Real Talk on Markets, Money, and Labor

Marx noted in Capital, Volume 1 and Grundrisse that a fundamental issue with

capitalism is the persistent tendency to drive down the value of labor.¹⁴ He was wrong about a lot, but right about this. While he cited mechanization as a driver, along with competition, I doubt he ever imagined the totality of automation we are at the cusp of today. Aaron Bastani’s Fully Automated Luxury Communism was published in 2019, not that long ago, but sufficiently air gapped to the transformer revolution that we might still call it prescient.¹⁵ He foresaw our impending predicament and perhaps best articulates the historic and economic case for why it is inevitable that technology will fully abrogate labor. I came to a similar conclusion independently before reading Bastani’s work, but it is reassuring to see that others think similarly. Many economists, including members of my family, vociferously disagree with the reality, our reality, that I am about to describe, but I have never been more sure of anything pertaining to our macro human condition.

There are many vector spaces of possibility for the future of humanity, but our degrees of freedom will rapidly clench for markets, money, and labor.

The Classical Model of economics tells us that total income or GDP, Y, is equal to consumption, C, plus investment, I, plus government spending, G.¹⁶

Y^t = C^t + I^t + G^t As this model falters in omitting technology, which has the potential to increase Y with C, I, and G constant, a subsequent generation of economists, including Robert Solow and Trevor Swan, created what we now call the Neoclassical, or Solow Growth Model. This model introduces a “Technology Multiplier,” also known as “Total Factor Productivity,” represented as “A.”¹⁷ The essential difference in this model is that A, technology, boosts GDP, Y, by simply multiplying by the factor A. Other differences include refactoring the other inputs into a function of capital, K, and labor, L.

Y = A × F(K, L) For the era of industrialization and rapid technological advancement, this model has proven apt in modeling economic growth. Think of A as being a tool that a laborer can use. As the tool increases in power, like our LLMs supercharging software engineers today, or a robot that allows one worker to assemble a whole car that might have once taken twenty workers, output increases per worker. The simplicity of this model, which presumes that technology is a factor that will always increase GDP, has blinded us to the obvious reality that at some point, the tools will become so good that we will not need the human laborer at all. At some point, increases in A will decrease L. At this point, technology will become net deflationary, meaning that its effects on making labor redundant will outweigh the increase in output. At this point, Y falls. We are likely nearing this point.

First we will see large-scale unemployment that comes on quickly. We will not be able to retrain workers rapidly enough for whatever new jobs are needed with new technology, and the simple reality is that we will need far fewer jobs. I am aware that past technological improvements have led to the replacement of jobs but also the creation of more jobs. But I insist, alongside many of the most prominent technology leaders, including Bill Gates, who are basically screaming at the top of their lungs at this point, that this time is different.¹⁸ The only basis for Marc Andreesen’s argument for why technology will not cause unemployment is “regulation,” which might be true in the short-term but will make little sense as people they don’t have to work.¹⁹ The only jobs it will make sense for humans to have are those for which we arbitrarily prefer they be done by a human. Arbitrary might be harsh, but scarcity will not be the driver. That is not to say that people will do nothing. Mathias Risse noted at Humanity Meets AI, a two-day symposium on religion and artificial intelligence that I helped to organize at Harvard, that we can distinguish between labor, an act out of scarcity for wages in a capitalist system, and work, which is simply what we do.²⁰ In the near future, the choice for humans to work will be driven by aesthetics, not utility, and labor as we know it today will cease to exist. The impact on markets and money will be dramatic.

¹⁸ Nickie Louise, “Bill Gates Warns: AI Will Replace Most Human Jobs, Including Doctors and Teachers,

One way to think about a company and why it has value is that it is an arbitrage on labor, capital, with technology being an intermediating force between them. A theoretical company with no humans could also have value if it has some type of property, assets, or machines that can sell a scarce good or service to a wanting customer. Through competition, most technology companies will see their prices going down, not up, in the long run. While companies are doing everything they can to create monopolies, the reality is that the cost of producing nearly everything that is not inherently scarce, such as natural resources that are finite, at least on Earth, will approach zero because of technology. How might the costs of energy or food approach zero?

All of the inputs to the harvest and creation of energy–and I’m assuming sustainable energy, not the burning of fossil fuels–will approach zero. If all of the inputs approach zero, then we will have unlimited free food and energy, barring powerful humans artificially preventing competition. I do anticipate people will block competition, but in the long run, if we do not experience civilizational collapse that sets us back to a premodern style of living, the market will always win. In this case, the market winning is it eating itself. Eventually, the infinite growth of public market indices will stall, then reverse, then collapse. In the long run, we’re all dead, and in the long run, most companies will be worth noting, maybe save for real estate and anyone who figures out how to coordinate the last jobs of humanity, what we want other humans to do for human’s sake. But the overall message is, whatever stability and security we might see in big numbers in investment accounts is likely to be upended, possibly far sooner than most of us could imagine. We should be preparing for extreme situations. Money as we know it today may, most likely will, soon be meaningless.