Physicist David Deutsch Fixes Dishwasher with ChatGPT, Questions GDP Limits

@DavidDeutschOxfI just fixed my dishwasher with the help of ChatGPT. A trivial task. I had been about to order a new one. So this software has increased the country's real wealth yet decreased the measured GDP. The main economic indicator is structurally incapable of registering the thing that actually makes people better off, namely the growth of knowledge

@DavidDeutschOxf@doncoffee26 Inverse broken window fallacy. I'm better off. The manufacturer is worse off. It's not a wash because I can spend that money on something else.

@Truthcoin@DavidDeutschOxf This is partly because GDP measures *cooperation*, not self reliance Anything you do for yourself isn't counted!

@misraetel@DavidDeutschOxf @connoraxiotes Yep. The 3rd Industrial Revolution already did lots of that. I think we need a very well thought through quality of life measure to index progress to instead of GDP.

@PatrickHeizerUnless you put that cash under your mattress, it's going to contribute to GDP when it's spent on consumption or investment. The dishwasher manufacturer is worse off, but the overall macro economy isn't.

@MaxUtilitarianAnother case of confusing growth with consumption. A new dishwasher would have shown up in GDP. Going from “broken machine / uneasiness” to “working machine / less uneasiness” is growth in the Misesian sense. The money not spent *might* lower measured GDP, or it might not — if you spend or invest it elsewhere. Either way, your personal wealth rose. As others have said, GDP just isn’t built to register Misean growth.

@ElonBachmanNot to rag on David (who's worlds smarter than I am), but it's instructive to see that even brilliant physicists struggle to understand the "creative destruction" by which both prosperity *and* measured GDP are increased

@jmhorpEconomists such as @erikbryn have tried to quantify how much GDP is understated for those kinds of reasons: https://www.aeaweb.org/articles?id=10.1257%2Fmac.20210319

@JesusFerna7026David Deutsch (@DavidDeutschOxf) has a nice post today explaining how he fixed his dishwasher with the help of ChatGPT. We have all been there over the last couple of years. In my case, from fixing a light fixture in my kitchen to repairing a leak in my irrigation system. Deutsch and many readers point out something that has been a staple of my talks for a decade. GDP was designed to measure an economy that produced coal and steel, easily measurable quantities. And GDP did its job quite well for decades. IT, first, and later the internet and AI, changed the landscape. My favorite example is books. Even as late as 2010 or so, getting the most recent books in Spanish on, let’s say, Spanish economic history was hard in the U.S.: expensive and time-consuming. Every time I went to Madrid, I carried two bags, one of them empty because it would come back filled with books. Then Kindle arrived, and now I can buy nearly every single Spanish book I want in seconds and at a lower price than the physical copy. This was an enormous increase in my welfare that never got reflected in GDP. The literature is divided on how big this effect is. I tend to side with those who think it is a big deal. Therefore, many of the gains in GDP growth announced by the strongest defenders of AI might not materialize: they will go instead into higher welfare. But the issue goes beyond getting GDP wrong. What Deutsch perhaps did not notice is that he did not pay VAT on the service of the repair person he did not hire, and that such a repair person did not pay income taxes on the service he did not render. Taxing AI-based economies might thus become much harder, from a purely technical perspective. One solution would be to tax the profits of OpenAI (or Deutsch’s subscription), but I am among those who think those profits are not going to be nearly as large as anticipated. Competition among labs will drive the subscription prices of models down (unless labs can cartelize, for example, by appealing to “AI security”). Over 95%, and perhaps as much as 99%, of the gains from AI will pass to the final user, whether another business or an individual. Now, we could tax the final user, for instance, at a fixed rate per token used. But that implies we are taxing the high-return activity (how to fix the dishwasher) at the same rate as the low-return activity (Claude: “tell me a joke about my cat jumping”). And taxing per token might hurt those final users who use more tokens because they are more productive, something we might not want to do (yes, there is something called the uniform commodity taxation theorem, but it often breaks down). Let me give you an extreme example: imagine that tomorrow the new OpenAI model cures all cancers, forever. Just a vaccine, $10, once in your life, and you never get cancer again. The increase in human welfare from such an invention would be staggering. But how do you measure it in GDP? Yes, people will live longer, perhaps work longer. A second-order effect on GDP. And more importantly: how do you tax the vaccine? Do you even want to tax the vaccine? I would argue we want to subsidize it, and generously. When I was still an undergrad, my first RA job was helping to construct GDP and other national aggregate statistics in Spain. It was a most valuable experience, because it made me aware of what GDP means, its strengths (and it has many more than its critics concede), and its limitations. But it also taught me that what you can tax out of GDP is far more limited than you would think at first sight. There are real upper bounds on taxation, and I am afraid the bound is tighter now than it used to be.

@AravSrinivasQuite an important take. Economists and their theories are outdated to measure the benefits of AI. AI is already saving people a lot of time and money that doesn’t get measured.

@DeryaTR_On the bright side, this is one of the most important points about the age of AI you’ll read. All that pace-unpace gloom-and-doom talk & posturing have less value than this dishwasher. Millions, soon billions, experience this incredible uplifting, and that’s what really matters.

@greg_ipThat AI might make us better off in ways GDP can't show is not an interesting or important insight. It has ALWAYS been true that much, even most, welfare improvement is unpriced. The lives saved by childhood vaccines, for example, never shows up in GDP (while the health expenditures from caring for sick children does). In the field of digital goods, there has been a lot of work on "willingness to pay" to figure out the value of free digital goods. (See this article I wrote for the Economist in 2013). The number is material but not transformative. Internet search, for example saved us vast amounts of time looking for basic information. Because AI as a whole is cash flow negative, we don't know really know whether consumers will ultimately pay the actual cost of the answers they get from ChatGPT (vs say if they had done a free search on Google or Wikipedia or Youtube, as you could do to repair a dishwasher - I've done it). Now I 100% agree AI will create a lot of consumer surplus in the manner described here, and if it cures cancer or makes fusion power viable, that's a TON of consumer surplus. But of course, we also have to measure the potential lost welfare from AI: all the extra effort to secure systems against AI-enabled hacking or weapons of mass destruction, and the future knowledge that is never created because AI has destroyed the economic incentive to create new knowledge about, for example, repairing dishwashers. https://www.economist.com/finance-and-economics/2013/03/09/net-benefits

Physicist David Deutsch Fixes Dishwasher with ChatGPT, Questions GDP Limits

Physicist David Deutsch Fixes Dishwasher with ChatGPT, Questions GDP Limits

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Physicist David Deutsch Fixes Dishwasher with ChatGPT, Questions GDP Limits

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