#baumol — Public Fediverse posts
Live and recent posts from across the Fediverse tagged #baumol, aggregated by home.social.
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Have you encountered Baumol's Cost Disease?
I've done a bit of reading about it over the years in the #healthcare sector. It also applies to most face-to-face #education, legal costs, performing arts, and even law enforcement.
Classic example...
How many musicians did it take to perform a Mozart quartet in 1790?
"Four"
How many does it take for a live performance today?
"Still Four"
This tautology illustrates one extreme of the per-worker productivity curve. A quartet will forever require four musicians. There are no opportunities to make the performance more efficient without fundamentally changing the definition of performance (such as increasing the size of the audience).
From the wiki page...
"...the tendency for wages in jobs that have experienced little or no increase in labor #productivity to rise in response to rising #wages in other jobs that did experience high productivity growth. In turn, these sectors of the economy become more expensive over time, because the input costs increase while productivity does not. Typically, this affects services more than manufactured goods, and in particular #health, #education, #arts and #culture."
https://en.wikipedia.org/wiki/Baumol_effect
His Book: "The Cost Disease: Why Computers Get Cheaper and Health Care Doesn't", William J. Baumol et al, 2012, Yale University Press
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"Now let’s think about what’s going to happen with widespread AI adoption, if it pays off the way we all think it will. First of all, it’s going to drive a lot of productivity gains in services specifically. (There is precedent for this; e.g. the railroads made the mail a lot more productive; the internet made travel booking a lot more productive.) Some services are going to get pulled into the Jevons vortex, and just rapidly start getting more productive, and unlocking new use cases for those services. (The key is to look for elastic-demand services, where we plausibly could consume 10x or more of the service, along some dimension. Legal services, for example, plausibly fit this bill.)
And then there are other kinds of services that are not going to be Jevons’ed, for some reason or another, and for those services, over time, we should expect to see wildly high prices for specific services that have no real reason to AI whatsoever. Your dog walker has nothing to do with AI infrastructure; and yet, he will cost more. But you’ll pay it anyway; if you love your dog.
The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”
When this happens (which it certainly will, across who knows how many industries, we’ll see a Baumol’s type effect take hold within single jobs."
https://a16z.substack.com/p/why-ac-is-cheap-but-ac-repair-is
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"Now let’s think about what’s going to happen with widespread AI adoption, if it pays off the way we all think it will. First of all, it’s going to drive a lot of productivity gains in services specifically. (There is precedent for this; e.g. the railroads made the mail a lot more productive; the internet made travel booking a lot more productive.) Some services are going to get pulled into the Jevons vortex, and just rapidly start getting more productive, and unlocking new use cases for those services. (The key is to look for elastic-demand services, where we plausibly could consume 10x or more of the service, along some dimension. Legal services, for example, plausibly fit this bill.)
And then there are other kinds of services that are not going to be Jevons’ed, for some reason or another, and for those services, over time, we should expect to see wildly high prices for specific services that have no real reason to AI whatsoever. Your dog walker has nothing to do with AI infrastructure; and yet, he will cost more. But you’ll pay it anyway; if you love your dog.
The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”
When this happens (which it certainly will, across who knows how many industries, we’ll see a Baumol’s type effect take hold within single jobs."
https://a16z.substack.com/p/why-ac-is-cheap-but-ac-repair-is
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"Now let’s think about what’s going to happen with widespread AI adoption, if it pays off the way we all think it will. First of all, it’s going to drive a lot of productivity gains in services specifically. (There is precedent for this; e.g. the railroads made the mail a lot more productive; the internet made travel booking a lot more productive.) Some services are going to get pulled into the Jevons vortex, and just rapidly start getting more productive, and unlocking new use cases for those services. (The key is to look for elastic-demand services, where we plausibly could consume 10x or more of the service, along some dimension. Legal services, for example, plausibly fit this bill.)
And then there are other kinds of services that are not going to be Jevons’ed, for some reason or another, and for those services, over time, we should expect to see wildly high prices for specific services that have no real reason to AI whatsoever. Your dog walker has nothing to do with AI infrastructure; and yet, he will cost more. But you’ll pay it anyway; if you love your dog.
The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”
When this happens (which it certainly will, across who knows how many industries, we’ll see a Baumol’s type effect take hold within single jobs."
https://a16z.substack.com/p/why-ac-is-cheap-but-ac-repair-is
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"Now let’s think about what’s going to happen with widespread AI adoption, if it pays off the way we all think it will. First of all, it’s going to drive a lot of productivity gains in services specifically. (There is precedent for this; e.g. the railroads made the mail a lot more productive; the internet made travel booking a lot more productive.) Some services are going to get pulled into the Jevons vortex, and just rapidly start getting more productive, and unlocking new use cases for those services. (The key is to look for elastic-demand services, where we plausibly could consume 10x or more of the service, along some dimension. Legal services, for example, plausibly fit this bill.)
And then there are other kinds of services that are not going to be Jevons’ed, for some reason or another, and for those services, over time, we should expect to see wildly high prices for specific services that have no real reason to AI whatsoever. Your dog walker has nothing to do with AI infrastructure; and yet, he will cost more. But you’ll pay it anyway; if you love your dog.
The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”
When this happens (which it certainly will, across who knows how many industries, we’ll see a Baumol’s type effect take hold within single jobs."
https://a16z.substack.com/p/why-ac-is-cheap-but-ac-repair-is
-
"Now let’s think about what’s going to happen with widespread AI adoption, if it pays off the way we all think it will. First of all, it’s going to drive a lot of productivity gains in services specifically. (There is precedent for this; e.g. the railroads made the mail a lot more productive; the internet made travel booking a lot more productive.) Some services are going to get pulled into the Jevons vortex, and just rapidly start getting more productive, and unlocking new use cases for those services. (The key is to look for elastic-demand services, where we plausibly could consume 10x or more of the service, along some dimension. Legal services, for example, plausibly fit this bill.)
And then there are other kinds of services that are not going to be Jevons’ed, for some reason or another, and for those services, over time, we should expect to see wildly high prices for specific services that have no real reason to AI whatsoever. Your dog walker has nothing to do with AI infrastructure; and yet, he will cost more. But you’ll pay it anyway; if you love your dog.
The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”
When this happens (which it certainly will, across who knows how many industries, we’ll see a Baumol’s type effect take hold within single jobs."
https://a16z.substack.com/p/why-ac-is-cheap-but-ac-repair-is