Coase's Theorem and Jevon's Paradox in an AGI world

Two laws are colliding in the labor market right now: Jevons' Paradox and Coase's Theorem.
Everyone keeps debating the surface-level question, "will AI replace engineers?", and missing the actual structural shift underneath.
Jevon: when you make a resource cheaper, total consumption goes up, not down. Cheaper coal means more coal burned. Cheaper light means more light consumed. Cheaper code means more code written.
Coase: firms exist because transaction costs make it cheaper to coordinate inside a company than across a market. Lower those costs and firms shrink. AI is a transaction-cost solvent. Contracts, coordination, documentation, code review, translation, legal review, all the connective tissue that made the big firm necessary, is collapsing in cost.
Stack them together and you get three predictions:
1. Total number of SWEs: increases
2. Total number of companies: increases
3. Employees per company: decreases
This is exactly what we're seeing. Big tech is laying off engineers by the tens of thousands. Small companies, one-person companies, and zero-person companies, are scrambling to hire them. The headlines look contradictory. They aren't. They're the same phenomenon viewed from two ends of the distribution.
The 10,000-person engineering org was a Coasean artifact. It existed because coordinating 10,000 humans inside one firm was cheaper than contracting 10,000 firms. Not anymore. AI is forcefully refactoring the org chart in real time.
Expect more engineers, in more companies, at smaller headcounts. The median software company of 2030 will look less like Google and more like a guild: three people, twelve AI agents, one product, global reach.
In the next post, I'll cover AGI's interaction with Baumol's cost disease.
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