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The Baumol Effect and Jevons paradox are related

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Re: The Baumol Effect and Jevons paradox are related

#41

Post by nocoiner »

estearum wrote: post #37
nocoiner wrote: post #32

Earlier quoted context omitted.

The modern day example that really made Baumol click for me is child care, particularly day care. It’s a highly labor intensive with basically minimal opportunities for productivity enhancements (due both to regulation and parental preferences, as well as just baseline sheer human decency). As the rest of the economy becomes more productive, the relative cost of child care goes up and up and up - which is why we now…

What productivity improvements would be possible if not for regulation?

For one, a higher child-to-caregiver ratio. There may be others, but this seems to be the easiest lever to pull to eke out some productivity gains.

Personally, I’m completely fine with having this be the subject of regulation - even if it’s possibly an overly blunt instrument, this is not an area where I’d be comfortable letting the free hand of the market do its thing. Further, I suspect that universal, subsidized, high-quality pre-K would be a net economic benefit in the long run, but I haven’t done the research to back up this assertion.

Re: The Baumol Effect and Jevons paradox are related

#42

Post by rahimnathwani »

estearum wrote: post #37
nocoiner wrote: post #32

Earlier quoted context omitted.

The modern day example that really made Baumol click for me is child care, particularly day care. It’s a highly labor intensive with basically minimal opportunities for productivity enhancements (due both to regulation and parental preferences, as well as just baseline sheer human decency). As the rest of the economy becomes more productive, the relative cost of child care goes up and up and up - which is why we now…

What productivity improvements would be possible if not for regulation?

In my city, the regulations specify a maximum # kids per adult. So if you were to devise a way to supervise more children per adult, using technology, you would still have to hire the same number of adults.

The regulations specify that teachers must have completed a certain number of units of a specific type of education. If you create an AI Assistant that means you can hire people with less training and have the same quality, then ... you cannot.

The regulations regulate inputs rather than outputs.

Re: The Baumol Effect and Jevons paradox are related

#43

Post by NoGravitas »

gruez wrote: post #25
biophysboy wrote: post #14

>If you live in the United States today, and you accidentally knock a hole in your wall, it’s probably cheaper to buy a flatscreen TV and stick it in front of the hole, compared to hiring a handyman to fix your drywall. Is it cheaper than buying a TV, and then having someone come install it on your wall? More meaningless drivel from Marc Andreesen.

Drilling a few holes to mount a TV is so straightforward that nearly everyone can do it, in contrast to patching drywall, so excluding the cost of hiring a professional for that case is reasonable. Granted, you might be able to learn how to do it with some youtube videos, trips to home depot, and trial/error, but the cost of that will quickly exceed the cost of a handyman if you value your time at all.

Patching drywall is also so straightforward that nearly everyone can do it, unless it's a very large hole. It's a one trip to Home Depot or Lowes job.

Re: The Baumol Effect and Jevons paradox are related

#44

Post by lesuorac »

> The last piece of this economic riddle, which we haven’t mentioned thus far, is that elected governments (who appoint and direct employment regulators) often believe they have a mandate to protect people’s employment and livelihoods. And the straightforward way that mandate gets applied, in the face of technological changes, is to protect human jobs by saying, “This safety function must be performed or signed off by a human.”

I mean the role of you to go jail if something goes wrong is pretty important.... It unfortunately often doesn't work but the lengths at which well paid people go to avoid and then shorten prison sentences really should demonstrate this is the only punishment that works.

We cannot have computers solely in charge of stuff because the computer cannot have responsibility. If you take the radiologist out of the loop then you should take the responsibility.

Re: The Baumol Effect and Jevons paradox are related

#45

Post by mushufasa »

