alt Hacker NewsThe dead economy theory
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> It is also a proposal in which he gets to be the one doing the distributing. Feudalism with better branding.
It's worse than feudalism. Feudalism is essentially a contract, an unfair one yes, but both parties need something from the other. The Lord needs the peasants (or vassals) to provide labor and soldiers for conflicts. But in this hypothetical world, the elite no longer need anything from the workers, the workers are completely dependent on the altruism of those who control all the resources, and that is not a stable place to be.
Of course that assumes that AI produces massive productivity gains. But if it doesn't, then we'll see a different kind of economic collapse when the bubble bursts. So we lose either way.
This article is good but it presupposes the norm of democracy and it presupposes (somehow) that the collapse of western democracy will not result in war. Both of these are fundamental misunderstandings, and while I love neither democracy nor war, the dissolution of the American economic system would result in both less democracy and more war.
Just to be clear, the people engaged in this discussion with any degree of seriousness think... LLMs (large language models) are going to get us there?
A bit of touching grass may be warranted.
If you’re going to go through the effort to write 5,000 words—-spend a bit more thought on what to do.
I am aware that the sky is falling and I am aware that there are foxes who would gladly replace 10%+ of global knowledge work in the next few years. I understand that there are cultural ramifications.
But what do we do?
While I think a dead economy is easy to imagine it is also pretty absurd. After all, real supply will be abundant and real demand will be strong except since so one has any (artificial) money, everything presumably stalls and we somehow end up in a worse situation than we had before money was invented.
This article's premise is entirely built on the idea that CEOs who layoff people citing AI aren't just lying.
And, well, of course they are. If AI was really making these companies meaningfully more productive, they could use that to out-innovate competitors. Instead, they're doing cost-cutting. That only makes sense if you're entirely out of ideas! It's a terribly embarrassing thing to say for a CEO!
Really what's going on is that companies do layoffs for all the usual reasons companies do layoffs. And as usual, they never say the real reason because it's embarrassing (we hired too many morons; I founded this place but now I dread waking up every morning because I hate all the middle managers; we just want more money now and not later; etc etc). Instead they say whatever silly excuse is in vogue to say. Right now that silly excuse is AI productivity. A few years ago it was "ZIRP is over oops y'all cost too much now", and before that it was "financial crisis!", which you could get away with for scary many years after Lehman went belly-up.
I feel like it's pretty ridiculous to take these remarks at face value and then build an entire what-if theory on top of it. Don't underestimate the possibility that layoffs happen because there happens to be a good excuse around. The occasional layoff can be good for a company. Cut out the dead meat etc. But if it makes you look bad, stock go down etc then you won't do it will you? But when ideas from lesswrong became mainstream enough that you can blame AI for your layoff, then what's stopping you?
I feel like people have said that about every technical revolution. I dont think this article would have been out of place in the hay day of the industrial revolution.
Its never been true in the past. Otoh, there always has to be a first time for everything. I think to be convincing though it needs more evidence on how this differed from other technical revolutions.
This article, both compelling and bleak, leaves little doubt: the Butlerian Jihad is coming. The forward-thinking universities should start training Mentats now.
The assumption is that if you send people checks, they’ll find meaning in hobbies and community. They’ll paint. They’ll garden. They’ll finally write that novel.
Is this why we all have to work 9 to 5 drudge jobs? Because we can't handle the freedom?
The problem below just was solved with workers organization.
> The agricultural transition took a hundred and forty years. Carl Benedikt Frey at Oxford has documented that the Industrial Revolution took seventy years before wages and employment recovered for the workers it displaced. In the interim, wages stagnated, the labor share of income collapsed, profits surged, inequality skyrocketed
Maybe we will all be CEOs or Board chairs of our own corporations employing agents. And we work to find the best agents to increase efficiencies, improve effectiveness, etc.
The "TAM as all white collar labor" thing looks good on paper. But AI companies don't need to really capture much labor to be fantastically profitable.
If we all delegate 20% of our work, and 20% of our salary for that 20% (e.g., 4% of our salaries in exchange for 20% of our jobs being automated), we get easier jobs and the AI labs supplant the existing tech moguls for revenue, with 1000x $/employee profits. That's just one scenario.
Power and wealth are not always the same. Current AI is helping people gather wealth within the American system. But as we are seeing in Iran, current AI does not provide a decisive edge in hard military power.
If that stays true for the long term, then it seems to me there is a good chance the wealth built with AI will transfer to those nations that still have hard military power, who can fight and win wars.
