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This completely breaks down under the current reality of AI investment, as players large and small are no longer price-takers. The marginal costs of investment

This completely breaks down under the current reality of AI investment, as players large and small are no longer price-takers. The marginal costs of investment are not constant because we have finite supplies of GPUs, TPUs, memory, hard drives, and power. The Hamiltonian in equations 5 and 6 needs to account for this.

metalliqaz 4mo ago
are you saying that previous technologies had effectively infinite supply?
- ok123456 4mo ago
  No. I'm stating where the paper's assumptions are clearly violated. AI companies are intentionally trying to monopolize the supply of inputs needed for R&D. This violates homogeneity of degree 1.
  - gwerbin 4mo ago
    Isn't this true in a lot of situations? Basically anytime maximum production capacity of an input is limited, or scale-up time is very long, firms are large relative to the supply so they are not price takers.
    - curio_Pol_curio 4mo ago
      PP's point has (mostly?) been addressed in https://www.aeaweb.org/articles?id=10.1257/mac.20180386 https://www.aeaweb.org/articles?id=10.1257/mac.20180386 Inputs that can be monopolized are manifestly _not_ the intangibles; price-taking is independent of their effect
      - gwerbin 4mo ago
        I don't think they implied that those inputs are the intangibles, only that the functional form assumption in the 2018 paper is unrealistic.
- jmalicki 4mo ago
  It's not that supply was actually infinite, but you didn't realistically have situations where you said "I want to buy GPUs for a data center" only to be told "there's a 3 year waiting list." You might have two months after NVidia 3090s came out where they were short, but it is nothing like today.
  - zbentley 4mo ago
    Citation needed. Industries that faced multi year supply constraints in recent memory include: nuclear power, battery manufacturing, flagship commercial aircraft models, late-stage pharmaceutical safety certification, certain luxury cars, and more.
    - jmalicki 4mo ago
      Fair! At the same time, a lot of interest in this paper is specific to the AI industry (even if it's not only about that), and outside of high-end labor, the other constraints are new there.
- deleted 4mo ago
  [deleted]

metalliqaz 4mo ago

are you saying that previous technologies had effectively infinite supply?

ok123456 4mo ago
No. I'm stating where the paper's assumptions are clearly violated. AI companies are intentionally trying to monopolize the supply of inputs needed for R&D. This violates homogeneity of degree 1.
- gwerbin 4mo ago
  Isn't this true in a lot of situations? Basically anytime maximum production capacity of an input is limited, or scale-up time is very long, firms are large relative to the supply so they are not price takers.
  - curio_Pol_curio 4mo ago
    PP's point has (mostly?) been addressed in https://www.aeaweb.org/articles?id=10.1257/mac.20180386 https://www.aeaweb.org/articles?id=10.1257/mac.20180386 Inputs that can be monopolized are manifestly _not_ the intangibles; price-taking is independent of their effect
    - gwerbin 4mo ago
      I don't think they implied that those inputs are the intangibles, only that the functional form assumption in the 2018 paper is unrealistic.
jmalicki 4mo ago
It's not that supply was actually infinite, but you didn't realistically have situations where you said "I want to buy GPUs for a data center" only to be told "there's a 3 year waiting list." You might have two months after NVidia 3090s came out where they were short, but it is nothing like today.
- zbentley 4mo ago
  Citation needed. Industries that faced multi year supply constraints in recent memory include: nuclear power, battery manufacturing, flagship commercial aircraft models, late-stage pharmaceutical safety certification, certain luxury cars, and more.
  - jmalicki 4mo ago
    Fair! At the same time, a lot of interest in this paper is specific to the AI industry (even if it's not only about that), and outside of high-end labor, the other constraints are new there.
deleted 4mo ago
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