"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

#Automation #Productivity #Economics #Jevons #Baumol