Since all my competitors are also running dark factories, we compete essentially on source materials + energy (assuming we have similar design/quality). Margin would be eventually razor thin. The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
The capital gain is not much , but since we have only a handful of employees, that is enough to pay everyone a decent wage, after paying for the factory itself, source materials and energy.
How much tax do we expect to get from this gizmo company ? 10 years ago, to produce the same gizmos, I needed 5,000 employees, the unit price was way higher, and had higher revenue. But since AI and dark factories came, the prices cratered, instead of 5,000 jobs, we only have 5 jobs to produce the same.
Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
> The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
But that's good, right? It means that the difference between what workers get paid when they do work and what they pay when they buy things is small.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
Let's consider the two possibilities here.
The first is that we automate everything. This is implausible, but let's consider what would happen. Well then necessities would be free, because there is no labor cost to produce arbitrarily many solar panels or skyscrapers or mine asteroids to get unlimited raw materials etc. So then you don't need taxes because nothing costs anything.
The second is that there is still work you need people to do, and then they do that, and still have jobs.
And the more stuff you do automate, the less expensive it is to produce things, and the less assistance anyone needs to afford the now-lower cost of necessities. So if you get halfway between one and two then that's still fine because costs go down in proportion to the lower demand for labor.
The real problem is if the cost of necessities are held artificially scarce through regulatory capture and zoning rules. But that's not an automation problem, that's a government problem.
> The first is that we automate everything. This is implausible, but let's consider what would happen. Well then necessities would be free, because there is no labor cost to produce arbitrarily many solar panels or skyscrapers or mine asteroids to get unlimited raw materials etc. So then you don't need taxes because nothing costs anything.
Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands). So unless we assume energy cost is 0 and raw materials are not scarce, the final product has a cost, and a price, now my understanding is that if everyone uses dark factories, the margin would go down, and so the gain per "company" would drop too, hence the limited tax base.
My guess is from the 2 ends of the spectrum that you listed, we are moving from "there is still work you need people to do, and then they do that, and still have jobs." to "we automate everything". And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
If we do not change how we tax things, I do not see how we would sustain a society where the majority is materially (gizmos) rich, but financially poor (no job, no retirement, no social security, no education).
While dark factories keep producing high volume of gizmos for next to nothing...
I am curious how we can manage that transition, which I believe could happen way faster than politicians can move.
> Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands).
But then you're back to having something that isn't automated. If machines do this then it's free. If you need people to do it then people have jobs.
> And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
But things would also cost less, in the same proportion.
Suppose healthcare is 20% of the economy, can't be automated, and we automate everything else. Then tax revenue goes down by 80%, but so do costs, so people only need 20% as much in government services or those services only cost 20% as much to provide.
Meanwhile you still need people to be doctors and nurses but not other things, so more people become doctors and nurses. This drives down wages there, but that's fine when the doctors and nurses are also paying 80% less for everything. And at the lower wages you can justify more work to be done. More people do medical research, doctors get to spend more time with each patient, etc. Soon everyone has a job again.
Let's even consider the hypothetical where that can't happen. There are 8 billion people and only a million jobs. No other jobs are possible, somehow. How much are those million people going to get paid? Peanuts, because like everyone else they'd have negligible living expenses and they'd be in competition with 8 billion people for who would be willing to do it for the least amount of compensation. Their payment would be something like bragging rights, or all the slots would be filled by volunteers.
But in practice we would never "run out" of jobs because the supply curve always intersects with the demand curve somewhere. If demand goes down then price goes down because there is higher demand at the lower price.
> > Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands).
> But then you're back to having something that isn't automated. If machines do this then it's free. If you need people to do it then people have jobs.
Not sure to follow, machines need energy as input. So unless energy is free and unlimited, even if the machines run without people, there is a cost for the products. It is not free, even if that is 100% automated. At the very least you have to pay for the energy, if not for the raw materials.
> > And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
> But things would also cost less, in the same proportion.
Yes, things (material) and services would cost less. But still cost the energy to produce those things and services.
> Suppose healthcare is 20% of the economy, can't be automated, and we automate everything else. Then tax revenue goes down by 80%, but so do costs, so people only need 20% as much in government services or those services only cost 20% as much to provide.
