Comment by chii
5 months ago
> ironic if AI actually ended up destroying economic activity
that's not destroying economic activity - it's removing a less efficient activity and replace it with a more efficient version. This produces economic surplus.
Imagine saying this for someone digging a hole, that if they use a mechanical digger instead of a hand shovel, they'd destroy economic activity since it now cost less to dig that hole!
It's not that it's replacing one form of activity with a cheaper one, it's that it removes the transaction. Which means that now there's nothing to tax, and nothing to measure. As far as GDP is concerned, economic activity will have gone down, even though the same work is being accomplished differently.
This sounds in awful lot like a cousin of the broken window fallacy.
The fallacy being that when a careless kid breaks a window of a store, that we should celebrate because the glazier now has been paid to come out and do a job. Economic activity has increased by one measure! Should we go around breaking windows? Of course not.
It very much is a cousin of the broken window fallacy.
Bastiat's original point of the Parable of the Broken Window could be summed up by the aphorism "not everything that counts can be counted, and not everything that can be counted counts". It's a caution to society to avoid relying too much on metrics, and to realize that sometimes positive metrics obscure actual negative outcomes in society.
It's very similar to the practice of startups funded by the same VC to all buy each others' products, regardless of whether they need them or not. At the end of the day, it's still the same pool of money, it has largely come around, little true economic value has been created: but large amounts of revenue has been booked, and this revenue can be used to attract other unsuspecting investors who look only at the metrics.
Or to the childcare paradox and the "Two Income Trap" identified by Elizabeth Warren. Start with a society of 1-income families, where one parent stays home to raise the kids and the other works. Now the other parent goes back to work. They now need childcare to look after the kids, and often a cleaner, gardener, meals out, etc. to manage the housework, very frequently taking up the whole income of the second parent. GDP has gone up tremendously through this arrangement: you add the second parent's salary to the national income, and then you also the cost of childcare, housework, gardening, all of those formerly-unpaid tasks that are now taxable transactions. But the net real result is that the kids are raised by someone other than their parents, and the household stuff is put away in places that the parents probably would not have chosen themselves.
Regardless, society does look at the metrics, and usually weights them heavier than qualitative outcomes they represent, sometimes resulting in absurdly non-optimal situations.
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If we want to increase GDP, we should.
True. If you wanted to increase GDP and taxation in a nation, then: People should not cook their own food; they must pay someone to cook it in a legally documented transaction with sales taxes and income taxes. People should not take care of their own children; they must outsource it to a legitimately run daycare. People should not live in a house that they own; they must pay rent to a landlord. (People can still own homes but must rent it out to someone else for money; you just cannot occupy a home that you own.)
Actually, the last point gets pretty interesting. Let's say that you and your neighbor live in two houses with identical features. If you just swapped houses with each other and charged each other rent and legally paid all required sales/income taxes, then both of you would have less money at the end of the year than if you just lived in your own house. Yet physically speaking, nothing is different - you both still derive the same value from living in a house.
While that situation sounds stupid and contrived, it is very similar to something that can happen in real life. You can own a home in city A (let's say it's a condo apartment), but suddenly you need to leave and move to city B due to a better job opportunity. If you rent out your home in city A, you need to pay income taxes, so that will not completely offset your cost to rent a home to live in city B. And the rent you paid out in city B generally is not tax-deductible. It's like a one-way transaction where the government always wins.
See also: https://en.wikipedia.org/wiki/Imputed_rent , https://money.stackexchange.com/questions/118832/is-it-tax-i...
As others have pointed out, this is a fallacy. By reducing costs in the supply chain, higher volumes of outputs are enabled. Nobody digs holes for for the sake of digging holes; by reducing costs and transaction volume at this layer, more businesses can afford to open and more money can be spent at higher value layers.
I think you’re missing their point. Many things create value that don’t get tracked by economic measurements. Cooking lunch for yourself creates value, but there’s no way to measure that in terms of GDP.
Subsidizing daycare vs stay at home parents isn’t necessarily a net win, but daycare and ordering takeout look like economic growth even if it’s net neutral. In that context a lot of economic growth over the last century disappears.
Thus AI could be neutral on economic measurements and still a net positive overall.
If more value is being created more efficiently, in the end it’s just a question of coming up with taxation system designed for the new economy.
Government gets x% of your processor time?
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I don't see value being created. I see a hobbyist getting to spend time wrapping AI slop with a hobbyist level of game dev. Fun for OP, but society isn't asking for more games like this.
If AI concentrates economic activity and leads to more natural monopolies (extremely likely), yeah, the lower level activity becomes more efficient but the macro economy becomes less efficient due to lower competition.
