The AI productivity delusion

The AI productivity delusion centers on whether the massive investments in AI will lead to significant productivity gains. Optimists believe the gains will be enormous, while skeptics, including figures like Goldman Sachs' Jim Covello and MIT's Daron Acemoglu, question this optimism. Both sides overlook a key point: AI's potential to devastate capitalism, regardless of productivity gains.

This perspective arises because we often view today's world through the lens of other technological revolutions that, while destructive, ultimately led to economic growth. However, the real question should be "More of what?" Traditional productivity measurements—tasks completed per unit of human labor—show that AI is already highly productive. Yet, if we continue to measure productivity in terms of monetary value produced per unit of labor, AI could cause an economic disaster.

Historically, technological revolutions like the steam engine and smartphones expanded capitalist markets, generating more material output and higher aggregate monetary value. Will AI follow this pattern? In China, where AI is combined with robotics, material production could rise, and short-term net revenues may increase. But in the West, AI's impact is more concerning as it enters service sectors like Amazon, back offices, law firms, and hospitals.

AI could shrink markets in two ways: first, by eliminating entire professions, creating fewer new jobs; and second, through the conversion of markets into cloud fiefs, turning profits into rents. Amazon's digital marketplace, while appearing market-like, is highly centralized, with a sole algorithm deciding matches to maximize profits for its owner.

As AI deepens its integration, profits will flow to tech lords as cloud rents, perpetuating a cycle of extracting value from markets. This trend will affect all major tech companies, from Apple's Siri to Google's Gemini, as they develop similar AI capabilities.

While AI boosts productivity per human worker, the profit rates of capitalist enterprises will plummet, leading to a systemic collapse. Even fiscal measures like quantitative easing, universal basic income, and wealth taxes will likely fail to prevent this collapse. Thus, the AI productivity delusion persists, preventing the possibility of a post-capitalist future where production aligns with ability and distribution with need.