Not sure why healthcare would not be 100% automated, but for the exercise, let's assume it still needs some people. Unless you also assume that unemployed people could get some ABI or SNAP from government (in US already 1 out 8 adult receives SNAP) to pay for food (cost less with 100% automation, but still cost the energy for fertilizer, tractors, transport, transformation), for shelter, etc. and pay for healthcare.
I am not sure if the gov lose 80% of its tax collection, it could sustain the population basic needs.
> Meanwhile you still need people to be doctors and nurses but not other things, so more people become doctors and nurses.
Not sure why we need doctors or nurses ? Doctors are mostly a sensor + decision tree... that speaks to the patient. I could see doctors and nurses to disappear eventually. It might take longer for robots to do surgery, but it should eventually come. So the cost should drop.
Drugs manufacturing should be 100% automated too. Lab work automated.
> This drives down wages there, but that's fine when the doctors and nurses are also paying 80% less for everything. And at the lower wages you can justify more work to be done. More people do medical research, doctors get to spend more time with each patient, etc. Soon everyone has a job again.
Let's even consider the hypothetical where that can't happen. There are 8 billion people and only a million jobs. No other jobs are possible, somehow. How much are those million people going to get paid? Peanuts, because like everyone else they'd have negligible living expenses and they'd be in competition with 8 billion people for who would be willing to do it for the least amount of compensation. Their payment would be something like bragging rights, or all the slots would be filled by volunteers.
But in practice we would never "run out" of jobs because the supply curve always intersects with the demand curve somewhere. If demand goes down then price goes down because there is higher demand at the lower price.
I guess the disconnect, for me the end of spectrum, is that all the products and services could eventually be 100% automated without human in the loop, expect for consuming the products/services. Those 100% automated product manufacturing or services, would cost energy (electricity basically) and raw material (arguably free, just need to pick it up on the ground using some energy). So, one machine would build everything and all services, with just energy as input. If energy is not free, then products and services would cost something. How people pay for product and services ?
> Not sure to follow, machines need energy as input. So unless energy is free and unlimited, even if the machines run without people, there is a cost for the products.
But where does energy come from? You would have machines that can make solar panels and install them and operate a power grid, or people would still have jobs doing those things.
> Unless you also assume that unemployed people could get some ABI or SNAP from government (in US already 1 out 8 adult receives SNAP) to pay for food (cost less with 100% automation, but still cost the energy for fertilizer, tractors, transport, transformation), for shelter, etc. and pay for healthcare.
If everything other than healthcare was automated then energy production, fertilizer production, tractor production, transportation, etc. would all be automated.
If everything is automated then everything is free. If there is still anything that can't be automated then people still have jobs doing that.
My problem is when you automate, the benefits are not passed on to the entire chain of people involved even though we start the discussion with that. So what do we do?
In a competitive market, efficiency gains are generally going to end up as lower prices to the customer, which is the main way that ordinary people benefit from them. That doesn't happen when the market is consolidated and the oligopoly keeps the gains themselves.
So, ensure competitive markets by thwarting regulatory capture and enforcing antitrust laws.
Yes, that has been the rule for now. But I am wondering that if the prices drop so much, but the price to pay for that abundance would be the loss of significant part of job market, then how can we keep the economy humming ?
We would need to find a way to give money to people so they can keep participating in the economy even though everything is cheap. If not UBI, we would need to find ways for the majority to do something that is not automated, and give them some coins in exchange.
For millennia the currency has been energy (human labor, then machines) and intelligence (human intelligence, then artificial intelligence). If energy and intelligence price goes down, and the amount of energy and intelligence increases, then what is left for humans to claim some reward/coins ?
> But I am wondering that if the prices drop so much, but the price to pay for that abundance would be the loss of significant part of job market, then how can we keep the economy humming ?
Money is an abstraction, so prices are always relative to wages. If prices go down, that's equivalent to wages going up. If your costs are $1000 and your wages are $1000, that's the same to you as if your costs are $100 and your wages are $100.
