Dwarkesh Patel argues post-AI singularity economies will create new consumption categories rather than shifting spending entirely to human-only services

Watch the full episode with Phil and @alexolegimas:

I don’t see how this helps the labor share point.

Labor share hasn’t collapsed since 1400. Yes, we found a lot of goods to consume with automation.

AND we found a lot more things for humans to do besides sing.

Some people argue that, after the singularity, the human labour share will still be high. Anything that can be produced by AI will become extremely cheap, and so we'll spend our money on the "human touch".

But @pawtrammell points out that a Mongolian economist in 1400 might have made the same prediction about today's world: industrialisation will automate the production of yurts and yogurt, so we'll just spend all our money on singers.

What the argument misses is that automation doesn't just make existing goods cheaper - it creates whole new categories of goods that we can't easily predict.

would the mongolian economist from 1400 have predicted yurts in SF selling for $750,000 above asking

@BrianCAlbrecht This is true. England + Wales labor share from 1200-1860 oscillated between 0.5 and 0.7 which puts the modern labor share well within range of long-run estimates. From my working paper with Akos Valentinyi, “A Theory of Long-run Development with Capital.”

Really interesting podcast w two engaging experts. In the end, tho, they mostly ignore the political economy. Sure, there is some place in the multiverse where this goes really well, and they've described it. But there are many - probably most - places in the general equilibrium multiverse where this goes poorly, and the path to their preferred destination requires very optimistic assumptions about state capacity, institutional resilience, elite pushback, democratic accountability, and much more. The vision they describe is not a bad one, but it's a dream without accounting for the very real, messy scrum that is politics.

@dwarkesh_sp @pawtrammell So the assumption is by AI squeezing jobs out of human labor, the average human will have more wealth which it could now spend on those goods as services which require the artisan part, human touch so to say? You do understand that less jobs means less purchasing power, right?

@dwarkesh_sp @pawtrammell We basically do spend all our money on pointless human touch things. Celebrities, sports stars and more are not essential things. They are a product of abundance in the the modern age.

@dwarkesh_sp @pawtrammell you want to know the economics behind ai labs, and you ask ai ceos, and they basically do not know. they tell you: “people give us a bunch of money.” no single organism in a system may understand why it works, they can’t explain it. please get an economist who can speak to it.

@dwarkesh_sp @pawtrammell you interviewed a lot of ai experts and ceos trying to explain the economics of ai labs and now you’ve gone straight to the economists explaining the societal implications of ai but you’ve missed the step where an economist explains the capex opex of ai labs.

@dwarkesh_sp @pawtrammell the mongolian economist would have been right

@BrianCAlbrecht @alexolegimas Exactly this! I still think despite how transformative AI is poised to be, the prior should be in favor of the Kaldor facts.

@karmakomik @dwarkesh_sp @pawtrammell Which value? People with no jobs have less/no "value" to begin with. And they are forced to spend that currency on more basic needs. We will have AI writers and streamers that would do a much better job than @theo . We will see more chess players for sure, homeless ones!

@AndrewChamb @dwarkesh_sp Explicit spending on wages for performers of all kinds, including e.g. athletes, has been ~0.5% of GDP in the US across the decades we’ve been collecting the data

@fsfarimani @dwarkesh_sp @pawtrammell If white collar work as we know it now disappears because automation becomes cheaper, won't the value then go to other jobs where humans prefer other humans? I suspect we will just see more people becoming chess players, streamers and substackers (and other things undreamt).

@dwarkesh_sp @pawtrammell This is the key correction. People underestimate how much demand shifts when capability changes. It’s not substitution, it’s expansion.

@dwarkesh_sp @pawtrammell If super intelligence is achieved, a bunch of yall need to go read old @waitbutwhy papers. Yall have no clue what you’re talking about in a post singularity world

@dwarkesh_sp @pawtrammell @grok what is the whole plausible set of goods that automation will create in the future ?

@dwarkesh_sp @pawtrammell goods get cheap before coordination gets cheap. every agent stack still ends up needing a human to say which mess matters first.