Your economics are wrong for a few reasons. Let’s grant the hypothetical where all humans supply homogeneous labor at a uniform wage.
If AI is slightly cheaper than humans, what happen is that wages fall slightly. At the new, lower wages, there is more demand for labor (and more humans drop out of the labor force). At the same time, capital costs are bid up slightly. Eventually the price of AI and human labor is equal, and the quantity demanded is equal to the quantity supplied.
At the same time, you are increasing demand for labor to build the AI (right now labor is ultimately the main input to building all the stuff that goes in datacenters). If the social value of the AI is near zero, then the net increase in demand is almost the same as the net increase in supply. Lowering wages and increasing capital costs doesn’t offset the benefits of extra productive capacity, it just shifts value from laborers to capitalists.
The real fiscal issue in this scenario is that you are shifting output from labor to capital, and the tax rate on capital is lower than the tax on labor. (Moreover as you automate the economy there are further corporate reorganizations that would drive effect tax rates well below the on-paper capital gains rate). You’re doing that at the same time that you are potentially increasing spending, which is tough unless you are willing to adjust the tax code.
I’m inclined to agree with other commenters though that none of this seems like the most important issue. The fiscal issues can be overcome if the state cares, and my best guess is that growth will accelerate enough that it would be OK even if there was no political change.
People should have much bigger concerns about being completely materially disempowered: (i) the state may not continue to support them, either because they are politically disempowered or because the state itself is disempowered, and (ii) even if they are able to survive they will have no say over what the world looks like and that sucks in its own way.
Your economics are wrong for a few reasons. Let’s grant the hypothetical where all humans supply homogeneous labor at a uniform wage.
If AI is slightly cheaper than humans, what happen is that wages fall slightly. At the new, lower wages, there is more demand for labor (and more humans drop out of the labor force). At the same time, capital costs are bid up slightly. Eventually the price of AI and human labor is equal, and the quantity demanded is equal to the quantity supplied.
At the same time, you are increasing demand for labor to build the AI (right now labor is ultimately the main input to building all the stuff that goes in datacenters). If the social value of the AI is near zero, then the net increase in demand is almost the same as the net increase in supply. Lowering wages and increasing capital costs doesn’t offset the benefits of extra productive capacity, it just shifts value from laborers to capitalists.
The real fiscal issue in this scenario is that you are shifting output from labor to capital, and the tax rate on capital is lower than the tax on labor. (Moreover as you automate the economy there are further corporate reorganizations that would drive effect tax rates well below the on-paper capital gains rate). You’re doing that at the same time that you are potentially increasing spending, which is tough unless you are willing to adjust the tax code.
I’m inclined to agree with other commenters though that none of this seems like the most important issue. The fiscal issues can be overcome if the state cares, and my best guess is that growth will accelerate enough that it would be OK even if there was no political change.
People should have much bigger concerns about being completely materially disempowered: (i) the state may not continue to support them, either because they are politically disempowered or because the state itself is disempowered, and (ii) even if they are able to survive they will have no say over what the world looks like and that sucks in its own way.