The better AI gets, the smaller its share of the economy might get – Alex Imas and Phil Trammell

Alex Imas, Phil Trammell · 1h 16m · youtube.com ↗

33 korrents from this recording

Alex Imas, Phil Trammell did not write this page.

Every claim below is a statement made in this recording, quoted word for word and linked to the second it was said, so you can hear it rather than take our word for it. The wording comes from the transcript published alongside the recording; the sentence above each quote is our reading of the claim, not their wording.

0:00:44 · watch on youtube.com↗ · Alex Imas

Our reading
What stays scarce when almost everything is automated is the relational sector: goods and services whose value depends on a human having been in the loop.

Their wordsSomething like the relational sector, which is what I defined as, um, you know, basically services and goods where the fact that the human was in the loop was actually part of the value of that product.

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2 min later
0:02:56 · watch on youtube.com↗ · Alex Imas

Our reading
Individual economists' forecasts about AI and the labour market are close to worthless, and aggregated forecasts from prediction markets should replace them.

Their wordsrather than thinking about individual forecasts like what me and Phil are going to do, rather looking at kind of like basically generating prediction markets, where you get aggregate forecasts, where you get like kind of wisdom of the crowd effects. And kind of the reason that I think this is because we have been famously terrible at forecasting.

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1 min later
0:03:50 · watch on youtube.com↗ · Alex Imas

Our reading
David Ricardo's prediction that the machines would take those jobs was exactly right, and he would still be astonished by today's employment rate.

Their wordsAnd if you look at Ricardo's predictions, they're actually right. If you look at all those jobs that made money in Ricardo's time, they got automated. So, if I was David Ricardo and I woke up and somebody told me all those jobs did get automated. And you ask me David Ricardo, like what do you think the prime age employment rate is in 2026? I think he would be surprised if you told him it was the highest it's ever been other than 2000.

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2 min later
0:05:39 · watch on youtube.com↗ · Alex Imas

Our reading
Economics cannot say what AI will do to work because the necessary data does not exist; what is needed is a Manhattan Project for data.

Their wordswe don't have any data. I've been kind of saying we need a Manhattan Project for data. We don't have data on basically consumer demand elasticities. We don't know what they are.

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3 min later
0:08:18 · watch on youtube.com↗ · Phil Trammell

Our reading
Nothing has yet been completely automated: look down the supply chain behind any machine and labour is still adding a great deal of the value.

Their wordsthere's a sense in which nothing's yet been completely automated. If you look at the network-adjusted factor shares of a good, which is to say you look down the supply chain and say not just like the final step, but how much of that is done by capital and labor, but what went into the machines that can automate that final step. You'll find that labor's adding a lot of value down the supply chain.

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1 min later
0:08:48 · watch on youtube.com↗ · Phil Trammell

Our reading
Some goods really will get a fully automated supply chain, and yet what that does to the overall capital share is genuinely ambiguous.

Their wordsI do think there's this qualitative shift that we I think we agree is coming, which is that there will be at least some goods whose network-adjusted capital share goes to one, right? Because the whole supply chain can be automated and there's no part in it that we care intrinsically about having a human do. Um, so that'll be a, you know, that'll be a qualitative shift. Interestingly, the implications of that shift for the overall capital share are ambiguous

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1 min later
0:09:37 · watch on youtube.com↗ · Phil Trammell

Our reading
Automating everything except the ballerina need not raise labour's share, because the marginal value of the automated stuff falls faster than its quantity rises.

Their wordsthen the quantity of everything that's not a ballerina, say, goes to infinity, but our the marginal utility in that stuff goes to zero faster than the quantity is rising.

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0:09:58 · watch on youtube.com↗ · Alex Imas

Our reading
The ballerina is the wrong picture of surviving human work: the relational sector is one task left inside an ordinary job, like a doctor giving the diagnosis.

Their wordsthe ballerina and the kind of performer, that's the wrong reference class. Right now we have a lot of jobs where you have different tasks. So this is the task-based model jobs where you have like a lot of different tasks. So like a doctor, what is their job? They're filling out insurance documents. They're you know, going and like calling different pharmaceutical companies. And one of their tasks is to actually see the patient and talk to them, but that's like actually not the main part part of the job.

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4 min later
0:13:30 · watch on youtube.com↗ · Phil Trammell

Our reading
The share of income spent on things only a human can do will stay negligible, because new things to buy keep being invented faster than we satiate on the old ones.

Their wordsbut of course, that's not what's happened, because as we've accumulated more wealth and you know, more advanced machines and and so on, we've expanded the range of things other than singers to spend our money on, and the share spent on singers has stayed sort of negligible. Um so likewise, that's sort of my central prediction about how future unfolds, though I it could go either way.

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4 min later
0:17:26 · watch on youtube.com↗ · Alex Imas

Our reading
People value a human-made good for the connection to its maker, which is why the premium disappears once five hundred copies exist.

