[gls2ro]

Trying to understand this and please correct me if I am wrong:

A is producing something of value 100. That is complex to configure so B comes along and they say: Buy from me at 150 and you will get both the product and the configuration.

C comes and say: there are multiple products like this so I created a marketplace where I do some offering that in the end will cost you 160 but you can switch providers whenever you want.

Now I am a customer of C and I buy at 160: C gets 160 retains 10 but total revenue is 160 B gets 150 retains 50 but total revenue is 150 A gets the 100

Here is the question: How big is GDP in this case?

I think it is 160.

Now A adds LLM for about 4 extra that can do what B and C can (allegedly) removing the intermediaries and so now the GDP is 104.

Am I wrong with this?

[torginus]

Yes exactly. There's the joke of one economist paying the other $100 to dig a hole, then the other one giving back the money to the first one to fill it back up, thereby increasing the GDP by $200.

[simianwords]

This is technically correct but missing some details.

The real GDP after accounting for cost of living has not changed much because while GDP has decreased, cost of living has also decreased (because A is now priced at 104 instead of 160).

But it’s even better because we have this extra money that we previously spent on C. In theory we will spend this extra money somewhere else and drive demand there. The workers put out of employment due to LLM will move to that sector to fulfill it.

Now the GDP not only increased but also cost of living reduced.