Comment by dleslie
1 day ago
> Won't super power AI tools allow companies to do more with the same number of people? Don't you think a smarter way to run a business is to capture more of the market if you have the resources to do so?
It is possible to have excess productivity. AI allows an existing labour pool to rapidly surpass necessary productivity levels for the existing demand.
IE, let's say I live in a small town and I open a machine shop. Should I hire every mechanic that walks in the door, forever? No, absolutely not; there is an optimal number of mechanics to hire for the demand for services.
If somehow a tool comes to exist that doubles the productivity of mechanics then laying off half the mechanics is next.
> It is possible to have excess productivity.
The most productive places in the world are also those with the highest incomes and wealth generation. "Excess productivity" is either temporary or a sector-specific phenomenon, it doesn't apply to society as a whole.
This is true; and in time it's entirely possible that AI makes us an overall wealthier and more productive society. However, from the article:
> “Most economists will acknowledge that technological progress can cause some adjustment problems in the short run. What is rarely noted is that the short run can be a lifetime.”
The redundant professionals will need to find other ways of generating wealth from their productivity, and that may not be possible in a reasonable amount of time. Not in the scope of their remaining lifetime.
We will most likely redefine what we mean by human "productivity". A plumber might be considered a highly productive worker, whereas many intellectual professions will partially refocus on effectively prompting AI and assessing/revising its output.
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Temporary excess productivity can linger a very long time and sector-specific excess productivity can still be broadly damaging. Detroit and southeastern Michigan were devastated by the collapse of American automotive industry in the '00s, taking something like 10-15 years before starting to recover.
That collapse happened in the late 1970s. And many would debate if its recovered to this day.
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That's not what productivity means. You're thinking about output capacity
You can aim to expand your addressable markets. A small town is a small market. Open a second location in a nearby town. Lower profit margins to undercut competition.
The small town constraint is a bit artificial to this problem isn't it?
If you operate a machine shop in a large urban area, have competitors, and access to much improved low cost tooling, would you:
a) lay off a bunch of workers, or b) lower your prices and capture more orders?
Same thing with accounting firms or marketers or business consultants.
The assumption that (b) happens is known as Say's Law
https://en.wikipedia.org/wiki/Say's_law
I can say that people are loathe to do it for various reasons.
Well, it's the same problem with all sorts of free-market capitalism and derivatives. They all believe there's infinite "somewhere else" that resources can come from, or the customers, or the funding etc. But reality is very much finite. And so instead of the theoretical equilibrium we get monopolies and collusion to manipulate markets.
The article, actually, addresses your claims:
> The optimists will tell you this is just productivity gains. 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. 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, and the political consequences included the Chartist movement and widespread social upheaval. As Frey puts it: “Most economists will acknowledge that technological progress can cause some adjustment problems in the short run. What is rarely noted is that the short run can be a lifetime.”
So, the author believes that the problem with your reasoning that it will take a long time for the niches you are talking about to be filled (lifetime, maybe more), meanwhile things will look quite bad for most those involved.
I am even less optimistic than the author. The new aspect of this workforce displacement is the centralization. Of course, previous advances in automation also caused a degree of centralization, but AI is posed to become super-centralized if you will. There will be just a handful of suppliers and nobody will be able to challenge them, similar to situation we have with microprocessors today. Needless to say this is absolutely not a healthy situation for the world's economy.
Carl Benedikt Frey at Oxford has documented that the Industrial Revolution took seventy years before wages and employment recovered for the workers it displaced.
I can’t imagine what claim this sentence is intending to describe.
Obviously individual workers can’t “recover” their wages: 70 years later they’re no longer working.
It also can’t make sense as a recovery of labor in displaced industries, since those are largely gone once they’re supplanted by labor-saving technology.
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I read it, but I don't think it's compelling. "the short run can be a lifetime" is kind of a throw away phrase not backed by evidence.
We've seen rapid growth of knowledge work at the same time as increased productivity, and there doesn't seem to be any compelling reason that greater productivity will reverse this persistent trend.
the number of functioning machine shop in the US in large urban areas has been plummeting for decades. where there were 50 there are now 3. the customers for machine shops are large production facilities with a need for custom parts. they're all gone. now its little bits of rnd work and some custom architectural design kind of stuff. and the margins are punishing.
ok, so machine shops aren't really central to the argument, but the collapse of demand is.
They're all gone completely, or gone as in moved to where they don't have to suffer ridiculous real estate costs? There are approximately 50 machine shops within a stone's throw of my place out in the middle of nowhere. I haven't been around long enough to truly know if that is more or less than the historical norm, but best I can tell it is a growing sector locally.
Kinda. What's the lead time on my high precision metal part that needs to be cut on a 6-axis lathe? Or a metal 3d print? Neither of those machines are cheap, so not only is lead time astronomical, profit on them is also pretty great for the machine shop, which implies there's room for more machine shops. There's a lot of red tape for the orders I see, (CMMI etc) so maybe AI will help machine shops get that and be competitive.
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>It is possible to have excess productivity? Isn't this what happened with the tech hiring during Covid? And also many of the big tech companies were hiring people just to make sure their competitors didn't have them?
Machinists work at a machine shop.