Comment by nostrademons
5 months ago
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.
Very thought out reply on the nuances around this. Thanks for generating insight on this topic.
I think our society is being broken by focusing too much on metrics.
Also the idea of breaking windows to generate more income reminds me of the kind of services we have in modern society. It's like many of the larger encomic players focus on "things be broke", or "Breaking Things" to drive income which defeats the purpose of having a healthy economic society.
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> the "Two Income Trap" identified by Elizabeth Warren
This is addressed here: https://www.peoplespolicyproject.org/2019/05/06/the-two-inco...
childcare is not usually a lifelong cost, so the advantage of working anyway is to develop a career that persists after children no longer need a full-time parent. And incomes usually go up over the course of a career, so if the income matches those costs when the parent goes to work, that is likely to change.
> the net real result is that the kids are raised by someone other than their parents
this is the genuine argument for staying home, but to counterpoint that, it still traps the homemaker with less work experience as a result, meaning they are potentially worse off in case of a divorce, though maybe that's an extension of the "welfare" argument i.e. divorce settlements.
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?
That sounds very Black Mirrory.
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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.