Jevons Paradox of Intelligence

Jevons Paradox of LLMs and Intelligence

When LLMs gets cheaper, we will not save costs but instead use more AI to automate additional workflows or increase accuracy.

Explanation:

GPT4 to 4o token costs dropped by almost 80% over the course of one year. Imagine how hard it was just 100 years ago to get an accurate answer on a complex chemistry problem. You would have had to travel and convince some famous researcher to talk to you. Now it’s at your fingertips.

Interestingly, one might think that with cheaper LLMs, we would see a lot of AI cost savings across organizations. However, instead, I think we will see Jevon's paradox happen here: When artificial intelligence gets cheaper, we will not save costs but instead just use more of it.

Automate more processes and hence possibly spend even more on the infrastructure.

Similar things have happened with engines and electricity.