Why the AI Price Is a Subsidy
Why is the price customers pay for AI a subsidy?
What individuals and companies pay for AI is not what it costs to run. The gap between the sticker price and the true cost is a subsidy. Venture capital fills that gap so prices stay below cost and companies capture market share. Customers, engineers, and companies then make rational decisions from a price signal that is wrong. Mises called the result malinvestment: capital flows into lines of production the market did not choose, and when the subsidy ends those projects cannot survive on their own economics.
What happens when engineers delegate reasoning to AI?
When an engineer writes the code, the reasoning stays in his head: why the function is structured that way, why the edge case is handled, why the database call happens before validation. When he delegates generation to AI, the code can compile and pass tests while nobody knows why it works. A trial cited in the article found engineers using AI assistance scored 17% lower on comprehension tests, with the largest gap in debugging. About 24.2% of tracked AI-introduced issues were still in the latest revision. The team responds by generating more code that fewer people understand, and the maintenance backlog grows.
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