huevosabio wrote: post #24

``` Each of these phenomena have a name: there’s Jevons Paradox, which means, “We’ll spend more on what gets more productive”, and there’s the Baumol Effect, which means, “We’ll spend more on what doesn’t get more productive.” ``` I don't think that's exactly right. Jevons says "we consume more on what gets more productive" and Baumol says "the unit cost increases for that which is less productive". The typical examp…

Another way to think of this intuitively is simple economies of scale. Or volume discounts if you work in sales.

When you buy 10,000 handbags you pay the wholesale price whereas buying a single handbag can be quite expensive.

If there is way lower hose demand (volume of sales), the horse producers will have to charge a higher price per horse.

Thus, society in aggregate spends way less on horses while the price of a horse goes up.

Re: The Baumol Effect and Jevons paradox are related

#46

Post by estearum »

rahimnathwani wrote: post #42
estearum wrote: post #37

Earlier quoted context omitted.

What productivity improvements would be possible if not for regulation?

In my city, the regulations specify a maximum # kids per adult. So if you were to devise a way to supervise more children per adult, using technology, you would still have to hire the same number of adults. The regulations specify that teachers must have completed a certain number of units of a specific type of education. If you create an AI Assistant that means you can hire people with less training and have the sam…

Well I think the regulations regulate outputs as well (if a child dies or is injured in daycare, there are regulations to handle that). The issue is that people aren't happy with settling for reactive punishments when something actually goes wrong.

Re: The Baumol Effect and Jevons paradox are related

#47

Post by Shog9 »

TekMol wrote: post #4

you accidentally knock a hole in your wall, it’s probably cheaper to buy a flatscreen TV and stick it in front of the hole What I recently did is that I 3D-printed an object with PLA that exactly fit the whole and just glued that in with assembly glue. What does the HN panel say? Is it a solution? Or does it have any downside?

It's a solution. There are better solutions, and far worse solutions (anyone who has worked to get a deposit back on a college rental has probably developed a few of their own), and most of them are all still fine because drywall isn't (shouldn't be) structural.

Crucially, even if you are completely unwilling to take a stab at a fix yourself, hiring a local handyman to patch a hole via some good enough technique should still be far cheaper in most places than buying a nice new TV.

But nothing is gonna ever beat buying a 2nd-hand framed picture or plaque or movie poster or grabbing a flyer from the junkmail on your porch and tacking it over the hole... And if you're determined to fix holes with a TV, you can probably find one used for about as cheap / free as any of the other choices. Which is what makes this such a stupid example - the cost of TVs, like framed images or furniture, spans from $0 to "as much as you're willing to pay". Hiring someone can also be arbitrarily expensive, but can by definition never be 0. So the comparison is rhetorical trickery and demonstrates nothing.

...other than, apparently, Andreessen's dissatisfaction with paying tradespeople.

Re: The Baumol Effect and Jevons paradox are related

#48

Post by CGMthrowaway »

huevosabio wrote: post #24

``` Each of these phenomena have a name: there’s Jevons Paradox, which means, “We’ll spend more on what gets more productive”, and there’s the Baumol Effect, which means, “We’ll spend more on what doesn’t get more productive.” ``` I don't think that's exactly right. Jevons says "we consume more on what gets more productive" and Baumol says "the unit cost increases for that which is less productive". The typical examp…

Going back to econ 101 & supply/demand curves:

Jevons describes the supply curve moving out, resulting in increased quantity

Baumol describes the supply curve moving back, resulting in higher prices

Re: The Baumol Effect and Jevons paradox are related

#49

Post by CGMthrowaway »

nocoiner wrote: post #32
huevosabio wrote: post #24

``` Each of these phenomena have a name: there’s Jevons Paradox, which means, “We’ll spend more on what gets more productive”, and there’s the Baumol Effect, which means, “We’ll spend more on what doesn’t get more productive.” ``` I don't think that's exactly right. Jevons says "we consume more on what gets more productive" and Baumol says "the unit cost increases for that which is less productive". The typical examp…

The modern day example that really made Baumol click for me is child care, particularly day care. It’s a highly labor intensive with basically minimal opportunities for productivity enhancements (due both to regulation and parental preferences, as well as just baseline sheer human decency). As the rest of the economy becomes more productive, the relative cost of child care goes up and up and up - which is why we now…

One way to measure the cost of human capital (the major component of childcare) is by the opportunity cost of that time spent. In Baumol's Effect it's not so much productivity stagnation that is the problem, it's the fact that there are so many better opportunities (jobs or otherwise) for a potential childcare worker to invest their time into.

Re: The Baumol Effect and Jevons paradox are related

#50

Post by lkey »

gruez wrote: post #28
lkey wrote: post #12

Earlier quoted context omitted.

Also as noted in the prior dupe, the article also misunderstands it's own topic, as explained in ( https://en.wikipedia.org/wiki/Jevons_paradox ): In economics, the Jevons paradox occurs when technological advancements make a resource more efficient * to use* ; however, as the cost of * using the resource drops* , if demand is highly price elastic [PED] , this results in overall demand [for the resource] increasing.…

>The cost to use tokens is already zero or deeply negative, depending on your accounting ??? Sure, there's zero cost tokens in the form free chatgpt, but negative cost implies that you're getting paid to consume tokens, which I'm not aware of?

In the sense that OpenAI had ~$2.5 billion of revenue 2024 but likely spent ~$3.8 billion just on inference.

Meaning they lose 50 cents for every dollar they spend to send you a token, more if you are a free user. This discounts employees, CapEx, real and imagined (1.4T), overhead, and training (subsidized by M$oft).

Thus, if you have a way to turn every token they give you back into USD, even at a discounted rate, you can and should rob them blind before the well dries up.

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