Economics of Wealth

I write frequently on the topics of the future. I write of the tragedies of the past and how to avoid making the same mistakes, or rather how to rectify such mistakes going forward. Ultimately the many categories I write on distill down to this: how to preserve civilization, and how to improve it. When I write I see a million different worlds all just within the reach of humanity. I see a boundless sky; a limitless reality of limitless possibility. Many people don’t share my views. They see the world as it is; as they have only ever known it. With the recent focus on the novel concepts of AI such as the capabilities showcased in recent models, I’ve observed the change in the mood of the public. It isn’t one of mass hysteria, indifference, or even one of excitement. The mood is one of dread. It hangs over seemingly the entire public discourse. No longer is the conversation one of debate on the capabilities or simply mocking the technology. The last two months have seen the end of that. Mockery had always been to downplay what they could not understand to conceal a fear and a dread they cannot abate.

With artists and the arrival of Stable Diffusion, I was fairly silent when it came to addressing the full concerns some have put forward. I knew not what to say to console people nor did I feel it my place to fain empathy to a situation of which I could not relate. With the recent advancement of Large Language Models (LLMs) into the field of chat-based interfaces, however, a clearer picture has been painted for me. For years the principal emotion conjured in the eye of the public with regard to Artificial Intelligence was that of fear. It was an almost primal reaction where people would imagine monsters unknowable by the human intellect enacting their will upon the planet as one could only compare to divine judgment. From every corner of media and public discourse, this line of thinking was the overwhelming majority. Yet, here we are now. As AI has actually progressed on the scale of technological achievement we’ve seen a lot. Largely a lot of failures. Chatbots that are about as original as a functional condition statement. Walking robots that fail to even walk on flat terrain with any semblance of ease. The list goes on. This changed the perception of the public. Fear became laughter. Humanity was afraid of this? Seriously, this was going to replace everyone? With every failure, the wariness of the public dwindled.

It was however an “artificial” sense of safety. During the year 2020 with the release of Generative Pre-trained Transformer 3 (GPT-3), the emotional sentiment of the public once again shifted. The GPT model, while certainly lacking polish in many regards, was good. It was impressive to some, but not to most. Stable Diffusion and DALLE2 are the models that really changed everything. No longer was AI this abstract thing that could barely function. It was real. So real in fact it could recreate virtually anything one could imagine with mere words. As is typical of the field, the advancement felt like it occurred overnight. From a purely economic standpoint, the laws of supply and demand were immediately felt. Works of art that would have taken months and thousands of dollars could be easily created with nothing more than an hour and mere coppers spent in GPU computing power. The rug had been pulled out from an entire industry. Putting this all in perspective art is and has always been a very small market. Only in the last hundred years have people become wealthy enough as individuals to sponsor works, a role previously only held by the noble and merchant classes. Watching how the art communities online have handled this has been enlightening if nothing else. There were those who became despondent concerning their future. Others in their anger quit the practice. Still others have attempted to fight back legally (an exercise in futility when there is no singular source to attack).

There are two ways to build wealth. The first is the path of the individual, where one may endeavor to enrich themselves by altering nothing about the systems one resides within. This path affords one a better life simply by the nature of being able to afford more expensive resources. There is nothing amoral about striving to improve one’s life in this way. The second path however is vastly different. It is the path of the group; of the society. Instead of simply raising oneself up to a level at which one can afford the better materials for a quality of life, this path revolves around lowering the cost of the better resources. Instead of raising yourself to a level so as to be able to afford a resource, you instead lower the barrier to acquiring it entirely. I can think of no more apt an example than the Industrial Age. During this period of human history items that previously took many hours of human labor to create a singular product suddenly could be made in minutes and in bulk.

