[jackcosgrove]

I'm not sure the comparison is apples to apples, but this article claims the current AI investment boom pales compared to the railroad investment boom in the 19th century.

https://wccftech.com/ai-capex-might-equal-2-percent-of-us-gd...

> Next, Kedrosky bestows a 2x multiplier to this imputed AI CapEx level, which equates to a $624 billion positive impact on the US GDP. Based on an estimated US GDP figure of $30 trillion, AI CapEx is expected to amount to 2.08 percent of the US GDP!

Do note that peak spending on rail roads eventually amounted to ~20 percent of the US GDP in the 19th century. This means that the ongoing AI CapEx boom has lots of legroom to run before it reaches parity with the rail road boom of that bygone era.

[tripletao]

> Do note that peak spending on rail roads eventually amounted to ~20 percent of the US GDP in the 19th century.

Has anyone found the source for that 20%? Here's a paper I found:

> Between 1848 and 1854, railroad investment, in these and in preceding years, contributed to 4.31% of GDP. Overall, the 1850s are the period in which railroad investment had the most substantial contribution to economic conditions, 2.93% of GDP, relative to 2.51% during the 1840s and 2.49% during the 1830s, driven by the much larger investment volumes during the period.

https://economics.wm.edu/wp/cwm_wp153.pdf

The first sentence isn't clear to me. Is 4.31 > 2.93 because the average was higher from 1848-1854 than from 1850-1859, or because the "preceding years" part means they lumped earlier investment into the former range so it's not actually an average? Regardless, we're nowhere near 20%.

I'm wondering if the claim was actually something like "total investment over x years was 20% of GDP for one year". For example, a paper about the UK says:

> At that time, £170 million was close to 20% of GDP, and most of it was spent in about four years.

https://www-users.cse.umn.edu/~odlyzko/doc/mania18.pdf

That would be more believable, but the comparison with AI spending in a single year would not be meaningful.

[theologic]

By the way it's always nice when somebody actually tries to double check somebody else's research especially when you hear numbers that seemingly just sound crazy. Maybe another factoid, GDP or GNP for all practical purposes wasn't rigorously done by the government until about 1944. I believe a large part of our viewpoints on what happened in the 1800s is primarily based upon census data. But obviously if you're trying to measure a 7 year event Using census that happens every 10 years, there's going to be a lot of gap in the whisker chart.

[Onewildgamer]

So we're much closer to the per year spend US saw during the railroad construction era.

At this rate, I hope we get something useful, public, and reasonably priced infrastructure out of these spending in about 5-8 years just like the railroads.

[jefftk]

> Do note that peak spending on rail roads eventually amounted to ~20 percent of the US GDP in the 19th century.

When you go so far back in time you run into the problem where GDP only counts the market economy. When you count people farming for their own consumption, making their own clothes, etc, spending on railroads was a much smaller fraction of the US economy than you'd estimate from that statistic (maybe 5-10%?)

[eru]

Yes, that was a problem back then, and is also a problem today, but in different ways.

First, GDP still doesn't count you making your own meals. Second, when eg free Wikipedia replaces paid for encyclopedias, this makes society better off, but technically decreases GDP.

However, having said all that, it's remarkably how well GDP correlates with all the goods things we care about, despite its technical limitations.

[m3047]

Am I the only person with vehicles to wrench, a house to work on, chickens in the yard... as well as open source projects? If I'm not getting paid, I still have plenty to do which feeds me to today or prepares me for tomorrow.

Cache la poudre.

[onlyrealcuzzo]

I don't know if the economy could ever be accurately reduced to "good" or "bad".

What's good for one class is often bad for another.

Is it a "good" economy if real GDP is up 4%, the S&P 500 is up 40%, and unemployment is up 10%?

For some people that's great. For others, not so great.

Maybe some economies are great for everyone, but this is definitely not one of those.

This economy is great for some people and bad for others.

[fc417fc802]

> Is it a "good" economy if real GDP is up 4%, the S&P 500 is up 40%, and unemployment is up 10%?

In today's US? Debatable, but on the whole probably not.

In a hypothetical country with sane health care and social safety net policies? Yes that would be hugely beneficial. The tax base would bear the vast majority of the burden of those displaced from their jobs making it a much more straightforward collective optimization problem.

[marcus_holmes]

Agree completely. The idea that an increasing GDP or stock market is always good has taken a beating recently. Mostly because it seems that the beneficiaries of that number increase are the same few who already have more than enough, and everyone else continues to decline.

We need new metrics.

[eru]

What's a class?

