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[2601.12339] The Economics of Digital Intelligence Capital: Endogenous Depreciation and the Structural Jevons Paradox
The Red Queen Effect (Endogenous Depreciation): Unlike a factory that wears out physically, AI assets lose value because competitors get smarter. Firms must invest at massive levels just to maintain their relative market position, creating a permanent "innovation tax."The Structural Jevons Paradox: As the cost of AI "tokens" (intelligence units) drops, total demand actually increases rather than stabilizes. This is because developers adopt more complex "agentic" architectures (like recursive reasoning loops) that consume vastly more compute than simple prompts.The Data Flywheel: Superior models attract more users, which generates more feedback data, further improving the model. This creates a "winner-takes-all" dynamic where the market naturally tips toward a monopoly once a certain threshold of data efficiency is reached.









