AGI and the Limits of Value Production

This paper develops a political-economy model of artificial general intelligence (AGI) as a technology that progressively substitutes living labor with machine-based productive systems. The model studies the transition from the first moment at which AGI becomes economically capable of replacing labor to the later moment at which AGI becomes technically and actually capable of near-complete replacement. The central distinction is between technical substitutability and actual adoption. Technical substitutability is the feasible replacement ceiling implied by the state of AGI capability, whereas actual adoption is the realized replacement share chosen under cost, profitability, and adoption frictions. Under the strict value-theoretic assumption that AGI transfers value but does not itself create new value, deeper AGI adoption raises the organic composition of capital, reduces the quantity of living labor when adoption outpaces the creation of new labor fields, compresses the source of surplus value, and places downward pressure on the social rate of profit. In the limiting case in which actual AGI adoption approaches complete substitution and new labor fields fail to compensate for displaced labor, living labor tends to zero, surplus value tends to zero, and the profit rate tends to zero. The model therefore identifies near-complete AGI substitution not merely as an efficiency transition, but as a boundary case for value production under a strict political-economy theory of value.