Their wordsSo with one, you get the effect that the person produced art print is valued much much higher than the than the AI version. And then what we do is to say there's in a set of other conditions, there's 500 of these being produced. So for the human made one, the price goes down a lot because it's no longer seen as like you're not like making a connection with this one artist versus with AI, there's no difference. AI is already viewed as like a commodity.

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1 min later
0:18:07 · watch on youtube.com↗ · Alex Imas

Our reading
The relational story only holds if a human is not like a horse: replacing them has to lower the value of the output, not just change the input.

Their wordsThe only way this relational story works and this is what we need more more data on is if it's not a human is not a horse in the sense that it is providing value from the output where if you replace the human, the the value of the output decreases.

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4 min later
0:22:24 · watch on youtube.com↗ · Alex Imas

Our reading
The worst AI employment scenario is not a crash but a slow drip, where people are quietly re-absorbed into worse-paid work over twenty years.

Their wordsI think in some ways like one of the worst scenarios is a drip scenario because of the political economy piece. Right? Because like you know, people essentially what you what you might see is like people not really being unemployed in mass, but kind of like moving into sectors that pay them less money, kind of basically getting uh what happened with phone operators in in in the mid-century of the of the between 1920 and 1940, phone operators were completely automated, right? But it took 20 years even though the technology existed.

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5 min later
0:27:00 · watch on youtube.com↗ · Alex Imas

Our reading
A universal basic income is a dangerous power-sharing arrangement, because it puts everyone's basic needs at the mercy of whoever holds office.

Their wordsLike right now we're endowed with labor that can turn into uh that can turn into income. When that is no longer the case and we are now at the mercy of the of the elected official for like basic needs, right? So that to me feels like a power sharing arrangement that's really dangerous.

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3 min later
0:30:26 · watch on youtube.com↗ · Alex Imas

Our reading
There is still no white-collar apocalypse in the data: you have to squint to see anything, and even junior developer hiring is below trend rather than falling.

Their wordsThey just recently released a report, and I think like you really have to squint to see anything happening. Like basically, if you want to take kind of like uh an an approach across the entire economy and looking at even looking at like software engineering, like the most exposed sort of sectors, there's just like not really anything going on. There might be a little bit of a signal about like junior developers getting jobs less than before, and that but that's like a less than before rather than a level shift.

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1 min later
0:31:40 · watch on youtube.com↗ · Alex Imas

Our reading
Some firms are laying people off mainly so as not to look behind on AI, in a cascade of keeping up with the Joneses.

Their wordslet's say we get into a narrative where like if you're a firm and you're not laying people off, then you're seen as like not adapting AI enough. So like then you'll get you're going to just get a cascade effect of firms like just needing to keep up with the Joneses in terms of like starting to lay people off.

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5 min later
0:36:33 · watch on youtube.com↗ · Alex Imas

Our reading
An AI-caused recession requires the owners of capital to hit a hard ceiling on spending and then refuse to invest the rest, which is a very improbable combination.

Their wordsSo, what you need is that basically demand to be bounded, like a hard bound, not even like a soft sort of like diminishing sensitivity. You need for them to eventually say, "I've had enough. I don't want to spend any more money." And for that money to not enter as investment.

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5 min later
0:41:53 · watch on youtube.com↗ · Alex Imas

Our reading
Professions like law will stay human for regulatory rather than relational reasons: you need somebody who can hold a licence, be blamed and be fired.

Their wordsSo, like with lawyers particularly, you need some entity to back up the product. You need kind of like an ownership of the product. You need somebody to be able to fire or or hire, like licensing issues. There's a lot of like sort of like regulatory layers that are like also going to be keeping even if there's no relational element human in the loop that have nothing to do with like the ability of the human to actually perform the service.

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1 min later
0:42:23 · watch on youtube.com↗ · Phil Trammell

Our reading
The rules that keep judges, juries and licensed professionals human are transitional, not permanent.

Their wordsall of these frictions on um the political type decisions that we are accustomed to only trusting human you know, only having humans for like legislation and being a judge, being a jury or all the licensing thing that keeps certain professions human that all strikes me as transitional, right?

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4 min later
0:45:58 · watch on youtube.com↗ · Alex Imas

Our reading
Natural selection will strengthen the human preference for other humans rather than erode it, because the people who resist outsourcing their social life are the ones who find mates.

Their wordsWhich of those two people are going to reproduce, find a mate, all of these sorts of things? I think the answer is kind of clear, right? It's the second one that has the preference for other people.

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3 min later
0:48:32 · watch on youtube.com↗ · Phil Trammell

Our reading
Whoever fails to satiate in capital rationally saves more, and therefore ends up holding most of the wealth in the long run.

Their wordsThen the person who doesn't satiate in capital is going to have if they're being rational they're going to have a higher savings rate.

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2 min later
0:50:09 · watch on youtube.com↗ · Alex Imas

Our reading
If people become satiated with capital, the returns to accumulating it fall and the rich start consuming again instead of compounding.

Their wordsBut, if we get into a situation where people are satiated with capital, um then the returns to accumulating capital are going to be lower. And so, then these rich people are going to be consuming more.