[decimalenough]

There is obvious utility to railroads, especially in a world with no cars.

The net utility of AI is far more debatable.

[Falkon1313]

It's more than that even. AI may have plenty of utility. But does the massive capex on GPUs that will all be obsolete in a couple years?

You can still run a train on those old tracks. And it'll be competitive. Sure you could build all new tracks, but that's a lot more expensive and difficult. So they'll need to be a whole lot better to beat the established network.

But GPUs? And with how much tech has changed in the last decade or two and might in the next?

We saw cryptocurrency mining go from CPU to GPU to FPGA to ASICs in just a few years.

We can't yet tell where this fad is going. But there's fair reason to believe that, even if AI has tons of utility, the current economics of it might be problematic.

[rockemsockem]

I'm continually amazed to find takes like this. Can you explain how you don't find clear utility, at the personal level, from LLMs?

I am being 100% genuine here, I struggle to understand how the most useful things I've ever encountered are thought of this way and would like to better understand your perspective.

[gruez]

>The net utility of AI is far more debatable.

I'm sure if you asked the luddites the utility of mechanized textile production you'd get a negative response as well.

[skybrian]

Computing is fairly general-purpose, so I suspect that the data centers at least will be used for something. Reusing so many GPU's might be harder, but not as bad as ASICs. There are a lot of other calculations they could do.

[pjc50]

The utility of housing is not at all ambiguous, but yet we still had a destructive boom-crash in debt-financed housing.

[peab]

the goal of the major AI labs is to create AGI. The net utility of AGI is at least on the level of electricity, or the steam engine. It's debatable whether or not they'll achieve that, but if you actually look at what the goal is, the investment makes sense.

[eru]

> There is obvious utility to railroads, especially in a world with no cars.

> The net utility of AI is far more debatable.

As long as people are willing to pay for access to AI (either directly or indirectly), who are we to argue?

In comparison: what's the utility of watching a Star Wars movie? I say, if people are willing to part with their hard earned cash for something, we must assume that they get something out of it.

[tharmas]

Isn't the US economy far more varied than it was in the 19th century? More dense? And therefore wouldn't be more difficult for one industry to dominate the US economy today than it was in the 19th century?

[fuzzfactor]

>not sure the comparison is apples to apples

More like apples to octopus.

People should keep in mind that there was no such thing as a GDP before the 1980's.

All that has been back-calculated, and the further back you go the more ridiculous it gets.

Excuses sounded plausible at the time but killed two birds with one stone.

Less rapid increase in government benefits which had become based on GNP for survival to cope with inflation, and further obscuring the ongoing poor economic performance of the 1980's going forward compared to how it was before 1970 numerically.

The people who were numerically smart before that and saw what things were like first hand were not fooled so easily.

Even using GDP back in the 1980's when it first came out, you couldn't get a good picture of the 1960's which were not that much earlier.

Don't make me laugh trying for the 1860's :)

[Ekaros]

I wonder about actual effectiveness of spending on railroads vs AI... Even if railroads were somewhat waste, did the investment spread much wider? At least geographically it must have as there were workers that moved around and needed services. That is it was mostly spend in economy. Thus had actual change to trickle down.

Where as AI, who actually gets the investment? Nvidia? TMSC? Are people who are employed some that would have anyway been employed? Do they actually spend much more? Any Nvidia profits likely go just back to the market propping it up even higher.

How much efficiency from use of LLMs have actually increased proctiveness?

[esseph]

Another interesting claim I have come across is that AI investment is now larger that consumer spending:

https://sherwood.news/markets/the-ai-spending-boom-is-eating...

[troyastorino]

Put a comment on this below, but the claim is highly misleading...consumer spending is ~$5 trillion, AI investment is ~$100 billion. The graph is looking at something like contribution to GDP growth (not contribution to GDP), but that is even misleading b/c if you don't adjust for seasonality, H1 consumer spending is almost always lower than H2 consumer spending of the previous year (because Q4 always has a higher level of consumer spending).

(comment below: https://news.ycombinator.com/item?id=44804528 )

[tagami]

Consider other infrastructure such as the US highway system. There may be an expansive bubble, but infrastructure such as the increase in base power production needs to be factored as well.

[gorgoiler]

One way to think about it is what if we’d done it the other way around? If we’d had AI first at 20% GDP investment levels, would the subsequent railroad boom have been an order of magnitude smaller at 2% GDP?

For me, that’s enough of a thought experiment — as implausible as it might be to have AI in 1901 — to be skeptical that the difference is simply that the first tech step-change was a pre-war uplift to build the post-war US success story, and the latter builds on it.