Market forces will misalign AI with human interests

(Daron Acemoglu, Institute Professor at MIT , , 5-20)

One objection to the argument I have developed is that it is unwise to mess with the market. Who are we to interfere with the innovations and technological breakthroughs the market is generating? Wouldn’t intervening sacrifice productivity growth and even risk our technological vibrancy? Aren’t we better off just letting the market mechanism deliver the best technologies and then use other tools, such as tax-based redistribution or universal basic income, to make sure that everybody benefits? The answer is no, for several reasons. First, it isn’t clear that the market is doing a great job of selecting the right technologies. It is true that we are in the midst of a period of prodigious technological creativity, with new breakthroughs and applications invented every day. Yet Robert Solow’s thirty-year-old quip about computers—that they are “everywhere but in the productivity statistics”—is even more true today. Despite these mind-boggling inventions, current productivity growth is strikingly slow compared to the decades that followed World War II. This sluggishness is clear from the standard statistic that economists use for measuring how much the technological capability of the economy is expanding—the growth of total factor productivity (TFP). TFP growth answers a simple question: If we kept the amount of labor and capital resources we are using constant from one year to the next, and only our technological capabilities changed, how much would aggregate income grow? TFP growth in much of the industrialized world was rapid during the decades that followed World War II, and has fallen sharply since then. In the US, for example, the average TFP growth was close to 2 percent a year between 1920 and 1970, and has averaged only a little above 0.5 percent a year over the last three decades. So the case that the market is doing a fantastic job of expanding our productive capacity isn’t ironclad. The argument that we should rely on the market for setting the direction of technological change is weak as well. In the terminology of economics, innovation creates significant positive “externalities”: when a company or a researcher innovates, much of the benefits accrue to others. This is doubly so for technologies that create new tasks. The beneficiaries are often workers whose wages increase (and new firms that later find the right organizational structures and come up with creative products to make use of these new tasks). But these benefits are not part of the calculus of innovating firms and researchers. Ordinary market forces—which fail to take account of externalities—may therefore deter the types of technologies that have the greatest social value. This same reasoning is even more compelling when new products produce non-economic costs and benefits. Consider surveillance technologies. The demand for surveillance from repressive (and even some democratic-looking) governments may be great, generating plenty of financial incentives for firms and researchers to invest in facial recognition and snooping technologies. But the erosion of liberties is a notable non-economic cost that it is often not taken into account. A similar point holds for automation technologies: it is easy to ignore the vital role that good, secure, and high-paying jobs play in making people feel fulfilled. With all of these externalities, how can we assume that the market will get things right? Market troubles multiply further still when there are competing technological paradigms, as in the field of AI. When one paradigm is ahead of the others, both researchers and companies are tempted to herd on that leading paradigm, even if another one is more productive. Consequently, when the wrong paradigm surges ahead, it becomes very difficult to switch to more promising alternatives. Last but certainly not least, innovation responds not just to economic incentives but also to norms. What researchers find acceptable, exciting, and promising is not purely a function of economic reward. Social norms play a key role by shaping researchers’ aims as well as their moral compasses. And if the norms within the research area do not reflect our social objectives, the resulting technological change will not serve society’s best interests. All of these reasons cast doubt on the wisdom of leaving the market to itself. What’s more, the measures that might be thought to compensate for a market left to itself—redistribution via taxes and the social safety net—are both insufficient and unlikely to work. We certainly need a better safety net. (The COVID-19 pandemic has made that even clearer.) But if we do not generate meaningful employment opportunities—and thus a viable social purpose—for most people in society, how can democracy work? And if democracy doesn’t work, how can we enact such redistributive measures—and how can we be sure that they will remain in place in the future?