If you have machines that substitute for human labor, wages fall to the cost of manufacturing & running the machines, which is well below human subsistence level. Fortunately, you also get very high economic growth rates. So even people with small amounts of money invested will end up far richer than when they had a job. Then the question becomes, "What happens to people when machines are far more intelligent & powerful and are doubling every few months?"
Falling below subsistence means people starve and cease to exist until supply and demand equalize or “something else” happens. That’s what Smith was getting at. Thus subsistence is a price floor for human labor.
Something else could mean developing a new concept of ownership or a new form of redistribution.
I said that wages would fall below human subsistence level, not that income would fall below subsistence level. People would still get income from other sources such as investments, charity, and government (via taxes on others).
If people’s wages are below subsistence levels they’ll sell their investments to survive. There can be no possibility of upward class mobility in this scenario.
An economy needs people and stuff. Productive people take a long time to make. We can make stuff in factories really quickly, but most stuff quickly hits diminishing returns. For example, a worker with two laptops won't be twice as productive as a worker with one laptop. Right now, developed economies mostly grow through innovation. We make better stuff. But if there are substitutes for people that can be mass produced in factories, then you can grow the economy very quickly without increasing the number of people.
Average wealth per person would skyrocket in such a scenario, though of course individuals will vary greatly in how much wealth they accumulate in this sort of takeoff. But if the economy doubles every year, even a small investment (of one year's wages) would be enough to live off of indefinitely. Likewise, governments will vary greatly in how much they tax & redistribute the wealth of their citizens.
After a decade of such doublings, it's hard to say what the world would look like. A 1024x increase in wealth would be more than the difference between us and hunter-gatherer tribes. And all of this assumes that AI will be benevolent.
Thanks for explaining in detail. The part I now understand is that an automation that removes the need for manual work could lead to much higher factory output.
The part I am unclear about is the impact on the supply-demand and pricing:
Say the prices of goods produced go down by 55% on an average (assumed loosely based on OP article that says knowledge work is 60%).
With 60% of the work gone, many humans may lose jobs and many may not have enough savings or investments for living even with 55% lesser cost of goods (while rent, etc. stay similar?).
While the factories could produce more, the demand may be much weaker, so the factories may not have enough need to produce more. Due to competition, the prices should ultimately go down (maximum by 55% in the scenario considered).
How does the wealth per person increase for factory owners, and/or, for others?
The OP article also says GDP growth would accelerate in all scenarios. I am not clear how. If cost of making good go down drastically, could the GDP also not go down instead?
Also, a separate question:
>> though of course individuals will vary greatly in how much wealth they accumulate in this sort of takeoff.
What would be your advice to people during this takeoff. :-)
