The Lawyer and The Secretary Travel To The Future

Well, maybe the present. It is difficult to tell these days, except in the realm of politics, which is clearly headed back to the past the whole world over.

What am I talking about when I talk about the lawyer and the secretary, you ask? Here’s my new favorite assistant, Claude 3 (Opus) with an explanation:

In his famous example, economist Paul Samuelson describes a skilled lawyer who is also an exceptionally fast typist. Even though the lawyer can type faster than their secretary, it still makes sense for the lawyer to focus on legal work and let the secretary handle the typing. This is because the lawyer’s time is much more valuably spent on legal tasks, while the secretary’s time is most effectively used for typing. By each focusing on what they do best relative to their other abilities, they can achieve more together than if they each split their time between both tasks.

https://claude.ai/

This is, of course, the idea of comparative advantage, an idea that econ students meet quite frequently in their studies. I explain it to my students by telling them about my love for eating and cooking good food. Why then, I ask my students, should we have a cook at home?

The answer is obvious to an economist:

The reason we have a cook at home is because paying the cook her salary is what makes us rich.

As I explain in the post I have linked to above, having a cook at home frees up my time to write about the fact that I have a cook at home. And while it is true that I love to cook, I get paid for using my skills as an economist, not for sautéing french beans (butter, salt and garlic, that’s it, and maybe parboil the beans first, if you like. Heavenly, I tell you).

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Underpinning the idea of comparative advantage is the idea of opportunity cost. Every hour that I spend sautéing french beans is an hour that I am unable to spend on writing blogposts. The more beans I saute, the less blog posts I write.

So even though I am very good (even if I do say so myself) at sautéing beans, I am better at writing blog posts. Or at any rate, society is willing to pay me more for blog posts about comparative advantage than it is willing to pay me for sautéing beans.

So, comparative advantage and opportunity costs – topics we have covered in the past here at EFE, and repeatedly. Why do I talk about them today?

Because I beseech you to go and read Noah Smith’s excellent take on AI and employment. He’s written out the entire post by using these simple (but surprisingly deep!) ideas, and has done a masterful job:

So anyway, because of comparative advantage, it’s possible that many of the jobs that humans do today will continue to be done by humans indefinitely, no matter how much better AIs are at those jobs. And it’s possible that humans will continue to be well-compensated for doing those same jobs.

In fact, if AI massively increases the total wealth of humankind, it’s possible that humans will be paid more and more for those jobs as time goes on. After all, if AI really does grow the economy by 10% or 20% a year, that’s going to lead to a fabulously wealthy society in a very short amount of time. If real per capita GDP goes to $10 million (in 2024 dollars), rich people aren’t going to think twice about shelling out $300 for a haircut or $2,000 for a doctor’s appointment. So wherever humans’ comparative advantage does happen to lie, it’s likely that in a society made super-rich by AI, it’ll be pretty well-paid.

https://www.noahpinion.blog/p/plentiful-high-paying-jobs-in-the

There’s thoughtful analysis, simple (but not simplistic!) explainers and there’s even a section towards the end that would have raised Truman’s hackles. This section talks about real and pressing concerns regarding inequality and adjustment shocks (a la Autor), and other reasons why even the techno-optimists should pause to ponder.

Please do go and read the whole thing, and as always, if you happen to disagree with Noah’s take, please do let me know why.