The AI Layoff Trap: When Competition Forces Firms to Destroy the Economy
Marx, Keynes, and A.I
A new economics paper reveals a 'demand externality' that traps firms in an automation arms race: each firm saves costs by replacing workers with AI, but the resulting loss of consumer demand falls on the whole industry. The author connects this to Marx's concept of coercive competition and Keynes's insights on wages, arguing that rational individual decisions lead to collectively disastrous outcomes. The paper proposes a Pigouvian automation tax, but the author suggests deeper social coordination of investment may be needed.
It's not that capitalist CEOs are just evil people—well, some definitely are—no, the structural logic is coercing them to do something destructive in order to survive.
- bwhiting2356
U.S. unemployment rate is steady at ~4% and we are now almost 4 years after the release of ChatGPT. The Jobs Apocalypse seems to be always on the horizon. UBI is being pushed by college educated workers burnt out of white collar work (understandably), but when you suggest to them working construction, teaching school, or working in a hospital, they deflect and go quiet.
- jhanschoo
> I wasn’t sure how I felt about these local moratoriums or about the tech-optimist gung-ho “let’s build” attitude. Both seemed kind of wrong to me. I think we need to be very deliberate—we need to have a robust public debate and understanding of just how and where we apply AI technology. Not “smash the machines” and not “let it rip” either.
My understanding regarding the moratorium is that that is exactly the objective: the current regulatory environment fails to price in the negative externalities of data centers, so their primary investors have an incentive to hem-and-haw on negotiations for revised regulations. A moriatorium is an action that can be taken unilaterally that changes those incentives, that brings them to the negotiating table.
edit: this sentiment is also produced in a comment in the substack (Ben Verschoor):
The thing with the data center issue is that a moratorium is the moderate option, because it gives us space to actually think about what we want to do with this technology and implement it. Recently there was an earnest, centrist-y guy who works for the industry but has concerns who came to our anti-data center group asking us to participate in some roundtable dialogue event. My answer was that as long as these data center projects are still moving forward, using our limited time and bandwidth to engage in dialogue rather than slow and stop their approach would amount to unilateral disarmament.
- munificent
Excellent article:
> This last point is crucial: it’s not that capitalist CEOs are just evil people—well, some definitely are—no, the structural logic is coercing them to do something destructive in order to survive. They can’t help themselves.
I spend a lot of time thinking about how much of the world going sideways is from bad actors and how much is from emergent behavior of complex systems. The answer is both.
In particular, there is a level above this that I want to draw attention to. The structure of corporate competition coerces executives into choices that are bad for the world. This is true even for entirely well-meaning executives.
However, executives are not stupid or unaware. So over time, it becomes known that being in an executive position will require you to make choices that are perhaps "economically rational" for the firm but otherwise require compromised morals. And once that awareness gets out, the system selects CEOs that are OK with that moral compromise.
So it's less a question of "is it bad actors or bad systems" and more "it's a bad system that produces bad actors".
- skeledrew
A lot of words here for something I think is simple and should be obvious to anyone who thinks about it for 5 minutes. Companies that can, will reach for AI to reduce cost. Those that can't will be killed by those that have. AI eventually leads to 100% automation, ie human economic value becomes 0. Humans no longer have the means of earning, which means they can purchase nothing. Companies can thus make no sales and the marketplaces crash. Good riddance to unsustainable Capitalism, hello to that thing especially the US's politically red has been trying to kill for decades.
- pasquinelli
i'm sure it's meant in some kind of technical sense that is precisely defined in the field of economics, but this use of the word "rational" is irritating:
> This demand externality traps rational firms in an automation arms race, displacing workers well beyond what is collectively optimal.
you can't be trapped in a sub-optimal situation and be rational at the same time. the rational thing for these rational competitors to do would be to agree to slow their deployment of ai, because the cost savings will be more than lost to demand destruction down the line. so if they won't or can't do that, they aren't rational. on the flip side, if it is actually impossible to slow ai deployment, then the firms are rational and the situation they find themselves in isn't actually sub-optimal.
it's irritating to me because i often see persuit of self-interest even to one's eventual detriment held up as "rationality", which may be true in some technical sense within the field of economics (i really couldn't say), but is certainly not true for, like, actual rationality. myopic selfishness is never rational.