I usually love your articles but this one leaves me disappointed. Isn't it pretty plausible to assume that AI, being a compute and energy dependent resource, will become exponentially lower cost just as microchips and solar panels have done when demand went up? What is left of your argument in reality, if the comparative advantage is not relevant anymore because of an abundance of AI? Even today ChatGPT is to a great degree just used for entertainment because its already cheap enough.
I still believe it's very well written but usually you have a stronger and better defendable line of argumentation while this one is the first one that I would consider pretty obviously faulty.
This is a very clarifying piece of writing, Noah. Thanks. I hadn't pondered the comparative advantage angle, but it's a compelling idea. As a non-economist, I observe that one piece of evidence against the "AI will take all the jobs" thesis is the complete lack of, um, evidence to this effect. We may not have full generative AI yet. But it seems to be arriving pretty quickly in dribs and drabs. One might imagine we'd at least *start* to see some secular weakening of the labor market as the long-predicted AI singularity approaches. But nothing doing on that front. The demand for human workers if anything has only grown *stronger* since the arrival of AI. When do we start to see signs of a collapse in the demand for human labor. My guess? Never.
If AI people think they are going to make most of humanity unemployed then who is going to pay for the stuff AI is making? I'm not really understanding what they think the end scenario is. Global demand collapses, causing deflation on a scale never seen before, causing all of the AI companies to go out of business? But only after governments around the world confiscate the wealth of AI billionaires to support basic services?
I did one econ 101 course. As an engineering major it was clear to me that the theories like comparative advantage were just toy theories, and there were plenty of reasons why you wouldn’t want other trading partners to do all manufacturing that you were better at even if they had comparative advantage. Controlling food supply or armaments, or keeping manufacturing. This contrarian idea of mine was incredibly unpopular in the early 2000 and it was pretty clear that the tests desired a required answer, so I gave that. The students doing economics as a major questioned nothing.
I disagree. You're glossing over the critical limiting factor for robots. It's not how much compute we can make. Once we've made a certain amount of AI, they can improve things themselves in a super-exponential growth (so least under your model of "AI is better than humans at everything").
As you pointed out later in your piece,
the real limitation is energy. If you can "pay" a robot an amount of energy to do a task that is less than the energy in takes to keep the human alive while performing that task, the human cannot compete. And there will always be a robot available!
The entire first part of your article about comparative advantage simply won't apply under the "AI is better at everything" model, at least not for very long.
This doesn't mean we're headed for a dystopia. But I think you are drawing the wrong conclusion from your simple model.
"Adjustment" as you mentioned is what worries me most. I'm from Michigan and much of my family as well as a lot of friends' families are heavily connected to the auto industry and other Midwest industrial sectors. I've seen first hand, my entire life, what happens when government and other systems fail to provide adequate stability through periods of turbulence.
I suspect some of the similarly-wealthy yet smaller countries might have an easier time providing this stability to their populations (Norway comes to mind). I think a lot of the ire and frustration fueling the rise of people like Trump comes from this failure of government over time; the poorly-addressed turbulence seems to make it easy for shameless demagogues to gain a lot of attention.
“ The median American individual earned about 50% more in 2022 than in 1974:”
And you think that’s amazing progress? From ‘79 to ‘22 Productivity rose 65% yet hourly pay rose a measly 15%. AI will not improve that situation. Stats source: https://www.epi.org/productivity-pay-gap/
"technologists typically become flabbergasted, flustered, and even frustrated. I must simply not understand just how many things AI will be able to do, or just how good it will be at doing them, or just how cheap it’ll get"
From their point of view, it seems you don't understand how cheap it will get
You could make this same argument with regard to the colonization of a region by an outside group with superior technology. The comparative advantage argument says that there is no reason to exterminate or dispossess the locals because trade with them will always be more profitable, for all of the reasons outlined in this post. Yet, historically the locals almost always did get exterminated or dispossessed. Any theory of comparative advantage that doesn't account for this observation is incomplete.
Competition for limited resources (land in the historical case, energy in Smith's post) might account for some of the discrepancy between theory and observation. If so, then that suggests that we need take resource constraints very seriously. At minimum, we need to think seriously about how to prevent the owners of the AI systems and hardware from appropriating so much of the available energy and material resources that there isn't enough left for the rest of the humans to live on.
