Comment by msteffen

Ok, I did more reading. I was actually super wrong about this, but it took me a while to get there. Oops! But very interesting!

Basically, people and firms are little black holes of unmet demand for all sorts of things. When the productivity shock happens, demand for stuff in the now-high-productivity sector(s) is now (mostly) met, freeing up money (that people and firms in the high-productivity sectors have more money to meet their own latent demand is also true, but somewhat incidental). That money goes to meeting other latent demand, some of which is for stuff in low-productivity sectors (housing, childcare, education, healthcare, construction), and that’s what drives up prices until/as people eventually move into those sectors. Even if housing specifically isn’t constrained, it still happens.

And I guess…as wages go up, some forms of automation also become economically sensible, which is what changes the balance of low/high productivity sectors. Latent demand for rope-holding is met with cones, latent demand for maids is (mostly) met with washing machines and dishwashers, latent demand for secretaries is (mostly) met with personal computers, etc.

So with AI, it sounds like people will move out of software into construction, healthcare, etc (only specialized work where the automation isn’t “good enough” stays). All the “teaching kids to code” that schools are doing now, eventually turns into people dealing with their own AI output as adults, where previously they would’ve hired a developer (like how managers who used to have a secretary now get a computer and type for themselves). Wages go up, education, healthcare, and housing get more expensive.