Max – A Thought Experiment: Could AI Run the Economy Better Than Markets?

One of the fundamental critiques against twentieth century experiments in central economic planning, and the main reason for their failures, was the inability of humandirected planning systems to manage the data gathering, analysis, computation, and control necessary to direct the vast complexity of production, allocation, and exchange decisions that make up a modern economy. Rapid recent advances in AI, data, and related technological capabilities have re-opened that old question, and provoked vigorous speculation about the feasibility, benefits, and threats of an AI-directed economy. This paper presents a thought experiment about how this might work, based on assuming a powerful AI agent (whimsically named “Max”) with no binding computational or algorithmic limits on its (his) ability to do the task. The paper’s novel contribution is to make this hitherto under-specified question more concrete and specific. It reasons concretely through how such a system might work under explicit assumptions about contextual conditions; what benefits it might offer relative to present market and mixed-market arrangements; what novel requirements or constraints it would present; what threats and challenges it would pose, and how it inflects long-standing understandings of foundational questions about state, society, and human liberty.As with smaller-scale regulatory interventions, the concrete implementation of comprehensive central planning can be abstracted as intervening via controlling either quantities or prices. The paper argues that quantity-based approaches would be fundamentally impaired by problems of principal-agent relations and incentives, which hobbled historical planning systems and would persist under arbitrary computational advances. Price-based approaches, as proposed by Oskar Lange, do not necessarily suffer from the same disabilities. More promising than either, however, would be a variant in which Max manages a comprehensive system of price modifications added to emergent market outcomes, equivalent to a comprehensive economy-wide system of Pigovian taxes and subsidies. Such a system, “Pigovian Max,” could in principle realize the information efficiency benefits and liberty interests of decentralized market outcomes, while also comprehensively correcting externalities and controlling inefficient concentration of market power and associated rent-seeking behavior. It could also, under certain additional assumptions, offer the prospect of taxation without deadweight loss, by taking all taxes from inframarginal rents.Having outlined the basic approach and these potential benefits, the paper discusses several challenges and potential risks presented by such a system. These include Max’s need for data and the potential costs of providing it; the granularity or aggregation of Max’s determinations; the problem of maintaining variety and innovation in an economy directed by Max; the implications of Max for the welfare of human workers, the meaning and extent of property rights, and associated liberty interests; the definition of social welfare that determines Max’s objective function, its compatibility with democratic control, and the resultant stability of the boundary between the state and the economy; and finally, the relationship of Max to AI-enabled trends already underway, with implications for the feasibility of Max being developed and adopted, and the associated risks. In view of the depth and difficulty of these questions, the discussion of each is necessarily preliminary and speculative

Reflections on Air Capture: The Political Economy of Active Intervention in the Global Environment; An Editorial Comment

When global climate change came onto domestic and international policy agendas in the late 1980s, only two types of response were initially considered: reducing emissions by improving efficiencies or switching to lower or non-carbon energy sources; and adapting to the anticipated changes. Since that time the agenda of potential responses has been progressively expanded, principally by adding various ways to intervene in the global carbon cycle or the climate to break the connection between emissions of greenhouse gases and the resultant climate changes. Three types of these “intervening” responses are now, to varying degrees, present in policy debate: biological sequestration of carbon in forests or soils; point-source carbon capture from fossil fuels or combustion gases, followed by sequestration in stable reservoirs; and various forms of albedo modification or other direct manipulation of the climate system, collectively called geoengineering. In this issue of Climatic Change,Keith, Ha-Duong, and Stolaroff propose that one additional intervening option should be considered: capturing CO2 directly from the atmosphere, then sequestering it in the same reservoirs as would be used for carbon captured from point sources. They argue that air capture, like a conventional backstop energy technology, can provide an essentially unlimited quantity of mitigation at constant, high marginal cost. But because air capture would be completely uncoupled from the energy system, it would have two key advantages over any prior mitigation technology. First, air capture would take place in free-standing dedicated plants, and so would offer complete flexibility in siting, timing, and scale. Second, air capture would not be bound to any particular emissions stream, and so could be conducted at large enough scale to make any enterprise, nation, or human civilization as a whole, a net remover of carbon from atmosphere, rather than a contributor to it

The Gulf Spill Context: Peak Oil, Risky Oil, and Energy Strategy

As shocking as the situation in the Gulf of Mexico may be, in this broader context it must be regarded as a normal event. That’s not to say that it’s normal in relation to past experience. Rather, the Gulf spill is “the new normal,” in the sense that our current energy strategy—or lack thereof—will make such events increasingly likely, even if we assume conditions of effective regulation and responsible compliance that evidently were not present on the Deepwater Horizon

The Big One

Richard Posner\u27s Catastrophe: Risk and Response (Oxford University Press, 2004) examines four risks whose worst cases could end advanced human civilization or worse: asteroid impacts, a catastrophic chain reaction initiated in high-energy particle accelerators, global climate change, and bioterrorism. He argues that these all warrant more thought and response than they are receiving, and that they can usefully be assessed using a simple analytic framework based on cost-benefit analysis. This essay reviews knowledge of these risks and critically examines Posner\u27s claims for a consistent analytic approach. While the conclusions that each risk merits more thought and effort appear persuasive, these rely on ad hoc arguments specific to each risk. The general analytic claims do not hold up well, as Posner develops his proposed framework thinly and applies it unevenly. Applying such a framework consistently to catastrophic risks would require engaging some fundamental problems that Posner does not address. The book\u27s major contributions are to identify and describe these risks, highlight the inadequate attention they are receiving, and advance a persuasive argument for their more serious examination

