Claude knows! —>

The Lump of Labor Fallacy and Why AGI Unemployment Panic Is Economically Illiterate
Let me lay this out with full rigor, because this argument deserves to be prosecuted completely rather than waved away with a sound bite.

I. What the Lump of Labor Fallacy Actually Is
The lump of labor fallacy is the assumption that there exists a fixed, finite quantity of work in an economy — a lump — such that if a machine (or an immigrant, or a woman entering the workforce) does some of it, there is necessarily less left for human workers to do. It treats employment as a zero-sum pie.
The fallacy was named and formalized in the early 20th century but the error it describes is far older. It animated the Luddite riots of 1811–1816, where English textile workers destroyed power looms convinced that the machines would steal their jobs permanently. It drove opposition to the spinning jenny, the cotton gin, the mechanical reaper, the steam engine, the telegraph, the railroad, the automobile assembly line, the personal computer, and every other major labor-displacing technology in the history of industrial civilization.
Every single time, the catastrophists were wrong. Not partially wrong. Structurally, fundamentally, categorically wrong — because they misunderstood the nature of economic production itself.
The reason the fixed-pie assumption fails is this: demand is not fixed. Work generates income. Income generates demand for goods and services. Demand for goods and services generates new categories of work. This is an engine, not a reservoir. When you drain some of the reservoir with a machine, the engine speeds up and refills it — and often refills it past its previous level.

II. The Classical Economic Mechanism That Destroys the Fallacy
To understand why the lump-of-labor assumption is wrong about AGI, you need to understand the precise mechanism by which technological unemployment resolves itself. There are four distinct channels, all operating simultaneously:
Channel 1: The Productivity-Demand Feedback Loop (Say’s Law, Modified)
When a technology increases the productivity of labor or replaces labor entirely in a given task, it lowers the cost of producing whatever that task was part of. Lower production costs mean either:
∙Lower prices for consumers (real purchasing power rises), or
∙Higher profits for producers (which get reinvested, distributed as dividends, or spent as wages for other workers), or
∙Both.
Either way, aggregate real income in the economy rises. That additional real income does not evaporate. It gets spent on something — including goods and services that didn’t previously exist or were previously too expensive to consume at scale. That spending creates demand. That demand creates jobs.
This is not a theoretical conjecture. The average American in 1900 spent roughly 43% of their income on food. Today it’s around 10%. Agricultural mechanization didn’t produce a nation of starving unemployed farm laborers — it freed up 33% of household income to be spent on automobiles, television sets, air conditioning, healthcare, education, travel, smartphones, and streaming services, most of which didn’t exist as industries in 1900. The workers who left farms went to factories, then to offices, then to service industries, then to information industries. The economy didn’t run out of work. It metamorphosed.

