Will transformative AI raise interest rates?
We want to know if AGI is coming. Chow, Halperin, and Mazlish have a paper called “Transformative AI, Existential Risk, and Real Interest Rates” arguing that, if we believe the markets, it is not coming for some time. The reasoning is simple. If we expect to consume much more in the future, and people engage in smoothing their incomes over time, then people will want to borrow more now. The real interest rate would rise. The reasoning also works if AI is unaligned, and has a chance of destroying all of us. People would want to spend what they have now. They would be disinclined to save, and real interest rates would have to rise in order to induce people to lend.
The trouble is that “economic growth” is not really one thing. It consists both of expanding our quantity of units consumed for a given amount of resources, but also in expanding what we are capable of consuming at all. Take the television – it has simultaneously become cheaper and greatly improved in quality. One can easily imagine a world in which the goods stay the same price, but greatly improve in quality. Thus, the marginal utility gained from one dollar increases in the future, and we would want to save more, not less. The coming of AGI could be heralded by falling interest rates and high levels of saving.