The Gulf Spill Context: Peak Oil, Risky Oil, and Energy Strategy

As shocking as the situation in the Gulf of Mexico may be, in this broader context it must be regarded as a normal event. That’s not to say that it’s normal in relation to past experience. Rather, the Gulf spill is “the new normal,” in the sense that our current energy strategy—or lack thereof—will make such events increasingly likely, even if we assume conditions of effective regulation and responsible compliance that evidently were not present on the Deepwater Horizon

The Big One

Richard Posner\u27s Catastrophe: Risk and Response (Oxford University Press, 2004) examines four risks whose worst cases could end advanced human civilization or worse: asteroid impacts, a catastrophic chain reaction initiated in high-energy particle accelerators, global climate change, and bioterrorism. He argues that these all warrant more thought and response than they are receiving, and that they can usefully be assessed using a simple analytic framework based on cost-benefit analysis. This essay reviews knowledge of these risks and critically examines Posner\u27s claims for a consistent analytic approach. While the conclusions that each risk merits more thought and effort appear persuasive, these rely on ad hoc arguments specific to each risk. The general analytic claims do not hold up well, as Posner develops his proposed framework thinly and applies it unevenly. Applying such a framework consistently to catastrophic risks would require engaging some fundamental problems that Posner does not address. The book\u27s major contributions are to identify and describe these risks, highlight the inadequate attention they are receiving, and advance a persuasive argument for their more serious examination

Seeking Truth for Power: Informational Strategy and Regulatory Policy Making

Whether regulating mutual funds or chemical manufacturers, government\u27s policy decisions depend on information possessed by industry. Yet it is not in any industry\u27s interests to share information that will lead to costly regulations. So how do government regulators secure needed information from industry? Since information disclosed by any firm cannot be retrieved and can be used to regulate the entire sector, industry faces a collective action problem in maintaining silence. While collective silence is easy to maintain if all firms\u27 interests are aligned, individual firms\u27 payoffs for disclosure can vary due to heterogeneous effects of regulation and differing expectations about the regulator\u27s expected actions with or without any given information. This leads to regulators\u27 first strategy: exploit asymmetries in firms\u27 interests in disclosure. Regulators\u27 second strategy comes from their ability to create asymmetries of interest, namely by selectively rewarding or punishing individual firms. Both of these strategies work best when pursued informally, in less visible ways, since other firms can be expected to inflict retribution on a squealer. Although informal relationships have been long deplored due to the risk of regulatory bias or capture, our analysis shows how they can be beneficial to government in playing the information game. This has important implications for regulatory procedure. Since total transparency would detract from government\u27s ability to secure valuable information, administrative law needs to balance between the competing needs of transparency to prevent abuse and opacity to facilitate information exchange

Reflections on Air Capture: the political economy of active intervention in the global environment

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/47530/1/10584_2005_Article_9032.pd

Preparing for Climatic Change: The Water, Salmon, and Forests of the Pacific Northwest

The impacts of year-to-year and decade-to-decade climatic variations on some of the Pacific Northwest’s key natural resources can be quantified to estimate sensitivity to regional climatic changes expected as part of anthropogenic global climatic change. Warmer, drier years, often associated with El Niño events and/or the warm phase of the Pacific Decadal Oscillation, tend to be associated with below-average snowpack, streamflow, and flood risk, below-average salmon survival, below-average forest growth, and above-average risk of forest fire. During the 20th century, the region experienced a warming of 0.8 ◦C. Using output from eight climate models, we project a further warming of 0.5–2.5 ◦C (central estimate 1.5 ◦C) by the 2020s, 1.5–3.2 ◦C (2.3◦C) by the 2040s, and an increase in precipitation except in summer. The foremost impact of a warming climate will be the reduction of regional snowpack, which presently supplies water for ecosystems and human uses during the dry summers. Our understanding of past climate also illustrates the responses of human management systems to climatic stresses, and suggests that a warming of the rate projected would pose significant challenges to the management of natural resources. Resource managers and planners currently have few plans for adapting to or mitigating the ecological and economic effects of climatic change

Preparing for Climatic Change: The Water, Salmon, and Forests of the Pacific Northwest

The impacts of year-to-year and decade-to-decade climatic variations on some of the Pacific Northwest’s key natural resources can be quantified to estimate sensitivity to regional climatic changes expected as part of anthropogenic global climatic change. Warmer, drier years, often associated with El Niño events and/or the warm phase of the Pacific Decadal Oscillation, tend to be associated with below-average snowpack, streamflow, and flood risk, below-average salmon survival, below-average forest growth, and above-average risk of forest fire. During the 20th century, the region experienced a warming of 0.8 ◦C. Using output from eight climate models, we project a further warming of 0.5–2.5 ◦C (central estimate 1.5 ◦C) by the 2020s, 1.5–3.2 ◦C (2.3◦C) by the 2040s, and an increase in precipitation except in summer. The foremost impact of a warming climate will be the reduction of regional snowpack, which presently supplies water for ecosystems and human uses during the dry summers. Our understanding of past climate also illustrates the responses of human management systems to climatic stresses, and suggests that a warming of the rate projected would pose significant challenges to the management of natural resources. Resource managers and planners currently have few plans for adapting to or mitigating the ecological and economic effects of climatic change