Software has basically done the same thing, where we do things faster and the fastest thing that happens is accumulation of power and a lower overall quality of life for everyone due to that.
How does enabling every person on earth to create Hollywood-quality films (for better or worse) result in more natural monopolies?
The Internet for example is thought to be “democratizing” for society, but in reality some argue we’re now living under a system of “technofeudalism” [1] which is anything but. E.g. just a handful of Internet-enabled companies essentially rule the world. You can sit down and code an Amazon clone with or without AI, and both of them will be highly unlikely to topple the existing monopolies.
[1] https://thebeautifultruth.org/the-basics/what-is-technofeuda...
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Once supply becomes huge, nothing stands out unless it's extraordinary or most likely, well promoted.
Things start becoming found through aggregators. Google, Facebook, Instagram, TikTok.
Do those names ring any bells?
Imagine if only Google has the AI and processing power capable enough to generate Hollywood-quality movies.
Yeah, indeed. People on this website tend to look at the immediate effects only, but what about the second order, macro effects? It's even more glaring because we've seen this play out already with social media and other tech "innovations" over the past two decades.
I mean, since we're in tech here we like pointing out that software has done this....
But transportation technology has done this readily since the since ICE engines became wide spread. Pretty much all cities and towns and to make their 'own things' since the speed of transpiration was slow (sailing ships, horses, walking) and the cost of transportation was high. Then trains came along and things got a bit faster and more regular. Then trucks came along and things got a bit faster and more regular. Then paved roads just about everywhere you needed came along and things got faster and more regular. Now you could ship something across the country and it wouldn't cost a bankrupting amount of money.
The end result of technology does point that you could have one factory somewhere with all the materials it needs and it could make anything and ship it anywhere. This is why a bit of science fiction talks about things like UBI and post-scarcity (at least post scarcity of basic needs). After some amount of technical progress the current method of work just starts breaking down because human labor becomes much less needed.
You are right. The next question is, who gets the surplus?
the owner of the AI software and hardware, then the user of said AI (who captures the remaining surplus that the AI owner doesn't/can't capture).
your example is complete nonsense as digging a hole is not creative in any way at all
People get paid to create holes for useful purposes all day everyday. It is creative in a very literal sense. Precision hole digging is - no joke - a multibillion dollar industry.
Unless you are out in nature you are almost certainly sitting or standing on top of a dirt that was paid to be dug.
If you mean hole digging isn’t creative in the figurative sense. Also wrong. People will pay thousands of dollars to travel and see holes dug in the ground. The Nazca lines is but one example of holes dug in the ground creatively that people regard as art.
My 8 & 6 year old have spent 2 weeks digging a hole out in our little forest. It has been one of the most bonding & therapeutic things in them I’ve witnessed. They’ve developed stories, they go out and dig after school or when they are upset, etc.
Give a boy a shovel, step back & witness unbridled creativity.
How many holes have you dug?
What was the soil like?
What was the weather like?
What equipment did you use?
Do you dig during daylight only?
More than you did. Yeah, it was so creative.
It creates a hole. What does AI create?
Incumbents hate this one trick!
Until everyone has a personal fully automatic hole digger and there are holes being dug everywhere and nobody can tell any more where is the right and wrong place to dig holes
It doesn't cost less to get the thing you actually want in the end anyway, no one in their right mind would actually launch with the founder's AI-produced assets because they'd be laughed out of the market immediately. They're placeholders at best, so you're still going to need to get a professional to do them eventually.
You say this but I see ai generated ads, graphics, etc. daily nowadays and it doesn't seem like it affects at all people going or not going to buy what these people are proposing.
In the context of the hole digging analogy, it seems like a lot of holes didn't need to be carefully hand-dug by experts with dead straight sides. Using an excavator to sloppily scoop out a few buckets in 5 minutes before driving off is good enough for dumping a tree into.
For ads especially no one except career ad-men give much of a shit about the fine details, I think. Most actual humans ignore most ads at a conscious levels and they are perceived on a subconscious level despite "banner-blindness". Website graphics are the same, people dump random stock photos of smiling people or abstract digital image into corporate web pages and read-never literature like flyers and brochures and so on all the time and no one really cares what the image actually are, let alone if the people have 6 fingers or whatever. If Corporate Memphis is good enough visual space-filling nonsense that signals "real company literature" somehow, then AI images presumably are too.
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Case in point.. I listen to my own AI generated music now like 90% of the time.
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Prototypes being launched as products is so common it’s an industry cliche.
Having those prototypes be AI generated is just a new twist.
We see plenty of AI produced output being the final product and not just a placeholder.