So the problem solves itself. You previously needed a job that would pay you $1000 to cover your costs, now you only need one that pays $100. And there is still $100 of work that needs to be done, because that's why things cost $100 instead of $0.
I agree, so the prices of everything would go down. People would be unemployed. Do we plan to give some money to pay for basic stuff (food, shelter) ?
Even if the cost for food and shelter is $1 per month, if there is no revenue, it is still too expensive, right ?
I am trying to understand the speed comparison between how fast the prices will go down, vs. how fast people will lose their jobs. If job loss goes faster than the price decrease, we might have a problem to solve.
> Even if the cost for food and shelter is $1 per month, if there is no revenue, it is still too expensive, right ?
Why would there be no revenue? Right now you need a job that pays at least e.g. $2500/month to afford basic necessities. If those jobs disappear but the cost falls to $1/month, you don't need those jobs, because a job that pays $3/month leaves you in fat city, much less one that pays $50/month.
> If job loss goes faster than the price decrease, we might have a problem to solve.
That would be a transient problem while the prices catch up, not a long-term problem. You could solve that by e.g. printing some money in the short term.
But if we fully automate how to make and sell and deliver TVs and blenders and now I can get a 200" TV for $2 and a blender for $0.05 but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Like sure all the goods are stupid cheap but things that are actually naturally rivalrous and exclusive like real estate continue to hold value most random people are pretty fucked it seems.
> But if we fully automate how to make and sell and deliver TVs and blenders and now I can get a 200" TV for $2 and a blender for $0.05 but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Delivery should be automated.
Rent would obviously crater as building housing craters too (robots making it, materials being extracted and manufactured by robots too). But again, it would still cost something (energy at very least and assuming energy is not free).
So I suspect that even if 100% is automated, we would still need little money to pay for the basics (food, shelter).
There is only so much land where people actually want to live. Governments put restrictions on what can be built. It might end up costing $20 to build a 100-story apartment complex, but if the government says buildings can only be five stories high or you have to only build single family homes it doesn't matter.
> It might end up costing $20 to build a 100-story apartment complex, but if the government says buildings can only be five stories high or you have to only build single family homes it doesn't matter.
And that's the point. The problem isn't caused by automation, it's caused by zoning restrictions.
> but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Apartments aren't land, they're buildings. Buildings can be made arbitrarily tall; if we built tall buildings we'd have more housing units than people long before we ran out of land.
So if there is a machine that can build buildings for free, apartments should be cheap. If there isn't a machine that can build buildings for free, get a job building buildings for money.
Even if 100% automated, there might still be a residual cost to building as it needs energy (assuming than raw material is free). I do not think that because the building would be not free, it would allow human to compete (too slow, inaccurate, etc.)
The problem with that is that it operates from a wrong idea of how to set prices for a product. From first principles, you make a widget, figure out how much it costs to make it, including your time, then add some amount of margin on top, and you have a business. That is incorrect. No, you have product, and then you just make up a number based on circumstances. If you're lucky, the price you manage to sell your widget for is above what it costs to make it. If you're not lucky, it isn't, and you have a sale, and lose less money than if you didn't sell anything. However, if you're lucky, you sell your widget for way more than it costs to make it, because of branding, aka luxury fashion brands. The numbers though, are just made up. That's the trick of capitalism. You just... make up a number! Once you understand that, the world starts to make even less sense than it did before. If pricing were cost-plus, branding and timing wouldn’t matter, and empirically they matter a lot.
You're describing what happens in uncompetitive markets (or for status goods, which have inherently weird behavior because they're a signaling mechanism that relies on waste and artificial scarcity as a mechanism of operation, but also inherently nobody actually needs them).
In an ordinary competitive market, margins are thin because sellers are fungible, so charging slightly less than the competition results in a disproportionate increase in sales because customers are just choosing the lowest price, and then sellers keep lowering prices until margins are thin because it's more profitable to get a $0.05 margin on a thousand units than a $0.10 margin on a dozen units.
Automation drives goods toward zero while destroying the wage base, as Ricardo warned: gains flow to owners (das capital) of scarce resources. Today that’s Ricardian rents on land, housing, zoning, healthcare, education. $2 TVs ain't gonna pay rent.
