Thanks. I’m a bit sceptical of that 10x estimate and will have a closer look at that paper.
However, even assuming wages for non-automatable roles goes up ~10x before full automation, that won’t help governments if their costs rise more than 10x. In developed countries, government costs mostly consist of social protection transfers and wages themselves. In the case where wages rise 10x, transfers could rise more than 10x if (1) transfers are linked to wages (which they often are); and/or (2) the share of people receiving transfers rises (because unemployment rises).
It is possible that transfers could be de-linked from wages somewhat, but political economy can make that difficult and, to the extent that people’s welfare depends on the parts of the economy that are not rapidly growing (e.g. healthcare, housing, childcare), that could have negative welfare impacts.
So I’m not saying governments are doomed—as I point out, TAI should be creating value and the challenge is ultimately one of distribution. But governments still have to worry about revenue, because it’s not the size of GDP that matters so much as the composition of government income and spending.
In the case where wages rise 10x, transfers could rise more than 10x if (1) transfers are linked to wages (which they often are); and/or (2) the share of people receiving transfers rises (because unemployment rises).
Interesting point. I think it’s true that current white collar workers in HICs would be unhappy with current levels of government unemployment support. However, I think they would generally be happy with <10x current unemployment benefits. As for rising unemployment, governments would need to tap into capital gains somehow. Foresight Institute has this interesting idea of “Capital dividend funds: National and regional funds holding equity in AI infrastructure, robotics fleets, and automated production facilities, distributing dividends to citizens as universal basic capital.”
I should note that “transfers” is not limited to unemployment benefits. For OECD governments, the biggest class of transfer by far is currently public pensions.
There are all sorts of good reasons why the elderly should be happy with lower public pensions (elderly poverty rates tend to be lower than for children or working-age adults, life expectancy has increased far more than retirement ages have). But that still doesn’t happen for political economy reasons. Perhaps that will change with TAI—the elderly tend to own more capital so they should see massive returns in general. Maybe they’ll be happy with <10x pension increases even as wages increase 10x. I just wouldn’t take that for granted.
Agree 100% that governments would need to tap into capital gains somehow, or capital more broadly. I also like that Capital dividend fund idea—thanks for sharing.
Thanks. I’m a bit sceptical of that 10x estimate and will have a closer look at that paper.
However, even assuming wages for non-automatable roles goes up ~10x before full automation, that won’t help governments if their costs rise more than 10x. In developed countries, government costs mostly consist of social protection transfers and wages themselves. In the case where wages rise 10x, transfers could rise more than 10x if (1) transfers are linked to wages (which they often are); and/or (2) the share of people receiving transfers rises (because unemployment rises).
It is possible that transfers could be de-linked from wages somewhat, but political economy can make that difficult and, to the extent that people’s welfare depends on the parts of the economy that are not rapidly growing (e.g. healthcare, housing, childcare), that could have negative welfare impacts.
So I’m not saying governments are doomed—as I point out, TAI should be creating value and the challenge is ultimately one of distribution. But governments still have to worry about revenue, because it’s not the size of GDP that matters so much as the composition of government income and spending.
Interesting point. I think it’s true that current white collar workers in HICs would be unhappy with current levels of government unemployment support. However, I think they would generally be happy with <10x current unemployment benefits. As for rising unemployment, governments would need to tap into capital gains somehow. Foresight Institute has this interesting idea of “Capital dividend funds: National and regional funds holding equity in AI infrastructure, robotics fleets, and automated production facilities, distributing dividends to citizens as universal basic capital.”
I should note that “transfers” is not limited to unemployment benefits. For OECD governments, the biggest class of transfer by far is currently public pensions.
There are all sorts of good reasons why the elderly should be happy with lower public pensions (elderly poverty rates tend to be lower than for children or working-age adults, life expectancy has increased far more than retirement ages have). But that still doesn’t happen for political economy reasons. Perhaps that will change with TAI—the elderly tend to own more capital so they should see massive returns in general. Maybe they’ll be happy with <10x pension increases even as wages increase 10x. I just wouldn’t take that for granted.
Agree 100% that governments would need to tap into capital gains somehow, or capital more broadly. I also like that Capital dividend fund idea—thanks for sharing.