Many I don’t even understand the economics of their own pocketbook, so then it comes as no surprise to me when so many people proclaim that AI will automate everyone out of a job resulting in the consumerist economy collapsing as nobody has money to buy. Usually, these are the same people who unironically suggest governmental authority is unquestionable and that they would be better off in a communist or socialist nation. Such people are hardly worth the time to admonish as they are likely unwilling to be convinced otherwise. The truth of the matter is, as with most things, simply none of the public perception is correct. Society will not crumble around you because of AI. There are plenty of other reasons for it to crumble but AI itself thankfully is not one of them. Many don’t realize it, but in any western nation, automation has resulted in the poorest of the poor in their countries still being relatively wealthy. You need look no further than your own person to confirm this. If you are in a western nation you are likely reading this on your own electronic device. Such an item as a smartphone can be acquired virtually on every street corner in the cities and at a price a mere fraction of a month’s work for even the poorest among you. At the time of writing you can buy some cheaper smartphones for around two hundred euros or dollars respectively. Now, look at your clothing. Or rather, go consult your wardrobe. Throughout all of recorded history up to the last hundred years, owning multiple clothing articles was a luxury reserved for the wealthiest of the wealthy. The kings. The nobles. The merchants. Yet here you stand with so many clothes to choose from. Of every color as well! The emperor of Rome himself could not wear full purple yet you can! All of those clothes you own. Each and every one of them. This only scratches the surface of the true wealth the west has worked hard to create for itself.

Now the place where many fall off the path of logic is at this point. People look to the highest peaks of human wealth as some unit of how well off they are leaving them feeling woefully lacking. Perhaps it’s the ability of humanity to quickly adapt to anything, no matter how radical or novel, that is to be blamed for this condition. Whatever the reason for it I feel very few in the west truly fathom the quality of life they have. Of the few that can I believe even fewer actually appreciate it. They more importantly fail to realize what has made it possible: Automation. Great monstrous machines made of materials old as time taking energy, harnessing it, and using it to create products of higher value. The plight of AI is no different.

Economics as a study is simply the study of how people interact with things of value. The goal of the field is to solve the Central Economic Problems, of which they can be most reasonably summarized as these four questions:

1. What resources should be produced?
2. How much of those resources should be produced?
3. How should those resources be produced?
4. Who should produce those resources?

Every economy everywhere that has ever existed distills down to these questions. In the case of AI, every innovation that leverages it will answer each of the questions posited by economics in it’s own way. The usual answer to this question is to produce as much of a resource as possible with a little input of resources as possible. This is the truest way of creating wealth. Someone perhaps more versed on these concepts would be none other than Adam Smith, the author of the book the Wealth of Nations. Here’s how he explains wealth creation:

To take an example, therefore, from a very trifling manufacture, but one in which the division of labor has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business (which the division of labor has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labor has probable given occasion), could scare, perhaps, with his utmost industry, make one pin a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is of a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a forth points it; a fifth grinds it at the top for receiving the head.

Adam Smith

The essence of economics is in these few sentences. With the same resources of twenty men working alone, each may at the very best make one or two pins a day. If you line them up like a factory where each does a separate role, you may produce one or two thousand a day per person. By making more with the same quantity of resources input the price is greatly diminished, meaning equality. Many could not afford if pins were perhaps the hundred dollars of a (rather low) minimum wage for the worker who could only craft one a day, but all can afford them if buying a box of a hundred is mere pennies. Automation takes this further, allowing fewer people to produce more resources for less, and AI takes this still further, by allowing no people to produce a still greater number of resources.

This is the key to understanding the future you have before you. Jobs didn’t just vanish or stagnate when automation came alone. They actually increased, as did wealth, population, individual potential in all fields, and the list just goes on! When anyone can have a resource we as a society seek the next resource to master. We strive to make things, more things, better things, never content with where we are and pursuing more. All of these things AI will supercharge, opening the potential for things never before possible. Cars as cheap as an evening meal. Housing so affordable it returns to a commodity not an investment. A world where every item we deem life altering to purchase becomes so ubiquitous the greater rarity is to find someone without rather than with. The topic of ending resource scarcity and it’s implications across society is one that deserves its own article.

Mankind’s endeavor to explore the stars not because we lacked a resource on this world, but rather because we always aim higher and shift our ambitions relative to what we have. A nation who’s wealth surpassed all before it then turned it’s eyes to the sky. By always pushing for more, there is always a limit to the resources available, meaning there is always a need for every function of the society. Every spare computer chip, every scrap of iron, every man, and every woman. Let us not then become complacent as a society. Let us not think the end goal of humanity has been attained with AI taking over all jobs and functions. Let us not use automation as an excuse to recuse ourselves from our dreams. Let us look forward not to a Universal Basic Income and a stagnant nation, but to a future more extensive and bright than any of us dare imagine! The future is yours! You stand now with AI as your tool, and every resource at your disposal as individuals, nations, and civilizations ready to ascend further, to the next level of ambition! To do things previously impossible! To change your destiny, and the destiny of all mankind. It’s your future. Go out then excited for it, and make it the one you wish to live in!