Antitrust decides who captures surplus, not how people access it once wages stop working. And UBI would just be stapling cash onto a broken distribution system. So what actually replaces labor as the primary claim on surplus?
The only truly scarce things are time and energy/matter. Everything else can be made from those.
Labor is essentially the sale of time. If labor becomes cheaper then energy/matter becomes the bottleneck. Except that there is actually quite a bit of energy and matter in the universe and the main bottleneck on collecting more of it is labor, so if labor gets cheaper then so does energy and matter.
The things you're pointing to are the things that are artificially scarce. How expensive is a housing unit if you can build a 100 story building on any lot and the labor to do that is cheap? Now how expensive is it if building tall buildings is banned and there is an intentional regulatory bottleneck on more people getting trade licenses?
If you still need human labor to build housing then people can get jobs building housing until housing gets cheap. If you don't need human labor to build housing then housing would already be cheap. Unless you have the government artificially constraining the housing supply, in which case you need to fix that. And the same thing for medicine and education.
> Unless you have the government artificially constraining the housing supply, in which case you need to fix that. And the same thing for medicine and education.
That is the meat of it. Zoning laws are why every city doesn't look like Hong Kong, even if it cost $1 to make a sky scraper. There are artificial limits on supply of doctors, and we don't pay teachers enough which is a whole other topic. If that's what we have to fix in order to make progress, I'm suddenly doubtful of how much progress will really be made in the face of the singularity.
> Zoning laws are why every city doesn't look like Hong Kong
The reason every city doesn't look like Hong Kong is that Hong Kong has a population of 7.5 million and a US city is considered "large" if it has 50,000 people.
Zoning laws are why every city doesn't look like Lubbock or Boise, which is hardly a problem.
> If that's what we have to fix in order to make progress
That's what we have to fix in order to make progress. It is what it is.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
So are we're simultaneously facing a big unemployment crisis, and a big shortage of health care providers and retirement care takers?
One could argue that AI could replace or add to the health and retirement care work force... I am not saying it should happen, but I am trying to understand where we are going with the AI promises, and their impact on society.
If AI is so good that it can replace health and retirement care, then the price should fall to.
But basically, we would end up with AI and dark factories building gizmos to sustain and entertain humans and fixing them until they die.
I guess taxes at this point are irrelevant, AI could build new factories of factories, money would be useless.
Taxes used to be based only on property rather than labour, maybe we should go back to that. Of course this won't happen as it is a force of wealth-deconcentration.
We've launched dozens of shuttles below the minimum temp threshold before there's no reason to delay this launch...
Also that's a singular industry, if the current crop of AI companies deliver what their hype and valuation demands it's a shock across the whole economy not isolated.
200 years ago, 95% of the workers in my country worked in subsistence farming. Today, only 2% are farmers. The whole spectrum of labor has turned upside down and upside down again, in that time. It has certainly not been a singular industry.
> 200 years ago, 95% of the workers in my country worked in subsistence farming. Today, only 2% are farmers.
Yes, it took some time to go from manual/animal labor (energy used is food) to mechanical labor (mostly oil energy). And oil is more energy dense than food, and tractors are more powerful than horses. And bonus points for the oil, it allowed to build fertilizers to boost productivity per acre. So, yes eventually we just need 2% to do what what 95% used to do in farming.
AI is promising to do the same but in virtually all industries (manufacturing, services, healthcare, etc.) and in a way shorten span.
Work used to be labor (human/animal) fueled by energy (food) + intelligence (human) fueled by energy (food), then labor (machine) fueled by energy (oil/electricity) + intelligence (AI) fueled by energy (electricity).
IF work is mostly done by AI/machines fueled by energy. Then work's price is mostly a function of energy price (assuming materials can be extracted/transported/transformed is also a function of energy).
If energy becomes abundant and cheap, then there is no reasons to not let AI do the work.
But then what happens to the rest of us, how the economy keeps humming ?
It was a bunch of small changes over the course of 200 years but yes that's perfectly comparible to the effects needed to justify the valuation put into all the AI companies right now... but I was talking about the issues with comparing it to singular inventions like the cotton gin or jacquard loom that DO largely only affect one industry.
