OK, let's go. It's the one thing we talk about around here...#1463052 #1485162, #1536926, #1550269, #1550071 eeeet cetera.
Beyond the immediate question of where on earth US monetary policy is headed, policymakers are being urged to pay attention to some deep changes in our economies wrought by AI.
AI doesn't just threaten work but... the financial system? Somehow. I thought the UBI was gonna be the fix? (#1561260)
The first and more recognisable risk is that of a fall in asset values. Bailey doesn’t use the word, but this is AI as the latest financial bubble.
Yes, fine: bubble (well, "bubble") in the valuations of the companies themselves. #1560741 Who (but a blokhead @BlokchainB) cares?
Second problem... cyber attacks
Bailey warns that AI could intensify the cyber risks threatening to disrupt institutions and markets. This creates understood if hard-to-manage challenges to financial markets.
Bo-riiiiing.
The risks go deeper still. At Jackson Hole last week, Princeton economist Markus Brunnermeier argued that agentic AI presents entirely novel challenges to how economies work. New concepts are needed for economic analysis, which may overturn the established conclusions of conventional theory. Brunnermeier’s own conceptual innovation is “asymmetric understanding”, which deepens the old information economics concept of asymmetric information.
Asymmetric info... aaagain?
Asymmetric information is when someone knows more about someone else than the other knows about them (or about matters of relevance to both). But this imperfect knowledge still operates within a correct understanding of how the world works (so that if you had perfect information, you would predict things correctly). Brunnermeier considers cases where not just information but understanding is imperfect and indeed asymmetric, and argues that in a world with AI agents, this asymmetry is to humans’ disadvantage: we cannot understand how AI agents think, even as they understand (at least to the point of being able to predict our actions better than we do theirs) how we think.
So they will eat us? Yesyes. Implication for monetary policy:
that central banks should pull back from trying to influence the market through markets and expectations, and instead focus on direct (what I would call “mechanical”) tools such as reserve requirements. Or that segmenting financial markets to reduce contagion risk if something does go wrong would be better for us than integrating and connecting them.
Oh no, he didn't just say that... x2! #1561710
Dude, you know the agents work on prices yes? Respond to very decentralized(-ish?) incentives?
archive: https://archive.md/JHf0p
Thus seems like an absurd statement to me. If it was the case, I doubt we'd find AI tools very useful. Instead, we have all grown quite comfortable with relying on AI tooling because we do understand how it works.
At the very least, we understand AI as much as AI can be said to understand human minds or society. I see no asymmetry.
The statement seems absurd to me too. And even though I might not be able to predict their exact words, I think how AI will respond to a question is actually very predictable.
I’m confident we’ll see someone who misunderstands the socialist calculation problem think that AI solves it.
Most deluded AI utopians already are.
I meant someone with the power of the state behind them.
They thought computers would back in the ignominious 1990s