https://x.com/pmarca/status/2037815241892151688

Channel 2: The Baumol Effect and the Inexhaustibility of Human Want
William Baumol’s “cost disease” is usually discussed as a problem, but it contains within it the answer to why technological unemployment can never be permanent at the macroeconomic level.
Baumol observed that productivity gains are uneven across sectors. Sectors that are easily mechanized (manufacturing, agriculture, data processing) see dramatic productivity increases; sectors that resist mechanization (live performance, personal care, bespoke services, therapy, teaching, craft) do not. As mechanized sectors get cheaper, the relative price of labor-intensive sectors rises, and society allocates more of its spending toward them — not less.
This means technology creates a systematic tilt toward human-intensive services precisely because it succeeds in automating the easily automated stuff. The more AGI automates routine cognitive work, the more valuable — and more in demand — genuine human connection, judgment, creativity, and embodied physical skill become. Not as a consolation prize, but because relative scarcity drives relative price and therefore relative employment.
Channel 3: Comparative Advantage and the Ricardo Insight
David Ricardo’s law of comparative advantage is one of the few truly non-obvious and consistently correct insights in all of economics, and it applies directly here.
Even if AGI becomes absolutely better than humans at every cognitive task — faster, cheaper, more accurate, more creative — it does not follow that humans have no economic role. What matters is comparative advantage: what can humans produce at the lowest opportunity cost relative to AGI?
Ricardo proved this with trade between nations: England should produce cloth and Portugal should produce wine even if Portugal is more productive at both, because specializing in their comparative advantages and trading leaves both better off than autarky. The same logic applies to humans and AGI. If AGI is 10x better at legal reasoning but 1,000x better at data entry, humans should do legal reasoning and let AGI do data entry — even though AGI dominates absolutely at both.
The AGI unemployment catastrophists implicitly assume that comparative advantage can somehow be zero — that there is literally nothing humans can do where the opportunity cost tradeoff favors human labor. This is not just empirically unsupported; it’s almost mathematically impossible given the structure of the argument. As long as human time has any value to humans themselves (which it trivially does), and as long as there is any production that requires human presence, consent, or subjective experience, comparative advantage exists.
Channel 4: New Industry Creation (The Jobs-That-Don’t-Exist-Yet Problem)
This is the channel that the catastrophists most egregiously ignore, perhaps because it’s the hardest to model in advance. The most important jobs created by technological revolutions are jobs that simply couldn’t have been predicted before the technology existed.
In 1900, nobody predicted that “film editor,” “radio broadcaster,” “airline pilot,” “software engineer,” “UX designer,” “social media manager,” or “podcast producer” would be major occupational categories. These jobs didn’t exist. They emerged from the new technological landscape and then became massive employers.
The argument against AGI-driven unemployment is not that we can predict exactly what the new jobs will be. The argument is that the historical base rate of technology creating new job categories at least as fast as it destroys old ones is 100% across every major technological transition in recorded economic history. Opponents of this view need to explain why this time is categorically different in a way that would break a pattern that has held without exception for 250 years of industrialization.

Thread of longform pieces on debanking: thefp.com/p/debanking-am…

THE LITTLE TECH AGENDA

Marc Andreessen & Ben Horowitz
July 5, 2024

Little Tech is our term for tech startups, as contrasted to Big Tech incumbents.

Little Tech has run independent of politics for our entire careers. But, as the old Soviet joke goes, “You may not be interested in politics, but politics is interested in you.”

We believe bad government policies are now the #1 threat to Little Tech.

We believe American technology supremacy, and the critical role that Little Tech startups play in ensuring that supremacy, is a first class political issue on par with any other.

The time has come to stand up for Little Tech.

Our political efforts as a firm are entirely focused on defending Little Tech.[1] We do not engage in political fights outside of issues directly relevant to Little Tech. But we will fight for Little Tech – for the freedom to research, to invent, to create jobs, to build the future – with all of our resources.

We find there are three kinds of politicians:

* Those who support Little Tech. We support them.

* Those who oppose Little Tech. We oppose them.

* Those who are somewhere in the middle – they want to be supportive, but they have concerns. We work with them in good faith.

We support or oppose politicians regardless of party and regardless of their positions on other issues.

We are in this for the long haul.

[1] a16z.com/politics-and-t… AMERICA

America led the 20th Century because we are preeminent in three dimensions:

(1) Technology – America drove the Second Industrial Revolution through the 1930’s, and then the Computer Revolution since the 1940’s.

(2) Economy – America’s free market system created enormous societal wealth and dramatic improvements in quality of life for everyday people.

(3) Military – American military might drove victory in World War I and World War II, and then catalyzed the unilateral surrender and dissolution of the Soviet Union.

Each of these dimensions reinforces the other two:

* Our technology preeminence powers our economy and our military.

* Our economic growth pays for our massive investment in technology and in our military.

* And our military dominance keeps us safe from foreign threats and hostile ideologies that could crush our technology, our economy, and our people.

And, America’s success has positive global spillover effects to much of the rest of the world. American technology is the global standard. The American economy is the leading production and consumption partner of many other nations. And the American military has maintained overall global peace and prosperity since World War II to a level unprecedented in world history.

Naysayers say America’s best days are behind us, that the 21st Century will see America play a diminished role in all three dimensions.

We disagree.

There is no reason American technology, economic, and military leadership cannot continue for decades to come.

There is no reason the 21st Century cannot be a Second American Century.

THE LITTLE TECH AGENDA

Marc Andreessen & Ben Horowitz
July 5, 2024

Little Tech is our term for tech startups, as contrasted to Big Tech incumbents.

