The main thrust of the economic argument has been on the cost of system adminstrators that maintain the hardware. Electricity and cooling being big ongoing costs, but also when AWS released it wasn't uncommon to order a server and have it take 3 months to arrive.

I think in practice the system administrators are still in the company now as AWS engineers, they still keep all that platform stuff running and your paying AWS for their engineers too as well as electricity. It has the advantage of being very quick to spin up another box, but also machines these days can come with 288 cores, its not a big stretch to maintain sufficient surplass and the tools to allow teams to self service.

Things are in a different place to when AWS first released, AWS ought to be charging a lot less for the compute, memory and storage, their business is wildly profitable at current rates because per core machines got cheaper.