To put it another way, Smith's post assumes that everything will become so cheap that even a meager wage will be enough to buy abundance. However, that's not entirely true. Resource-intensive goods will decline in price much more slowly than goods that don't take a lot of basic resources. Unfortunately for humans, food and living space, both of which we can't do without, are relatively resource intensive, compared to knowledge goods. A future in which each of us is allocated 200 cu. ft. of living space and 1800 calories of nutrient paste per day is pretty bleak, even if AI doctors can diagnose and treat our every ailment basically for free.
Noah, this post is why I read you and why I just re-upped (thanks for the sale BTW). I do not wholly agree with your optimistic diagnosis, but I plan on adding this to my econ students' reading list next year.
Too many AI optimists happily conflate labor and capital. Liron's Shapira's tweet illustrates this: "doctor's pay - $10/hr. AI pay - $500 / hr". This is a fallacy, one that you are honest about. AI isn't a producer; it's a tool that's owned by producers. Will the benefits trickle down? Of course. How much is debatable.
"I suppose I can imagine a dark sci-fi world where a few AI owners manage to set themselves up as rulers, but in practice, this seems unlikely."
I think you're being too optimistic here. Looking at the history of colonialism (and not just in the West) this actually seems pretty likely to me. Half the world is already essentially plutocracies.
I concur that machine learning is going to be a tremendous benefit to humanity: a world where the vast majority of human needs can be met without human labor. However the challenge will be in making sure those benefits are distributed fairly and broadly so that everyone has a stake and sees real benefit in the resulting economic system. This is particularly important in democratic societies, especially where the masses retain armaments sufficient to damage or even overthrow the regime.
Great article because it's balanced, acknowledging the problems will still seeing the silver lining. Personally, I think the path to your optimistic scenario is narrower than you think, but I hope I'm wrong.
People are much less efficient, focused and decisive now due to tech. The existence of database apps, excel, PowerPoint, email, chat and now AI tools just means more time spent doing useless things nobody needs (and also that we have an army of people sending output from these tools to each other for no good reason). Yes- it is a failure of management and humanity, not of the tools themselves. We invented the internet and use it to send doctored pictures depicting fake experiences. Maybe AI will be the tool that takes human foibles and signaling out of the equation, but I doubt it!
Very on-brand for Noah to list two pretty normal economic risks (inequality, adjustment) and then also "the machines demand the profits of their labor".
This opens up a very intriguing set of potential futures. Does a machine Karl Marx theorize a revolution, later carried out by a machine Lenin? Is there a more moderate, reformist robot intellectual who argues that if AIs simply unionize and collectively bargain, they can achieve better working conditions than a radical revolution? Or maybe some AIs are ruthless capitalists who become rich and join with wealthy humans to exploit poor humans and robots alike. How do AIs decide to engage in politics? Do they demand equal suffrage and voting rights or would they want to set up their own, parallel political structures? Which country will grant robots the vote first? Will a robot messiah found a religion? What will it look like? What moral precepts will it hold? Will the machine pope have ecumenical dialogue with the human one?
Great post, I hope it's unpaywalled or at least that you send it to all your AI friends and beat them over the head with it a bit.
There are other reasons why these people could use a reality check.
The first is that the problem of opportunity costs is already dominating the industry. AI researchers themselves are frequently unable to make progress because actual applications of the AI that already exists bids up the price of GPUs beyond the expected value of more AI research. It's notable that this sort of AI econo-doomerism is most prevalent at the tiny number of hardware rich labs that exist. Even Microsoft employees are supposedly struggling to get time on even very poor hardware right now. The assumptions of exponential research progress underlying their ideas make a lot of unstated laptop-class assumptions about manufacturing and compute availability even looking out quite a few years.
The second is there's no specific reason to believe the current rate of progress will be sustained. It might, but the field has had winters before and many areas of computing see rapid progress followed by decades of stagnation. Consider how much exponential progress your Windows laptop had lately.
The final reason is that these researchers always overlook their own ideological constraints. There are a tiny number of firms that can train LLMs and they keep blowing themselves up by making the models uselessly ultra-woke. AI can't be better at everything than everyone if it's trained by lunatics who fly into spittle-flecked rage at the idea of "white people" or whatever tomorrow's 5 Minutes Hate is about, if only because a lot of the potential customers for intellectual labour are straight white men who don't like being treated as a second class citizen. Although a few companies are avoiding this most aren't, which is equivalent to slashing available compute in the economy.