For example, China will just copy the AI, not have to pay all the R&D costs, undercut all these American AI companies on price, and take most of the global AI market and long term wealth. And there is nothing American AI companies can do to stop them because America cannot fight and win a war against China.
This is making an assumption that LLMs are even capable of doing what these companies claim they can or will do in the future. Stop doing the marketing for them by believing what they tell you at face value.
> [CEOs] expressed more extreme concern about the labor market impacts of A.I. in private conversation, but suddenly became optimists once I turned on the mic.
At some point once the rate of investment capital starts to decline, they'll make a hard pivot from the investor-wooing method of "blaming AI for layoffs", to the more politically expedient method of blaming minorities and immigrants. That'll be the signal for the transition from power grabbing to power ossification, and the point at which change becomes a lot harder.
If I belong to the group who only own the bottom 10 percent of the wealth, what do I have to loose? Let others become poor too like me and that will force society to find better way to redistribute wealth.
Just fyi: I am not poor but thinking the above from a poor person's perspective.
This is a great article, but it under-emphasises the fact that it’s middle-class jobs under threat. The studies that are summarised show what happens when working-class people are kicked out of the economy, but the historical record shows that when middle-class people are kicked out of the economy, they use their education to form and lead revolutions.
Unless the bubble pops and destroys all these companies, I don’t think the leaders of AI companies will die natural deaths.
All of these discussions seem to assume there's a limit at human level intelligence beyond which AI can progress no further. What stops the AI companies taking their human level model and training it even more until it's superhuman?
Here is a very sad and frightening fact: the owner class can actually restructure "the economy" (whatever that is) to revolve entirely around AI consuming AI, and machines using machines.
Most people assume that "the economy" can only ever be based on human consumption, and therefore humans have to have an income in order for "the economy" to exist. This assumption is erroneous; billions of monetary transactions are done every day by companies with no product, no service, and no employees. These are economically valid, even though barely any humans consume or produce anything. The owning class just manages to convert those virtual transactions to "actual" money, and buy products and services because we already produce more than we consume.
It is more than frightening, but "the economy" (whatever that is nowadays) can run without many humans in the loop. AI consuming AI, phantom companies doing transactions with other phantom companies, machines working for machines.
I feel there's an interesting juxtaposition between these two quotes:
"The economy has absorbed automation before; agricultural employment collapsed from ninety percent of the American workforce to two percent and civilization continued. David Autor at MIT has shown that roughly sixty percent of today’s jobs didn’t exist in 1940. New technologies create new categories of work. True. But there’s a difference between an observation about the past and a law of nature, and the optimists consistently confuse the two."
and
"The assumption is that if you send people checks, they’ll find meaning in hobbies and community. They’ll paint. They’ll garden. They’ll finally write that novel.
This is ahistorical bullshit."
In the former the author establish that you can't make a observation about the past and take it as a law of nature. In the latter they refute arguments as "ahistorical bullshit" for not doing exactly that.
Especially since they then proceed with historical example, all of which had poverty as a strong contributing factor.
The economy is an adaptive organism that never dies.
During the Industrial revolution, 90% of agricultural workers moved to the factories. And the fields kept producing.
Then it came the computer revolution and factory workers moved to offices. And factories kept producing even more.
Then it came the internet revolution and office workers moved back home. And corporations kept producing more than before.
Then it came the AI revolution and home workers moved to the virtual world. And they kept producing even more. slop. but it sells.
We adapt. The economy adapts. Nobody dies.
> UBI is unpopular with American voters; a federal jobs guarantee has legs. People don’t want a check. They want work. They want purpose.
Nobody is opposed to getting free money. UBI is unpopular because people realize somebody has to pay for it, and they know full well the bill will land on working taxpayers, not the billionaires making windfall gains.
> Every investor presentation of an AI agent “doing the work of ten analysts” is telling you the same thing: the product is labor replacement.
I have a solution for that. Let's use AI to replace all these corporations who just lost their big moats. Conveniently, they just laid off a bunch of people with all the critical know-how and I bet they are very willing to just give it up out of spite.
> Promised an age of superconnectivity, we’ve let our shared physical spaces wither, only to find our promised digital commons to be one large billboard increasingly read and created by bots.
No, this is good. Cyberspace led to — primarily enabled — sociocultural collapse. The machines destroying cyberspace would be the most merciful outcome.
Not going to be popular, but this article misses the point entirely.
The reason we are pursuing AI so quickly is the same reason we (the West, US) pursued the atomic bomb so quickly: not because having it was great (we've only used it twice), but because 'the other guys' having it is worse.