Little Tech has run independent of politics for our entire careers. But, as the old Soviet joke goes, “You may not be interested in politics, but politics is interested in you.”

We believe bad government policies are now the #1 threat to Little Tech.

We believe American technology supremacy, and the critical role that Little Tech startups play in ensuring that supremacy, is a first class political issue on par with any other.

The time has come to stand up for Little Tech.

Our political efforts as a firm are entirely focused on defending Little Tech.[1] We do not engage in political fights outside of issues directly relevant to Little Tech. But we will fight for Little Tech – for the freedom to research, to invent, to create jobs, to build the future – with all of our resources.

We find there are three kinds of politicians:

* Those who support Little Tech. We support them.

* Those who oppose Little Tech. We oppose them.

* Those who are somewhere in the middle – they want to be supportive, but they have concerns. We work with them in good faith.

We support or oppose politicians regardless of party and regardless of their positions on other issues.

We are in this for the long haul.

[1] a16z.com/politics-and-t… AMERICA

America led the 20th Century because we are preeminent in three dimensions:

(1) Technology – America drove the Second Industrial Revolution through the 1930’s, and then the Computer Revolution since the 1940’s.

(2) Economy – America’s free market system created enormous societal wealth and dramatic improvements in quality of life for everyday people.

(3) Military – American military might drove victory in World War I and World War II, and then catalyzed the unilateral surrender and dissolution of the Soviet Union.

Each of these dimensions reinforces the other two:

* Our technology preeminence powers our economy and our military.

* Our economic growth pays for our massive investment in technology and in our military.

* And our military dominance keeps us safe from foreign threats and hostile ideologies that could crush our technology, our economy, and our people.

And, America’s success has positive global spillover effects to much of the rest of the world. American technology is the global standard. The American economy is the leading production and consumption partner of many other nations. And the American military has maintained overall global peace and prosperity since World War II to a level unprecedented in world history.

Naysayers say America’s best days are behind us, that the 21st Century will see America play a diminished role in all three dimensions.

We disagree.

There is no reason American technology, economic, and military leadership cannot continue for decades to come.

There is no reason the 21st Century cannot be a Second American Century.

THE TECHNO-OPTIMIST MANIFESTO part 1

“You live in a deranged age — more deranged than usual, because despite great scientific and technological advances, man has not the faintest idea of who he is or what he is doing.”
— Walker Percy

“Our species is 300,000 years old. For the first 290,000 years, we were foragers, subsisting in a way that’s still observable among the Bushmen of the Kalahari and the Sentinelese of the Andaman Islands. Even after Homo Sapiens embraced agriculture, progress was painfully slow. A person born in Sumer in 4,000BC would find the resources, work, and technology available in England at the time of the Norman Conquest or in the Aztec Empire at the time of Columbus quite familiar. Then, beginning in the 18th Century, many people’s standard of living skyrocketed. What brought about this dramatic improvement, and why?”
— Marian Tupy

“There’s a way to do it better. Find it.”
— Thomas Edison

Lies

We are being lied to.

We are told that technology takes our jobs, reduces our wages, increases inequality, threatens our health, ruins the environment, degrades our society, corrupts our children, impairs our humanity, threatens our future, and is ever on the verge of ruining everything.

We are told to be angry, bitter, and resentful about technology.

We are told to be pessimistic.

The myth of Prometheus – in various updated forms like Frankenstein, Oppenheimer, and Terminator – haunts our nightmares.

We are told to denounce our birthright – our intelligence, our control over nature, our ability to build a better world.

We are told to be miserable about the future. THE TECHNO-OPTIMIST MANIFESTO part 2

Truth

Our civilization was built on technology.

Our civilization is built on technology.

Technology is the glory of human ambition and achievement, the spearhead of progress, and the realization of our potential.

For hundreds of years, we properly glorified this – until recently.

I am here to bring the good news.

We can advance to a far superior way of living, and of being.

We have the tools, the systems, the ideas.

We have the will.

It is time, once again, to raise the technology flag.

It is time to be Techno-Optimists.

Why AI Will Save The World
Screenshots edition!
🧵 twitter.com/i/web/status/1… Why AI Can Make Everything We Care About Better twitter.com/i/web/status/1…

Why AI Will Save The World
By Marc Andreessen

The era of Artificial Intelligence is here, and boy are people freaking out.