I think it's weird there's so much pushback on the idea that if the hype proves true and it /can/ replace basically any knowledge worker (and potentially drive robots replacing physical laborers) that that would have a bit of a larger effect than inventions that affect some parts of some industries...
There's plenty of space to think it just won't happen (where I'm personally at, at least on the current LLM driven versions) but if it does work the broad spread of the impact would require a huge amount of change all at once.
> I was talking about the issues with comparing it to singular inventions like the cotton gin or jacquard loom
Ok, appreciate the clarification. But in that time frame there have been a number of really tectonic inventions that changed pretty much everything: steam power, ICE power, electrification, refrigeration, computing and the internet, just to name a few off the top of my head.
> There's plenty of space to think it just won't happen (where I'm personally at, at least on the current LLM driven versions)
Same. I am both optimistic about human ability to find new jobs, and skeptical that "AI" is going to make that necessary in the new future.
That amount of change over 200 years is vastly different from the supposed timeline for AI to 'change everything' is the core of the difference. Over that long there's time for people to retrain into other jobs and there's enough people not significantly affected by the change that society as a whole can roll on and support the affected people. Mass disruption and joblessness is extremely destabilizing.
I get what you are saying, and I don't think you are wrong, but it has been like 100 monumental changes in 200 years. The demographic shift of the industrial revolution was particularly painful, to be sure. But we seem to be pretty good at coping with them, overall.
And again, I remain skeptical that general artificial intelligence is actually that close at hand.
There is likewise no indication that it won't. And if I am looking at a pattern where a thousand careers were destroyed by the advance of technology and were swiftly replaced by tens of thousands of new ones, it is not unreasonable to suspect that the pattern is likely repeat.
Do you think that the velocity of change is different from previously ?
I am wondering if we are touching on a human biological limitation. Human are adaptable and flexible, but there is a limit to that flexibility. Some sort of biological limit on how fast we can turn around.
The technology acceleration is increasing, and I am wondering if there would be a point where the technology would evolve faster than what human biology can comprehend.
1,000 years ago, anyone could pretty much build or fix the current technology (anyone could fix a cart).
50 years ago, a majority of people could build or fix the current technology (e.g. most could fix a car).
this year, a limited number of people can build or fix the current technology (e.g. how many people can fix a self driving car?)
10 years from now, a very limited number of people if any could build or fix the current technology (e.g. explain how is AI doing this thing?)
If AI evolves at the same pace, and replacing labor (robots) and services (AI), I am not sure that human would turn around? How do you think we can turn things around ?
Education ? but we are reaching the limit already of how much technology we can teach in a student lifetime. Now we could argue, that one does not need a PhD in computer science to use AI, but eventually do we even need someone to use AI ? Would AI be cheap and pervasive enough that AI would drive AI would drive AI... why would you add a 20W analog brain in the loop ?
What activity would require human involvement ? Genuinely curious how the technology acceleration in general and AI in particular would affect the economy.
> If AI evolves at the same pace, and replacing labor (robots) and services (AI), I am not sure that human would turn around? How do you think we can turn things around ?
I see no indication that we are close to building a GAI, or that we are close to solving the hallucination problems that severely limit the utility LLMs without human managers. We don't understand how our own intelligence works, or even an ant's. The notion the we are close to replicating or exceeding it seems far fetched to me.
> What activity would require human involvement ?
Nurses, bar tenders, barbers... Hasn't anyone read Player Piano? :)
> How do you think we can turn things around ?
I dunno. Did anyone know how dangerous fire or deadly spear points world work out?
Since all my competitors are also running dark factories, we compete essentially on source materials + energy (assuming we have similar design/quality). Margin would be eventually razor thin. The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
The capital gain is not much , but since we have only a handful of employees, that is enough to pay everyone a decent wage, after paying for the factory itself, source materials and energy.
How much tax do we expect to get from this gizmo company ? 10 years ago, to produce the same gizmos, I needed 5,000 employees, the unit price was way higher, and had higher revenue. But since AI and dark factories came, the prices cratered, instead of 5,000 jobs, we only have 5 jobs to produce the same.
Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
I am wondering how best to solve that equation ?