As bad as anyone thinks AI is for a free and democratic society with oligarchs, you can be assured that a future in a China or Russia controlled totalitarian AI state would be infinitely worse.
The US at least in principle values an individual human life, as judged by its conduct in roughly 3 centuries of conflict.
China and Russia emphatically do not.
It may be cold comfort when the terminator eventually comes for you, but I'd trust an American Skynet over a Chinese, North Korean or Russian one any day.
This part specifically is a clear indication of a tendency to slide towards corporatism, in Mussolini’s sense.:
> that this leads to “the reluctance of tech companies to criticize the U.S. government, and the government’s support for extreme anti-regulatory policies on A.I.” The regulator and the regulated have converged into a single interest.
Relatedly: a tip for writers.
When an article has an obviously AI-generated slop image followed by a wall of text, I immediately know that the wall of text is also a mechanical product and I stop reading. There's nothing worse you can do to tarnish your personal brand than to open with obvious zero-effort graphics.
The text might be insightful, who knows, but the AI slop images are such an immediate red flag that there's no point in delving into it.
I say this as someone who uses agents heavily for work and has no bias against it for productivity. For creative work like writing think pieces, it's an immediate back button click.
> The assumption is that if you send people checks, they’ll find meaning in hobbies and community. They’ll paint. They’ll garden. They’ll finally write that novel... This is ahistorical bullshit.
I think this part of your theory is unsupported. Yes, we have historical evidence that when you suddenly layoff a large percentage of the population without providing replacement income, things go very, very badly.
However we also have quite a bit of evidence at this point that if you give people no-strings-attached support, they do figure out how to fill their time with art and other hobbies (for a concrete example, Ireland's very successful UBI-for-artists pilot).
Selective history marinated with ideological bias. Unreadable.
It's not necessary for them to cut labor to boost profits, but rather just to produce more goods; ideally this could be done with them hiring more people to run machines that produce more goods, so that both workers get paid and the companies can profit
The first bit is just a restatement of the "paradox of thrift":
https://en.wikipedia.org/wiki/Paradox_of_thrift
If every business cuts headcount and costs, then you overall get a contraction in the economy and high unemployment and a recession. Everyone's spending is someone else's salary and revenues.
Couldn't get through the rest of it because it was a bunch of overly verbose human-slop writing.
I think the bigger issue right now is also just straightforward economic pressure caused by tariffs and high energy costs and inflation. If the affluent consumer starts to buckle, businesses may get caught in a downsizing spiral where they start posting lower profits, firing actual management, stock prices decline, and the affluent consumer retracts. No AI required to fuel that.
Right now with stocks hitting record highs, the affluent consumer is not changing their behavior at all and just spending even harder, which is keeping profits pumped up, and keeping stocks at record highs. At the margins, though, fewer and fewer people are participating in the economy, which is a trend that is going to be unsustainable.
I think AI is going to be most relevant in the debt collapse that it leaves behind, and in the excuses it gives to shed employees. This economy is going to hit a wall at some point, AI or not.
i think we are all beating around the bush and not addressing the root issue: AI could obsolete human beings in the future. what i'm not seeing is discussion or exploration of different branches or paths that could occur once that happens.
Provocative title to generate traction on your website. Technological revolution at scale is probably what you could have called it but that has less doom and sexiness.
Or some companies resist- and form fortresses- little markets, where only non-ai companies are allowed to enter and where only non-ai products can be bought. Economic arcologies.
Can someone point me to credible evidence/examples of productivity increases from AI spending, among non-ai providers? And if you'd bear with me, I'm asking for productivity in the sense of "accelerating the businesses pursuit of its existing goals" rather than quantity. I think that in most sane business's, output quantity bereft of output quality is utterly useless in said pursuit.
what about massive western economies who export wealth through imports could they not offset the effect of employment changes domestically with a decreased demand on imports?
seems to me this will effect countries who rely on mid market exports over raw or high end exports way more then others.
I think missing from the turns is when companies do AI layoffs, then realize they aren't as productive as they thought and have to rehire 70% of the people they let go.
I'm telling you guys if you think the powerful are gonna let us all continuing living after our value becomes obsolete you have a big surprise coming.
There is nothing original in this article. This could’ve been written by an AI just scraping one month of posts to hacker news. This article is a critique of autonomously repackaging existing ideas by autonomously repackaging existing ideas. The irony is not lost on me.
