Comment by twoodfin
1 day ago
The argument isn’t that AI brings the labor cost down to 0 in isolation. It brings the labor cost of the same amount of production down. So you get more production (more things = more supply -> lower prices) out of less labor.
> So you get more production out of less labor.
We don't need "AI" to figure out that technological advances increase productivity. The problem with yout argument is assuming that increased productivity mean overall reduced costs. It does not.
Healthcare, housing, education all have gone up despite increased productivity. Then you have things that are already so automated that there is no way to make them cheaper unless sacrificing quality - food, clothing, etc.
Then we have all the types of consumer products that have prices completely decoupled from the cost of labor. No one in their right mind the "cost of labor" has any relation whatsoever with Apple charging $1000 for an iPhone and/or Motorola charging $180 for a Moto G.
Healthcare, housing, education all have gone up despite increased productivity.
The hypothesis of Baumol’s Cost Disease is that these industries are exactly where we should expect prices to rise because they’re still dependent on low-productivity-growth human labor.
Baumol's Cost Disease is about relative costs. We are talking about productivity enabling absolute reduction in costs. Don't mix them up.
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