[twoodfin]

Healthcare, housing, education all have gone up despite increased productivity.

The hypothesis of Baumol’s Cost Disease is that these industries are exactly where we should expect prices to rise because they’re still dependent on low-productivity-growth human labor.

[rglullis]

Baumol's Cost Disease is about relative costs. We are talking about productivity enabling absolute reduction in costs. Don't mix them up.

[twoodfin]

We were talking about infrastructure costs under increasing labor productivity. Now what are we talking about?

If the premise is that AI won’t improve productivity in industries like healthcare, education, and housing construction, then why are we worried about “the dead economy”?

[rglullis]

No. You are getting it backwards. The premise is: even if AI improves productivity, we the people are not going to benefit from it.

The mistake you are making is that you are assuming that a system where productivity per unit of labor is higher automatically translates into increased global output. It does not. This idea of a dead economy theory is precisely the concern we are heading to a world where machines can make practically everything on the cheap, but it won't matter because the moneyed class won't need to satisfy the demands of the general populace.

[twoodfin]

So we have a bunch of billionaires sitting around, surveying a world where a much smaller amount of labor will produce a much larger amount of output, and they collectively decide not to hire that labor or spend capital on the technology that generates that output in combination with that labor because… they have enough money already?

[rglullis]

No, ffs. You are missing that if they can do whatever they want with just "a small amount of labor", then the whole system gets to a point where Capital becomes the bottleneck for global productivity. People can not be trained faster than the machines can be created, so all that capital will go to an increasingly smaller number of workers.

To illustrate the point: Facebook laid off thousands of developers at the same time that it was hiring AI researchers, paying them tens of millions of dollars as a signing bonus.

[twoodfin]

Facebook (Meta) mostly “makes” ad space. So in that case, they’re making more / better ad space for the same inputs.

Online advertising is a competitive business, so that means more bang for the buck for Facebook’s advertisers. Now those advertisers have more money to invest in making more / better of whatever they make.