

1 Comments in Response to

Comment by PureTrust
Entered on:

Here is another thing that AI will do. It will allow the refining of biological life, so that, when applied, there will be no more death. But will that be a good thing? Revelation 9:6, "During those days people will seek death but will not find it; they will long to die, but death will elude them," - https://biblehub.com/revelation/9-6.htm.