# Four ways learning Econ makes people dumber re: future AI

([*Cross-posted from X*](https://x.com/steve47285/status/1958527894965108829)*, intended for a general audience.*)

There’s a funny thing where economics education paradoxically makes people DUMBER at thinking about future AI. Econ textbooks teach concepts & frames that are great for most things, but counterproductive for thinking about AGI. Here are 4 examples:

**THE FIRST PIECE** of Econ anti-pedagogy is hiding in the words “labor” & “capital”. These words conflate a superficial difference (flesh-and-blood human vs not) with a bundle of unspoken assumptions and intuitions, which will all get broken by Artificial General Intelligence (AGI).

By “AGI” I mean here “a bundle of chips, algorithms, electricity, and/or teleoperated robots that can autonomously do the kinds of stuff that ambitious human adults can do—founding and running new companies, R&D, learning new skills, using arbitrary teleoperated robots after very little practice, etc.”

Yes I know, this does not exist yet! (Despite hype to the contrary.) Try asking an LLM to autonomously write a business plan, found a company, then run and grow it for years as CEO. Lol! It will crash and burn! But that’s a limitation of today’s LLMs, not of “all AI forever”. AI that could nail that task, and much more beyond, is obviously possible—human brains and bodies and societies are not powered by some magical sorcery forever beyond the reach of science. I for one expect such AI in my lifetime, for better or worse. (Probably “worse”, see below.)

Now, is this kind of AGI “labor” or “capital”? Well it’s not a flesh-and-blood human. But it’s more like “labor” than “capital” in many other respects:

*   Capital can’t just up and do things by itself? AGI can.
*   New technologies take a long time to integrate into the economy? Well ask yourself: how do highly-skilled, experienced, and entrepreneurial immigrant humans manage to integrate into the economy immediately? Once you’ve answered that question, note that AGI will be able to do those things too.
*   Capital sits around idle if there are no humans willing and able to use it? Well those immigrant humans don’t sit around idle. And neither will AGI.
*   Capital can’t advocate for political rights, or launch coups? Well…

Anyway, people see sci-fi robot movies, and they get this! Then they take economics courses, and it makes them dumber.

(Yes I know, #NotAllEconomists etc.)

**THE SECOND PIECE** of Econ anti-pedagogy is instilling a default assumption that it’s possible for a market to equilibrate. But the market for AGI cannot: AGI combines a property of labor markets with a property of product markets, where those properties are mutually exclusive. Those properties are:[^66l0kievg24]

*   (A) “NO LUMP OF LABOR”: If human population goes up, wages drop in the very short term, because the demand curve for labor slopes down. But in the longer term, people find new productive things to do—the demand curve moves right. If anything, the value of labor goes UP, not down, with population! E.g. dense cities are engines of growth!
*   (B) “EXPERIENCE CURVES”: If the demand for a product rises, there’s price increase in the very short term, because the supply curve slopes up. But in the longer term, people ramp up manufacturing—the supply curve moves right. If anything, the price goes DOWN, not up, with demand, thanks to economies of scale and R&D.

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/3e26ab3854d49095dad1053125dc7e03aa87fc1070ae5243.png)

Here’s the famous diagram, for any non-economists trying to follow along.

QUIZ: Considering (A) & (B), what’s the equilibrium price of this AGI bundle (chips, algorithms, electricity, teleoperated robots, etc.)?

…Trick question! There is no equilibrium. Our two principles, (A) “no lump of labor” and (B) “experience curves”, make equilibrium impossible:

*   If price is low, (A) says the demand curve races rightwards—there’s no lump of labor, therefore there’s massive profit to be made by skilled entrepreneurial AGIs finding new productive things to do.
*   If price is high, (B) says the supply curve races rightwards—there’s massive profit to be made by ramping up manufacturing of AGI.
*   If the price is in between, then the demand curve and supply curve are BOTH racing rightwards!

This is neither capital nor labor as we know it. Instead of the market for AGI equilibrating, it forms a positive feedback loop / perpetual motion machine that blows up exponentially.

Does that sound absurd? There’s a precedent: humans! The human world, as a whole, is already a positive feedback loop / perpetual motion machine of this type! Humans bootstrapped themselves up from a few thousand hominins to 8 billion people running a $80T economy.

How? It’s not literally a perpetual motion machine. Rather, it’s an engine that draws from the well of “not-yet-exploited economic opportunities”. But remember “No Lump of Labor”: the well of not-yet-exploited economic opportunities is ~infinitely deep. We haven’t run out of possible companies to found. Nobody has made a Dyson swarm yet.

There’s only so many humans to found companies and exploit new opportunities. But the positive feedback loop of AGI has no such limit. The doubling time can be short indeed:

Imagine an autonomous factory that can build an identical autonomous factory, which then build two more, etc., using just widely-available input materials and sunlight. Economics textbooks don’t talk about that. But biology textbooks do! A cyanobacterium is such a factory, and can double itself in a day (≈ googol percent annualized growth rate 😛).

Anyway, we don’t know how explosive will be the positive feedback loop of AGI building AGI, but I expect it to be light-years beyond anything in economic history.

