If Moore’s law completely stops (in a sense there will be no new more effective chips), this will lower the price of computations for a few reasons:
1) Biggest part of a processor price is covering of R&D, but if Moore’s law stops, there will be no R&D, only manufacturing costs.
2) Biggest part of the manufacturing cost is covering the cost and amortisation of large chip fabs. If no more new chip fabs, price will be marginal. For example, 8080 processor cost 350 USD after inventing in the beginning of1970s and only 3.5 USD at the end of 1970s then it was morally obsolete.
3) No more moral amortisation of computers. Amortisation will be not 3 years, but 20 years, which will lower the price of computation—or alternatively will allow users to linearly increase their computation power by buying more and more computers for a long periods of time.
4) Expiring patents will allow cheaper manufacturing by other vendors.
Are you claiming that price per computation would drop in absolute terms, or compared with the world in which Moore’s law continued? The first one seems unobjectionable, the default state of everything is for prices to fall since there’ll be innovation in other parts of the supply chain. The second one seems false. Basic counter-argument: if it were true, why don’t people produce chips from a decade ago which are cheaper per amount of computation than the ones being produced today?
1. You wouldn’t have to do R&D, you could just copy old chip designs.
2. You wouldn’t have to keep upgrading your chip fabs, you could use old ones.
3. People could just keep collecting your old chips without getting rid of them.
4. Patents on old chip designs have already expired.
Do you think it is more likely that r&d will simply cease rather than there being fewer and fewer returns from r&d over time, causing companies to put more money into it to stay competitive? I wonder if the situation might not cause the prices to actually go up, like with medication.
I don’t think that r&d will cease. My argument was in style if “A then B”, but I don’t think that A is true. I am argue here against those who associate the end of Moore’s law with the end of growth of computational power.
I believe that the intuitive economic model you have in mind does not work.
1) In the moment when you sell a thing, its development costs are sunk. That is, you have to explain the price via market conditions at the moment when things are offered at the market. You can argue that development is a fixed cost, therefore less firms will enter the market, therefore the price is higher. But this is independent of the development costs for future processors.
2) Basically, see 1) …?
3) If I don’t expect that my computer becomes obsolete in two years, I am willing to pay more. Thus, the demand curve moves upwards. So the price of the processor may be higher. (But this also depends on supply, i.e., points 1) and 2))
4) Ok, but this is independent of whether Moore’s law does or does not hold. That is, if you have some processor type X1, at some point its patent expires and people can offer it cheaply (because they don’t have to cover the costs discussed in point 1).
If Moore’s law completely stops (in a sense there will be no new more effective chips), this will lower the price of computations for a few reasons:
1) Biggest part of a processor price is covering of R&D, but if Moore’s law stops, there will be no R&D, only manufacturing costs.
2) Biggest part of the manufacturing cost is covering the cost and amortisation of large chip fabs. If no more new chip fabs, price will be marginal. For example, 8080 processor cost 350 USD after inventing in the beginning of1970s and only 3.5 USD at the end of 1970s then it was morally obsolete.
3) No more moral amortisation of computers. Amortisation will be not 3 years, but 20 years, which will lower the price of computation—or alternatively will allow users to linearly increase their computation power by buying more and more computers for a long periods of time.
4) Expiring patents will allow cheaper manufacturing by other vendors.
Are you claiming that price per computation would drop in absolute terms, or compared with the world in which Moore’s law continued? The first one seems unobjectionable, the default state of everything is for prices to fall since there’ll be innovation in other parts of the supply chain. The second one seems false. Basic counter-argument: if it were true, why don’t people produce chips from a decade ago which are cheaper per amount of computation than the ones being produced today?
1. You wouldn’t have to do R&D, you could just copy old chip designs.
2. You wouldn’t have to keep upgrading your chip fabs, you could use old ones.
3. People could just keep collecting your old chips without getting rid of them.
4. Patents on old chip designs have already expired.
Do you think it is more likely that r&d will simply cease rather than there being fewer and fewer returns from r&d over time, causing companies to put more money into it to stay competitive? I wonder if the situation might not cause the prices to actually go up, like with medication.
I don’t think that r&d will cease. My argument was in style if “A then B”, but I don’t think that A is true. I am argue here against those who associate the end of Moore’s law with the end of growth of computational power.
I see. Just running with the premise as it stood.
In place of “Moore’s law stops” let us say ‘the doubling time increases from X to Y.’
I believe that the intuitive economic model you have in mind does not work.
1) In the moment when you sell a thing, its development costs are sunk. That is, you have to explain the price via market conditions at the moment when things are offered at the market. You can argue that development is a fixed cost, therefore less firms will enter the market, therefore the price is higher. But this is independent of the development costs for future processors.
2) Basically, see 1) …?
3) If I don’t expect that my computer becomes obsolete in two years, I am willing to pay more. Thus, the demand curve moves upwards. So the price of the processor may be higher. (But this also depends on supply, i.e., points 1) and 2))
4) Ok, but this is independent of whether Moore’s law does or does not hold. That is, if you have some processor type X1, at some point its patent expires and people can offer it cheaply (because they don’t have to cover the costs discussed in point 1).
What’s meant by “Moral” here?
A thing could function, but there are better and cheaper things—the correct name probably is “functional obsolescence”
https://en.wikipedia.org/wiki/Obsolescence#Functional_obsolescence