alt Hacker News> But will it?
My prediction is no, because productivity gains must benefit the lower classes to see a multiplier in the economy.
For example, ATMs being automated did cause a negative drop in teller jobs, but fast money any time does increase the velocity of money in the economy. It decreases savings rate and encourages spending among the class of people whose money imparts the highest multiplier.
AI does not. All the spending on AI goes to a very small minority, who have a high savings rate. Junior employees that would have productively joined the labor force at good wages, must now compete to join the labor force at lower wages, depressing their purchasing power and reducing the flow of money.
Look at all the most used things for AI: cutting out menial decisions such as customer service. There are no "productivity" gains for the economy here. Each person in the US hired to do that job would spend their entire paycheck. Now instead, that money goes to a mega-corp and the savings is passed on to execs. The price of the service provided is not dropping (yet). Thus, no technology savings is occurring, either.
In my mind, the outcomes are:
* Lower quality services
* Higher savings rate
* K-shaped economy catering to the high earners
* Sticky prices
* Concentration of compute in AI companies
* Increased price of compute prevents new entrants from utilizing AI without paying rent-seekers, the AI companies
* Cycle continues all previous steps
We may reach a point where the only ones able to afford compute are AI companies and those that can pay AI companies. Where is the innovation then? It is a unique failure outcome I have yet to see anyone talk about, even though the supply and demand issues are present right now.
Replies
> cutting out menial decisions such as customer service
This is cited so often. We tried it at a large scale with some of the best engineering talent but unfortunately the humans on the other side preferred speaking to and interacting with a human by a wide margin.
We are still trying with the latest AI models but humans are still doing better at serving other humans.
In one of our studies, we observed by a large margin that our customers would hang up immediately on knowing that they are interacting with an AI system.
I have heard this from others as well.
> because productivity gains must benefit the lower classes to see a multiplier in the economy
by this logic, the invention of mechanized farm equipment, which displaced farm labor, didnt increase productivity
Your argument is (mildly) a variant of the broken window fallacy.
AI will bring about a de-sequestering of talent and resources from some sectors of the economy. It's very difficult to predict where these people and resources will go after that, and what effect that will have upon the world.
> cutting out menial decisions such as customer service. … Each person in the US hired to do that job would spend their entire paycheck
This person can no longer get a customer service job, but why can’t they get another job? Customer service is hardly career with a huge sunk cost in training and with a non-fungible skill set.
If they go get another job, compared to the base case of economy = customer service, we now have economy = customer service (AI) + new job.
At some point we're gonna have to abolish the economy itself. We need to transition to a post-scarcity society where everything is abundant and there's no need to economize.
More likely, we will never know
> My prediction is no, because productivity gains must benefit the lower classes to see a multiplier in the economy.
> It decreases savings rate and encourages spending among the class of people whose money imparts the highest multiplier.
Huh, what? What kind of multiplier stuff are you talking about here?
The central bank looks at the overall spending in the economy (well, including forecasts), and compares that with its targets. They adjust their policy stance accordingly to try and hit their targets.
If people become more or less likely to spend their money ('multipliers') the central bank can and will adjust the amount of money available.
In my humble opinion, money is a distraction most of the time when trying to understand economic matters. Instead it's better to take opposite view: looking at the flow of goods and services.
AI will allow higher production of goods and services. If producing goods and services becomes cheap enough (and it's looking like it will become dirt cheap), then it will not take much redistribution for it to reach the masses.
I think the true crisis will be one of purpose. That we live meaningless lives of leisurely abundance.
> It is a unique failure outcome I have yet to see anyone talk about
It seems likely to me that we will reach a violent, bloody revolt before we possibly reach this point. That may be why no one is taking about this failure mode
> We may reach a point where the only ones able to afford compute are AI companies
Nah. I think "good enough AI for 95% of people" will be able to run locally within 3-5 years on consumer-accessible devices. There will be concentration of the best compute in AI companies for training, but inference will always become cheaper over time. Decommissioned training chips will also become inference chips, adding even more compute capacity to inference.
This is like computing once again. In 1990 only the upper class could afford computers, as of 2000 only the upper class owned mobile phones, as of now more or less everyone and their kid has these things.
I would argue we've even already seen this play out with productivity gains across the economy over the last 40 years. The American middle class has been gradually declining since the '80s. AI seems likely to accelerate that trend for the exact reasons you point out.
A lot of people recognize this pattern even if they can't articulate it, and that's why they hate AI so much. To them, it doesn't matter if AI lives up to the hype or not. Either it does and we're staring down a future of 20%+ unemployment, or it doesn't and the economy crashes because we put all our eggs in this basket.
No matter what happens, the middle class is likely fucked, and anyone pushing AI as "the future" will be despised for it whether or not they're right.
Personally, I think the solution here might be to artificially constrain the supply of productivity. If AI makes the average middle-class worker twice as productive, then maybe we should cut the number of work hours expected from them in a given week.
The complete unwillingness of people in power to even acknowledge this problem is disheartening, and is highly reminiscent of the rampant corruption and wealth inequality of the Gilded Age.
Technological progress that hurts more people than it helps isn't progress, it's class warfare.
> that money goes to a mega-corp and the savings is passed on to execs
And the execs invest that money back into the economy.
> My prediction is no, because productivity gains must benefit the lower classes to see a multiplier in the economy.
Baumol's cost disease hurts the lower classes by restricting their access to services like health care and education, and LLMs/agents make it possible to increase productivity in these areas in ways which were once unimaginable. The problem with services is that they're typically resistant to productivity growth, and that's finally changing.
If you can get high quality medical advice for effectively nothing, if you can get high quality individualized tutoring for free, that's a pretty big game changer for a lot of people. Prices on these services have been rising to the stratosphere over the past few decades because it's so difficult to increase the productivity of individual medical practitioners and educators. We're entering an era that could finally break this logjam.