DeepMind paper: AI displaces jobs gradually within firms, suddenly when AI firms win
paulnovosad · x · 2026-10-29
Economist Paul Novosad highlights an "Organizing Intelligence" paper by Google DeepMind researchers (Alex Imas, Andrew Koh, Shane Legg) modeling how AI advances reshape market structure and employment.
- Distinguishes competence (raises productivity levels) from coordination (governs how productivity scales with size)
- Key AI-human asymmetries: AI expertise is reproducible while human expertise is in fixed supply; AIs may escape human coordination limits
- Once AI outperforms the average human, complementary human teams can still outcompete AI; rising competence shrinks firm size and shifts workforce composition
- Improving coordination can break the Coasean ceiling on firm size, triggering a phase transition toward large, concentrated AI-heavy firms
- Employment change is gradual when AI displaces workers inside mixed human-AI firms, sudden when AI firms outcompete human firms
- Wage effects decompose into a technology effect and a reorganization effect, which can reverse the technology effect
His punchline: "AI isn't replacing the jobs in the ad agency. It's replacing the ad agency."
Related event: DeepMind Launches Institute with AGI Economics Essays(3 posts)→
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