EA - AGI and the EMH: markets are not expecting aligned or unaligned AI in the next 30 years by basil.halperin

Link to original articleWelcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: AGI and the EMH: markets are not expecting aligned or unaligned AI in the next 30 years, published by basil.halperin on January 10, 2023 on The Effective Altruism Forum.by Trevor Chow, Basil Halperin, and J. Zachary MazlishIn this post, we point out that short AI timelines would cause real interest rates to be high, and would do so under expectations of either unaligned or aligned AI. However, 30- to 50-year real interest rates are low. We argue that this suggests one of two possibilities:Long(er) timelines. Financial markets are often highly effective information aggregators (the “efficient market hypothesis”), and therefore real interest rates accurately reflect that transformative AI is unlikely to be developed in the next 30-50 years.Market inefficiency. Markets are radically underestimating how soon advanced AI technology will be developed, and real interest rates are therefore too low. There is thus an opportunity for philanthropists to borrow while real rates are low to cheaply do good today; and/or an opportunity for anyone to earn excess returns by betting that real rates will rise.In the rest of this post we flesh out this argument.Both intuitively and under every mainstream economic model, the “explosive growth” caused by aligned AI would cause high real interest rates.Both intuitively and under every mainstream economic model, the existential risk caused by unaligned AI would cause high real interest rates.We show that in the historical data, indeed, real interest rates have been correlated with future growth.Plugging the Cotra probabilities for AI timelines into the baseline workhorse model of economic growth implies substantially higher real interest rates today.In particular, we argue that markets are decisively rejecting the shortest possible timelines of 0-10 years.We argue that the efficient market hypothesis (EMH) is a reasonable prior, and therefore one reasonable interpretation of low real rates is that since markets are simply not forecasting short timelines, neither should we be forecasting short timelines.Alternatively, if you believe that financial markets are wrong, then you have the opportunity to (1) borrow cheaply today and use that money to e.g. fund AI safety work; and/or (2) earn alpha by betting that real rates will rise.An order-of-magnitude estimate is that, if markets are getting this wrong, then there is easily $1 trillion lying on the table in the US treasury bond market alone – setting aside the enormous implications for every other asset class.Interpretation. We view our argument as the best existing outside view evidence on AI timelines – but also as only one model among a mixture of models that you should consider when thinking about AI timelines. The logic here is a simple implication of a few basic concepts in orthodox economic theory and some supporting empirical evidence, which is important because the unprecedented nature of transformative AI makes “reference class”-based outside views difficult to construct. This outside view approach contrasts with, and complements, an inside view approach, which attempts to build a detailed structural model of the world to forecast timelines (e.g. Cotra 2020; see also Nostalgebraist 2022).Outline. If you want a short version of the argument, sections I and II (700 words) are the heart of the post. Additionally, the section titles are themselves summaries, and we use text formatting to highlight key ideas.I. Long-term real rates would be high if the market was pricing advanced AIReal interest rates reflect, among other things:Time discounting, which includes the probability of deathExpectations of future economic growthThis claim is compactly summarized in the “Ramsey rule” (and the only math that we will introduce in this post), a version of the “Euler equation” th...