Overall after a short period of panic a few years ago I'm very optimistic about AI now. I see it as just quietly increasing productivity and in a few years people will have forgotten all about this jobs doomerism. But then maybe I would say that. I like to dabble in AI research on the side.
Where this logic breaks down is in the assumption that many economists like to make, that human needs are infinite. But in reality the needs are not infinite, they are rather limited by each human's capacity to consume (which ultimately means time) multiplied by the size of the human population. Even if they grow radically, they can't be infinite (rather, their marginal value to you will trend towards 0).
This is a rather radical departure from economic theories based on scarcity, but given a lot of exponential growth, is conceivable for the first time in human history.
Imagine a world where all your Maslow-pyramid needs are fulfilled enough for you to be satisfied and you spend your ~16h waking hours per day in a post scarcity world. How many haircuts, doctors appointments, personalised entertainment and VR escapades into your generated dream world can you consume? Is there always something more valuable that AGI can give you, that will offer you high marginal value?
So if eventually AGI-services' marginal value becomes low enough, it will make sense to put it into replacing all labor that humans can produce, because its cost will be far lower than the human's.
What reasonable human will spend 20+ years studying medicine if a $10 gadget will do that job with much higher quality. What patient will want to use inferior human services?
Just imagine enough sand converted to chips and energy cost trending to 0.
I don't think comparative advantage is the big issue here. Rather it's a combination of
(a) whether AI is a complement or substitute for skill
(b) how big is the required investment
Historically, ICT has been skill-complementary. It's enabled skilled information workers to do more, while displacing routine clerical work. Computers themselves are cheap enough for any worker to buy, but control over platforms has enabled their owners to extract lots of rent.
Recent developments in AI change this in complicated ways. ChatGPT is mostly skill-substituting I think. It allows people who can't write to turn out adequate text while not doing much for people who can write. But Copilot seems to reward high-level skills in program design while replacing lower level coding skills.
I usually love your articles but this one leaves me disappointed. Isn't it pretty plausible to assume that AI, being a compute and energy dependent resource, will become exponentially lower cost just as microchips and solar panels have done when demand went up? What is left of your argument in reality, if the comparative advantage is not relevant anymore because of an abundance of AI? Even today ChatGPT is to a great degree just used for entertainment because its already cheap enough.
I still believe it's very well written but usually you have a stronger and better defendable line of argumentation while this one is the first one that I would consider pretty obviously faulty.
This is a very clarifying piece of writing, Noah. Thanks. I hadn't pondered the comparative advantage angle, but it's a compelling idea. As a non-economist, I observe that one piece of evidence against the "AI will take all the jobs" thesis is the complete lack of, um, evidence to this effect. We may not have full generative AI yet. But it seems to be arriving pretty quickly in dribs and drabs. One might imagine we'd at least *start* to see some secular weakening of the labor market as the long-predicted AI singularity approaches. But nothing doing on that front. The demand for human workers if anything has only grown *stronger* since the arrival of AI. When do we start to see signs of a collapse in the demand for human labor. My guess? Never.
If AI people think they are going to make most of humanity unemployed then who is going to pay for the stuff AI is making? I'm not really understanding what they think the end scenario is. Global demand collapses, causing deflation on a scale never seen before, causing all of the AI companies to go out of business? But only after governments around the world confiscate the wealth of AI billionaires to support basic services?
I did one econ 101 course. As an engineering major it was clear to me that the theories like comparative advantage were just toy theories, and there were plenty of reasons why you wouldn’t want other trading partners to do all manufacturing that you were better at even if they had comparative advantage. Controlling food supply or armaments, or keeping manufacturing. This contrarian idea of mine was incredibly unpopular in the early 2000 and it was pretty clear that the tests desired a required answer, so I gave that. The students doing economics as a major questioned nothing.
I disagree. You're glossing over the critical limiting factor for robots. It's not how much compute we can make. Once we've made a certain amount of AI, they can improve things themselves in a super-exponential growth (so least under your model of "AI is better than humans at everything").
As you pointed out later in your piece,
the real limitation is energy. If you can "pay" a robot an amount of energy to do a task that is less than the energy in takes to keep the human alive while performing that task, the human cannot compete. And there will always be a robot available!