**THE THIRD PIECE** of Econ anti-pedagogy is its promotion of GDP growth as a proxy for progress and change. On the contrary, it’s possible for the world to transform into a wild sci-fi land beyond all recognition or comprehension each month, month after month, without “GDP growth” actually being all that high. GDP is a funny metric, and especially poor at describing the impact of transformative technological revolutions. (For example, if some new tech is inexpensive, and meanwhile other sectors of the economy remain expensive due to regulatory restrictions, then the new tech might not impact GDP much, no matter how much it upends the world.) I mean, sure we can argue about GDP, but we shouldn’t treat it as a proxy battle over whether AGI will or won’t be a big deal.

Last and most importantly, **THE FOURTH PIECE** of Econ anti-pedagogy is the focus on “mutually-beneficial trades” over “killing people and taking their stuff”. Econ 101 proves that trading is selfishly better than isolation. But sometimes “killing people and taking their stuff” is selfishly best of all.

When we’re talking about AGI, we’re talking about creating a new intelligent species on Earth, one which will eventually be faster, smarter, better-coordinated, and more numerous than humans.

Normal people, people who have seen sci-fi movies about robots and aliens, people who have learned the history of colonialism and slavery, will immediately ask lots of reasonable questions here. “What will their motives be?” “Who will have the hard power?” “If they’re seeming friendly and cooperative early on, might they stab us in the back when they get more powerful?”

These are excellent questions! We should definitely be asking these questions! (FWIW, this is my area of expertise, and I’m very pessimistic.)

…And then those normal people take economics classes, and wind up stupider. They stop asking those questions. Instead, they “learn” that AGI is “capital”, kinda like an injection-molding machine. Injection-molding machines wouldn’t wipe out humans and run the world by themselves. So we’re fine. Lol.

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…Since actual AGI is so foreign to economists’ worldviews, they often deny the premise. E.g. here’s Tyler Cowen demonstrating a complete lack of understanding of what we doomers are talking about, when we talk about future powerful AI.

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/1791fead6a489c341724f82c9751bed8136054801ecf35ca.png)

[Source](https://marginalrevolution.com/marginalrevolution/2025/02/why-i-think-ai-take-off-is-relatively-slow.html)

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And here’s Daron Acemoglu assuming without any discussion that in the next 10 yrs, “AI” will not include any new yet-to-be-developed techniques that go way beyond today’s LLMs. Funny omission, when the whole LLM paradigm didn’t exist 10 yrs ago!

(Tbc, it’s fine to make that assumption! Maybe it will be valid, or maybe not, who knows, technological forecasting is hard. But when your paper depends on a giant load-bearing assumption about future AI tech progress, an assumption which many AI domain experts dispute, then that assumption should at least be clearly stated! Probably in the very first sentence of the paper, if not the title!)

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/1841f3b1dba76c30c4bf1ded09f12d0de221b4272ef6d824.jpg)

Source: [“The Simple Macroeconomics of AI” (Acemoglu, 2024)](https://economics.mit.edu/sites/default/files/2024-04/The%20Simple%20Macroeconomics%20of%20AI.pdf)

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And here’s another example of economists “arguing” against AGI scenarios by simply rejecting out of hand any scenario in which actual AGI exists. Many such examples…

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/2e6ef3bff7e0e31eff7258510338eb7b574e367310dcf2f5.png)

[Source](https://x.com/steve47285/status/1771187467229511718)

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I think part of the problem is people taking human brains for granted instead of treating them as an existence proof that today’s LLMs are nowhere near the ceiling of what’s possible with AI ↓ *(*[*source*](https://www.lesswrong.com/posts/yew6zFWAKG4AGs3Wk/foom-and-doom-1-brain-in-a-box-in-a-basement)*)*

> 1.3.2 Three increasingly-radical perspectives on what AI capability acquisition will look like
> ----------------------------------------------------------------------------------------------
> 
> Here are three perspectives:
> 
> 1.  *Economists and other people who see AI as a normal technology:* “If we want AI to work in some new application area, like some particular industrial design workflow, then humans need to do a lot of R&D work to develop and integrate the AI into this task.”
> 2.  *LLM-focused AGI person:* “Ah, that’s true today, but eventually other AIs can do this ‘development and integration’ R&D work for us! No human labor need be involved!”
> 3.  *Me:* “No! That’s still not radical enough! In the future, that kind of ‘development and integration’ R&D work just won’t need to be done at all—not by humans, not by AIs, not by anyone! Consider that there are 8 billion copies of basically *one* human brain design, and if a copy wants to do industrial design, it can just figure it out. By the same token, there can be basically *one* future AGI design, and if a copy wants to do industrial design, it can just figure it out!”
> 
> Another place this comes up is robotics:
> 
> 1.  *Economists:* “Humans will need to do R&D to invent good robotics algorithms.”
> 2.  *LLM-focused AGI person:* “Future powerful AIs will need to do R&D to invent good robotics algorithms.”
> 3.  *Me:* “Future powerful AI will *already be* a good robotics algorithm!”
>     
> 
> …After all, if a human wants to use a new kind of teleoperated robot, nobody needs to do a big R&D project or breed a new subspecies of human. You just take an off-the-shelf bog-standard human brain, and if it wants to pilot a new teleoperated robot, it will just autonomously figure out how to do so, getting rapidly better within a few hours. By the same token, there can be *one* future AGI design, and it will be able to do that same thing.

[^66l0kievg24]: This part overlaps with my earlier post: Applying traditional economic thinking to AGI: a trilemma