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1 min later
0:51:37 · watch on youtube.com↗ · Phil Trammell

Our reading
The capital stock can grow quickly while the capital share falls, because the price of capital goods relative to consumption goods can drop faster still.

Their wordsthe capital stock could grow quickly, but the price of capital goods relative to consumption goods could be falling faster than the capital stock is growing.

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1 min later
0:52:53 · watch on youtube.com↗ · Phil Trammell

Our reading
There is no single interest rate in a world of rapidly cheapening robots: measured in robots it might be ten thousand per cent.

Their wordsIt might be that every robot now can turn into, you know, 100 robots next year, right? So, in units of robots the interest rate is 10,000%.

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0:53:09 · watch on youtube.com↗ · Phil Trammell

Our reading
Most macroeconomic models cannot describe the AI transition, because they assume a single output that converts one-for-one into capital or consumption.

Their wordshere prices are adjusting in this interesting way that too many macro models don't allow for, right? So, that what what a what's happening is what would be called investment specific technical change where yeah, the price of capital is like falling relative to the price of consumption instead of like the standard doing the standard macro thing of saying there's just output.

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5 min later
0:58:29 · watch on youtube.com↗ · Phil Trammell

Our reading
There is an unsatiating reason to want wealth that has nothing to do with greed: a classical utilitarian wants resources in order to create new happy beings.

Their wordswhen I think about why it might be good to have a lot of wealth in the future as a good classical utilitarian, to me, the value is or at least one way you could have a kind of almost unsatiating uh utility function in in having wealth in the future is to create new happy beings, right? They just add to the total welfare of the world.

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3 min later
1:01:52 · watch on youtube.com↗ · Alex Imas

Our reading
The biggest gap in economics right now is that almost nobody is thinking about what AI does to middle-income developing countries.

Their wordsI think the biggest lack of resources that we have allocated in the economic profession is thinking about middle-income developing countries in the in the age of AI.

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1 min later
1:03:20 · watch on youtube.com↗ · Phil Trammell

Our reading
Even with no redistribution at all, a little saving would rescue a great many people, because the same AI that automates the work makes returns enormous.

Their wordsthings have to go really wrong for us to like just get over the threshold of uh you know, capital being productive enough to automate lots of work, but not be productive enough that that the interest rate is high and or the price of capital produced goods is falling a lot, okay? So, even without redistribution, a little bit of savings will save a lot of people.

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4 min later
1:07:11 · watch on youtube.com↗ · Alex Imas

Our reading
Whether AI's gains are widely shared turns on whether it is like electricity, where the users captured the benefit, or like social media, where the platform did.

Their wordsbecause a lot with electricity, a lot of the downstream benefits actually came to like the users of the electricity rather than the rather than the actual entity producing the electricity. On the other hand, with social media, it was the opposite case, right? Social media, you know, it was everywhere. Everybody uses social media, but the rents went to the platform.

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2 min later
1:09:35 · watch on youtube.com↗ · Alex Imas

Our reading
A country outside the AI supply chain should just buy the index — which works only in the world where AI ends up commoditised rather than concentrated.

Their wordsSo, I think there is a world where it is concentrated, in which case it's going to be really hard to index AGI. There is another world where it is not It's electricity, then like basically every company has access to AGI. So, you just buy you use buy the index. So, like, you know, Nigeria just needs to buy the index.

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1 min later
1:10:10 · watch on youtube.com↗ · Phil Trammell

Our reading
A poor country should prioritise owning a piece of AI over retraining its workers, but it should not bet everything on that.

Their wordsI would prioritize trying to index, but just given how fast AI could, you know, hit the world. But, um I definitely wouldn't just rely on that because like it could the the sort of um messy middle type cases or the just a long timelines cases on which like you we don't get it anything like AGI all that soon.

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2 min later
1:11:50 · watch on youtube.com↗ · Phil Trammell

Our reading
The worry that AI's returns are locked away in private companies is overstated: well under a fifth of American market capitalisation is private.

Their wordsit's already not that hard to index. So it's not There's been a bit of an increase in the privatization of returns but it's still like you know well under 20% of the total market cap of um non-non-tiny companies in in the US is is a private.

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1 min later
1:12:41 · watch on youtube.com↗ · Phil Trammell

Our reading
The long trend of making it easier for ordinary people to index more of the economy will resume, and AI itself will help by cutting the cost of going public.

Their wordsif I had to guess I would guess that the kind of long kind of general trend of just like lowering those frictions and making it easier for more and more people to index more and more will continue despite the recent bump in the other direction.

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2 min later
1:14:44 · watch on youtube.com↗ · Phil Trammell

Our reading
There is far less trade-off than people assume between a safer AI race and widely shared gains: a big lead can be held by a widely owned public company.

Their wordssome people think either uh frontier AI gets commoditized and we all enjoy the benefits, but there might be some risk because like it's the market's really competitive and cutthroat, or um things are safer because there's a big gap between the leader and the laggard, but that means that the leaders get fantastically wealthy. No, like you could just have a relatively big gap, but it's a public company ownership and it's widely distributed.

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