The Baumol Effect and Jevons paradox are related
5 days ago
- #AI
- #productivity
- #economics
- The Baumol Effect and Jevons Paradox explain why some services become cheaper while others become more expensive due to productivity changes.
- Jevons Paradox describes how increased efficiency in production (e.g., coal, transistors) leads to higher overall consumption rather than reduced usage.
- The Baumol Effect explains that wages in less productive sectors rise to compete with more productive sectors, making services like dog walking or AC repair more expensive.
- AI adoption may lead to productivity gains in some services (Jevons effect) while making other human-dependent services more costly (Baumol effect).
- Governments may mandate human oversight in jobs partially automated by AI, leading to higher wages for the remaining human roles.
- The article critiques the oversimplification of economic trends, arguing that wealth concentration and competition for necessities drive price changes more than productivity alone.