Some Simple Economics of AGI

arXiv:2602.20946v2 Announce Type: replace-cross
Abstract: For millennia, human cognition was the primary engine of progress on Earth. As AI decouples cognition from biology, the marginal cost of measurable execution falls to zero, absorbing any labor capturable by metrics–including creative, analytical, and innovative work. The binding constraint on growth is no longer intelligence but human verification bandwidth: the capacity to validate, audit, and underwrite responsibility when execution is abundant. We model the AGI transition as the collision of two racing cost curves: an exponentially decaying Cost to Automate and a biologically bottlenecked Cost to Verify. This structural asymmetry widens a Measurability Gap between what agents can execute and what humans can afford to verify. It also drives a shift from skill-biased to measurability-biased technical change. Rents migrate to verification-grade ground truth, cryptographic provenance, and liability underwriting–the ability to insure outcomes rather than merely generate them. The current human-in-the-loop equilibrium is unstable: eroded from below as apprenticeship collapses (Missing Junior Loop) and from within as experts codify their obsolescence (Codifier’s Curse). Unverified deployment becomes privately rational–a Trojan Horse externality. Unmanaged, these forces pull toward a Hollow Economy. Yet by scaling verification alongside agentic capabilities, the forces that threaten collapse become the catalyst for unbounded discovery and experimentation–an Augmented Economy. We derive a practical playbook for individuals, companies, investors, and policymakers. Today’s defining challenge is not the race to deploy the most autonomous systems; it is the race to secure the foundations of their oversight. Only by scaling our bandwidth for verification alongside our capacity for execution can we ensure that the intelligence we have summoned preserves the humanity that initiated it.