> except that software has near-zero marginal cost
Yes, but not AI. This is where AI differs from other software: marginal cost is not zero, in fact it doesn't go down much, if at all, for each generated token (after accounting for the depreciation of hardware), and could even go up if trying to find an extra MWh gets more and more difficult and therefore more and more expensive.
Economies of scale don't work well in AI.
A couple of disorganized thoughts in case anyone reads far enough to see them.
The article posits that people don't want a check, they want a job. It's interesting because I think that varies widely from person to person and from job to job. The guy standing on the corner in the 95º heat with the "NEW HOMES >" sign isn't doing it for the love of the craft. Ditto for people picking tomatoes. People walking door to door hawking solar panels, is this what they excitedly told their classmates back in school that they were looking forward to after they graduated? A ton of jobs are BS jobs. Depending on whether you believe Elon Musk will produce cheap bipedal robots at scale (terrifying as that is for those of us who came of age watching Terminator 2) approximately 100% of jobs could be eliminated. If I were shoveling ditches or some other job that I have zero personal passion about, I would 100% rather accept a check and just hang out with friends and tinker in my garage for the rest of my days.
Laying aside hypotheticals, I work in tech and I would still consider that bargain. My point is just that I think a lot of people would be willing to decouple "work" from "survival" if that option were given.
The main issue I see is that I don't see the path from "here" to "there." On two sides: We have neither a proven way to do UBI in a way that wouldn't distort the market self-defeatingly[1] nor do we have a way to raise money in the ways the article briefly touches on in ways that don't seem wildly unconstitutional. In fact, let's cast the Constitution aside -- even then we do not have whole-world consensus on taxation, so faced with things like 'wealth taxes' and such, those targeted would be easily able to relocate themselves safely away from them.
All this to say, I disagree outright with very little of what's being said here -- it just strains my imagination to figure out any alternative path that's both plausible to do, and likely to have a brighter outcome. The way the Altmans and Darios of the world talk is very telling -- they sound, too, like they know what's coming will suck, but that the only real choices a person in their position has is to stay the course, or, quit and be replaced by someone else who will take us to the same destination.
What if AI did not exist and the labor market expanded 50% overnight?
Hrm. I plugged in the first 4000 words of this essay into my free Pangram account and it says "59% AI generated", "We believe that this document is a mix of AI-generated, AI-assisted, and human-written content".
Who is the customer for this stuff?
>"This creates a prisoners’ dilemma: every firm rationally automates beyond the socially optimal level, because the individual incentive to cut labor costs always outweighs the diffuse, shared consequence of eliminating consumer spending."
It seems like the author is attributing a 'standard' recessionary spiral to AI. I am not sure that AI is causing the layoffs, but it does seem like the AI investments are the only thing that have kept us from a deep recession (until now).
It seems kinda obvious to me that a cyborg (human plus AI) is going to outcompete AI-only in most scenarios. Anytime you ask an AI to do everything itself, you get the typical slop generic result that’s clogging up YouTube and Google search results.
However there is a space in the economy where “good enough” is all that matters, and “perform better” doesn’t really matter, usually because consumers aren’t discerning enough to care.
This is the range of the labor market that is really at risk. The high-end, cyborg one is probably fine, at least in terms of human labor needs.
My wife owns a business in a highly AI-resistant field (occupational therapy) in the most historically price-insensitive market (Silicon Valley). Her CAGR is 88% over the last 8 years. But we were talking about this economy problem today and with the SWE layoffs starting to roll through she said this morning: "It doesn't matter if AI can't replace us if no one can afford the service." That's crazy. Shit has changed. Not getting OT for your autistic kid is like not getting a wheel chair for a bilateral below-the-knee amputee. Whatever it takes.
> at a fraction of the cost of human workers.
herein lies the rub
I agree with most of it, but I don't think these three turns are the end of it.
We see that as soon as companies can, they will drop support for end consumers like us and focus on B2B.
The only way to sustain some level of revenue is by turning into aggression levels which is ineffective, and obviously, imoral and unacceptable.
The way things are going we all be dead by hunger. This seems by design made up to seem unavoidable.
This article reminds me of the issues raised in Technofeudalism by Yanis Varoufakis
We need to consider that by automating and replacing the work of people who have an income, those people stop consuming and no longer generate profit for capitalism.
How is this sustainable?
The Ouoroboros (serpent) eats its own tail, feeling satisfied and full in the short-term but ultimately, there is nothing left to eat.
The farmer, rather than feeding his livestock so they can keep producing milk/eggs/etc, decides to greedily eat all the corn himself.