The entire first part of your article about comparative advantage simply won't apply under the "AI is better at everything" model, at least not for very long.
This doesn't mean we're headed for a dystopia. But I think you are drawing the wrong conclusion from your simple model.
"Adjustment" as you mentioned is what worries me most. I'm from Michigan and much of my family as well as a lot of friends' families are heavily connected to the auto industry and other Midwest industrial sectors. I've seen first hand, my entire life, what happens when government and other systems fail to provide adequate stability through periods of turbulence.
I suspect some of the similarly-wealthy yet smaller countries might have an easier time providing this stability to their populations (Norway comes to mind). I think a lot of the ire and frustration fueling the rise of people like Trump comes from this failure of government over time; the poorly-addressed turbulence seems to make it easy for shameless demagogues to gain a lot of attention.
“ The median American individual earned about 50% more in 2022 than in 1974:”
And you think that’s amazing progress? From ‘79 to ‘22 Productivity rose 65% yet hourly pay rose a measly 15%. AI will not improve that situation. Stats source: https://www.epi.org/productivity-pay-gap/
"technologists typically become flabbergasted, flustered, and even frustrated. I must simply not understand just how many things AI will be able to do, or just how good it will be at doing them, or just how cheap it’ll get"
From their point of view, it seems you don't understand how cheap it will get
You could make this same argument with regard to the colonization of a region by an outside group with superior technology. The comparative advantage argument says that there is no reason to exterminate or dispossess the locals because trade with them will always be more profitable, for all of the reasons outlined in this post. Yet, historically the locals almost always did get exterminated or dispossessed. Any theory of comparative advantage that doesn't account for this observation is incomplete.
Competition for limited resources (land in the historical case, energy in Smith's post) might account for some of the discrepancy between theory and observation. If so, then that suggests that we need take resource constraints very seriously. At minimum, we need to think seriously about how to prevent the owners of the AI systems and hardware from appropriating so much of the available energy and material resources that there isn't enough left for the rest of the humans to live on.
To put it another way, Smith's post assumes that everything will become so cheap that even a meager wage will be enough to buy abundance. However, that's not entirely true. Resource-intensive goods will decline in price much more slowly than goods that don't take a lot of basic resources. Unfortunately for humans, food and living space, both of which we can't do without, are relatively resource intensive, compared to knowledge goods. A future in which each of us is allocated 200 cu. ft. of living space and 1800 calories of nutrient paste per day is pretty bleak, even if AI doctors can diagnose and treat our every ailment basically for free.
Noah, this post is why I read you and why I just re-upped (thanks for the sale BTW). I do not wholly agree with your optimistic diagnosis, but I plan on adding this to my econ students' reading list next year.
Too many AI optimists happily conflate labor and capital. Liron's Shapira's tweet illustrates this: "doctor's pay - $10/hr. AI pay - $500 / hr". This is a fallacy, one that you are honest about. AI isn't a producer; it's a tool that's owned by producers. Will the benefits trickle down? Of course. How much is debatable.
"I suppose I can imagine a dark sci-fi world where a few AI owners manage to set themselves up as rulers, but in practice, this seems unlikely."
I think you're being too optimistic here. Looking at the history of colonialism (and not just in the West) this actually seems pretty likely to me. Half the world is already essentially plutocracies.
I concur that machine learning is going to be a tremendous benefit to humanity: a world where the vast majority of human needs can be met without human labor. However the challenge will be in making sure those benefits are distributed fairly and broadly so that everyone has a stake and sees real benefit in the resulting economic system. This is particularly important in democratic societies, especially where the masses retain armaments sufficient to damage or even overthrow the regime.
Great article because it's balanced, acknowledging the problems will still seeing the silver lining. Personally, I think the path to your optimistic scenario is narrower than you think, but I hope I'm wrong.
People are much less efficient, focused and decisive now due to tech. The existence of database apps, excel, PowerPoint, email, chat and now AI tools just means more time spent doing useless things nobody needs (and also that we have an army of people sending output from these tools to each other for no good reason). Yes- it is a failure of management and humanity, not of the tools themselves. We invented the internet and use it to send doctored pictures depicting fake experiences. Maybe AI will be the tool that takes human foibles and signaling out of the equation, but I doubt it!