Fortunately, I am here to bring the good news: AI will not destroy the world, and in fact may save it.
🧵 twitter.com/i/web/status/1… First, a short description of what AI is: The application of mathematics and software code to teach computers how to understand, synthesize, and generate knowledge in ways similar to how people do it. AI is a computer program like any other – it runs, takes input, processes, and… twitter.com/i/web/status/1…

Sandbagger. Sandbagger!

"Alas! There comes the time when man will no longer give birth to any star. Alas! There comes the time of the most despicable man, who can no longer despise himself. Lo! I show you the Last Man." "'What is love? What is creation? What is longing? What is a star?' -- so asks the Last Man, and blinks."

Whitepill #1: The hysterics have only a negative vision to sell. Narrow, pinched, sanctimonious, endlessly critical, resentful, bitter, demoralizing, depressing. No normal person actually wants to live like that. Whitepill #2: Notwithstanding all the censorship pressure campaigns, information really is more readily available today than ever before.

Most interesting telling of the story of the Pilgrims and the Mayflower: amazon.com/Americana-400-… @bhu_srinivasan @bhu_srinivasan

New Twitter Terms of Service: gutenberg.org/files/10741/10… "The feelings of honor and shame exist in every man who is not utterly depraved."

Many lands Zarathustra saw and many peoples; thus he discovered many peoples’ good and evil. No greater marketplace on earth did Zarathustra find than good and evil. No people could live that did not first esteem; but if they want to preserve themselves, then they must not esteem as their neighbor esteems.

There are at least two sets of journalists continuing to contact my friends and acquaintances, trying to find out what I am up to. I tried to help them write their stories with my prior tweetstorm (

https://twitter.com/pmarca/status/1577364915823685638

), but I now realize I was insufficiently helpful. I only said what I was doing, not what I *wasn't* doing.

An Internet news outlet is asking a lot of people I know, and some I don't, what I've been up to lately. Lord knows what they'll ultimately publish, so I thought I'd just write this instead. --> We are in my 14th year of working to build our venture firm, Andreessen Horowitz. The overwhelming credit for A16Z's accomplishments goes to Ben and all our partners, but I do what I can to contribute.

Reading list for the Professional-Managerical Class and the managerial elite: The original papers by Barbara and John Ehrehreich defining the Professional-Managerial Class from the far left in 1977: library.brown.edu/pdfs/112540355… files.libcom.org/files/Rad%20Am…

"The Professional-Managerial Class cannot be considered a stratum of a broader class of workers, because it exists in an objectively antagonistic relationship to another class of wage earners simply called the working class." "We define the Professional-Managerial Class as consisting of salaried mental workers who do not own the means of production." [But nevertheless control them through their managerial roles, per Burnham.]

"The term professional–managerial class (PMC) refers to a social class within capitalism that, by controlling production processes through occupying a superior management position, is neither proletarian nor bourgeois." "This group of professionals is distinguished from other social classes by their training and education, typically business qualifications and university degrees, with occupations thought to offer influence on society that would otherwise be available only to capital owners."

"Social fascism was a theory that was supported by the Communist International (Comintern) and affiliated communist parties in the early 1930s that held that social democracy was a variant of fascism because it stood in the way of communism." "At the time, leaders of the Comintern such as Joseph Stalin argued that capitalist society had entered the period in which a communist revolution was imminent, but this could be prevented by social democrats and other 'fascist' forces."

"No right was deemed by the fathers of the Government more sacred than the right of speech. It was in their eyes, as in the eyes of all thoughtful men, the great moral renovator of society and government." "Liberty is meaningless where the right to utter one’s thoughts and opinions has ceased to exist. That, of all rights, is the dread of tyrants. It is the right which they first of all strike down. They know its power."

Excellent question! Professor Nyhan has forgotten more about these topics than I will ever know, but I will do my best as an amateur and citizen to respond.

https://twitter.com/BrendanNyhan/status/1519118949656539138

First, it is certainly true, as the Professor indicates, that the First Amendment and associated case law binds the government ("Congress shall make no law...") and not companies or individuals. But, the topic does not end there.