In some industries, prices will follow wealthier people as more profit will come from gouging those on the lucky side now much larger wealth divide, and the middle class will vanish.
You saw an example of this in ecommerce during the pandemic's economic upheaval. Luxury goods recorded increased sales, as did bottom of the barrel retailers. Services and items in the comfortable middle class we all deserve suffered decreases.
I was not talking about scarcity, I was talking about the perversions of markets in an increasing wealth gap. There is no scarcity of brand name clothes for example. It's only expensive because people with excess money choose to pay for it, but it cost cents to make and there is no mismatch between supply and demand, and it is often not better than cheaper clothing.
Why would you need a monopoly? They aren't competing on price. It's an irrational market.
It depends what business you're in. If you're a company making yachts, supercars, or private jets, then owners consume much more than workers.
As wealth shifts to fewer hands, companies making mass-market goods are forced to drop prices, squeezing their margins and forcing consolidation and further automation, as the buying power of the customer base disappears. Investment capital shifts into the luxury sector where demand is growing, and prices and production quantities increase.
More and more of the economy gets dedicated to serving the needs of the wealthy (which is essentially what what it means for the rich to get richer).
The short answer is because markets are not monolithic.
You can have all kinds of price and market distortion as long as it’s a small group of people or a group of people that has a significant wealth effect over those that do not have it.
Just like you have services and products specifically for multimillionaires and billionaires, where you can get things that nobody else has, and in many cases even aware exist, you can see that happen for broader parts of society without having a deleterious effect on the overall survival of the human species.
It’s just market specialization, and we haven’t seen it with commodities yet, but we could see it with commodities in the future, and that would really change the game if commodities become available, only to those who are inside of a small pool of people that are making all the money with artificial intelligence, and the rest of us have no access to it. That is a very real possibility.
When sufficient profit motive exists to serve commodity markets for small numbers of people instead of the broad collective, a wage/price acceleration condition could be had which we haven’t seen before where more-and-more resources are locked up by a smaller and smaller but wealthier and wealthier small part of the population, essentially creating a wage / price spiral but inside of a wealth effect. Think of it is the impact of capital, and you begin to see why well concentration could lead to commodity concentration, in ways that we’ve never seen before. We have some examples that are similar to this happening right now, with the consolidation of industry, after industry by private equity, which is unprecedented.
AI has the possibility of accelerating these trends.
We have seen this happen many times, where broad and cheap food groups become speciality food groups and product categories, rise in price as they become popular with the smaller wealthier elite groups (think of ox tails, bluefin tuna, certain purebred dogs, fine wines and cheeses, etc) they become out-of-reach to the general society.
We haven’t seen this for commodities but there is little reason that it couldn’t also come into effect in broad commodity markets with automation and AI remove the need for wage classes.
Ai is the automation of intellectual work, but also the ground technology for advanced robotics and automation powered by AI. The impact will be more profound than anyone here applying 20th century economic theory and colloquialisms really understands. The potential for interruptions is profound, and AGI and it’s ongoing improvements is very likely like a new nuclear threat.
People like to apply the logic of the wave theory of Internet, mobile, radio, television, etc. you can go all the way back to the weaving machine, the printing press, and the cotton gin.
The real question is whether or not this time is different. You know everything is not different until the time that it actually is and when you start thinking about building a digital brain, you’re not just talking about creating another transformational technology revolution, you’re talking about replicating the creature that actually creates those technology waves. That’s slightly different and deserves a little more consideration many of the people talking about this AI revolution tend to give it. Instead of creating something new that changes society, we’re creating something to replace the thing that creates those technology tools and waves in the first place. Something like us.
Like all technology revolutions, the resulting profits and productivity can be used for the uplift of humanity and for social good, or it can be used for selfish motivations. And to be fair, it could be used for selfish motivations, and end up benefiting all of humanity if the system allows for those selfish motivations to benefit the larger society. But that comes down to wise governance and careful shepherding by those in power. Gene Roddenbury is prescient as always.
So, in short, you either end up with amplification, like you’re talking about, which creates a stratification between the classes of benefit from AI technology, and the classes of those who were left behind, were you see a general transformation of the overall society that brings everyone into a new era of productivity that changes everything on earth as a paradigm-style transformation. Which model applies? The question is this: is it different to build a new machine or a machine that dreams up and makes new machines?
Look up what the business model for in-app purchases is. In short, it's a few rich "whales" that sustain those economies, everyone else is just providing free labor to amuse the "whales".
The paradox of productivity will kick in and prices will plummet.