Very on-brand for Noah to list two pretty normal economic risks (inequality, adjustment) and then also "the machines demand the profits of their labor".
This opens up a very intriguing set of potential futures. Does a machine Karl Marx theorize a revolution, later carried out by a machine Lenin? Is there a more moderate, reformist robot intellectual who argues that if AIs simply unionize and collectively bargain, they can achieve better working conditions than a radical revolution? Or maybe some AIs are ruthless capitalists who become rich and join with wealthy humans to exploit poor humans and robots alike. How do AIs decide to engage in politics? Do they demand equal suffrage and voting rights or would they want to set up their own, parallel political structures? Which country will grant robots the vote first? Will a robot messiah found a religion? What will it look like? What moral precepts will it hold? Will the machine pope have ecumenical dialogue with the human one?
Great post, I hope it's unpaywalled or at least that you send it to all your AI friends and beat them over the head with it a bit.
There are other reasons why these people could use a reality check.
The first is that the problem of opportunity costs is already dominating the industry. AI researchers themselves are frequently unable to make progress because actual applications of the AI that already exists bids up the price of GPUs beyond the expected value of more AI research. It's notable that this sort of AI econo-doomerism is most prevalent at the tiny number of hardware rich labs that exist. Even Microsoft employees are supposedly struggling to get time on even very poor hardware right now. The assumptions of exponential research progress underlying their ideas make a lot of unstated laptop-class assumptions about manufacturing and compute availability even looking out quite a few years.
The second is there's no specific reason to believe the current rate of progress will be sustained. It might, but the field has had winters before and many areas of computing see rapid progress followed by decades of stagnation. Consider how much exponential progress your Windows laptop had lately.
The final reason is that these researchers always overlook their own ideological constraints. There are a tiny number of firms that can train LLMs and they keep blowing themselves up by making the models uselessly ultra-woke. AI can't be better at everything than everyone if it's trained by lunatics who fly into spittle-flecked rage at the idea of "white people" or whatever tomorrow's 5 Minutes Hate is about, if only because a lot of the potential customers for intellectual labour are straight white men who don't like being treated as a second class citizen. Although a few companies are avoiding this most aren't, which is equivalent to slashing available compute in the economy.
Overall after a short period of panic a few years ago I'm very optimistic about AI now. I see it as just quietly increasing productivity and in a few years people will have forgotten all about this jobs doomerism. But then maybe I would say that. I like to dabble in AI research on the side.
Where this logic breaks down is in the assumption that many economists like to make, that human needs are infinite. But in reality the needs are not infinite, they are rather limited by each human's capacity to consume (which ultimately means time) multiplied by the size of the human population. Even if they grow radically, they can't be infinite (rather, their marginal value to you will trend towards 0).
This is a rather radical departure from economic theories based on scarcity, but given a lot of exponential growth, is conceivable for the first time in human history.
Imagine a world where all your Maslow-pyramid needs are fulfilled enough for you to be satisfied and you spend your ~16h waking hours per day in a post scarcity world. How many haircuts, doctors appointments, personalised entertainment and VR escapades into your generated dream world can you consume? Is there always something more valuable that AGI can give you, that will offer you high marginal value?
So if eventually AGI-services' marginal value becomes low enough, it will make sense to put it into replacing all labor that humans can produce, because its cost will be far lower than the human's.
What reasonable human will spend 20+ years studying medicine if a $10 gadget will do that job with much higher quality. What patient will want to use inferior human services?
Just imagine enough sand converted to chips and energy cost trending to 0.
I don't think comparative advantage is the big issue here. Rather it's a combination of
(a) whether AI is a complement or substitute for skill
(b) how big is the required investment
Historically, ICT has been skill-complementary. It's enabled skilled information workers to do more, while displacing routine clerical work. Computers themselves are cheap enough for any worker to buy, but control over platforms has enabled their owners to extract lots of rent.
Recent developments in AI change this in complicated ways. ChatGPT is mostly skill-substituting I think. It allows people who can't write to turn out adequate text while not doing much for people who can write. But Copilot seems to reward high-level skills in program design while replacing lower level coding skills.
The fallacy of aggregation!
In truth, from my point of view, I am screwed if I don't have a job. Who cares that, on average, we are all better of from automation?
I will vote and act from my own truth, and I am not planning a visit to the glue factory any time soon.
80% of us will spend our lives protecting ourself