By Pia Malaney
In Silicon Valley one often hears discussion about the “AI Steering Problem”: While we can program our artificial intelligence with desired skills and abilities, how do we program it with the right motivation? As AI develops rapidly and innovation increasingly changes the nature of the world we live in, there is another problem we increasingly need to address: How do we steer markets in the face of a rapidly changing economy?
As driverless cars begin to appear on our streets, we understand that trucking as a profession may have its days numbered. As smart contracts get increasingly sophisticated, what will the lawyers’ role be? Medical students reading the writing on the wall are increasingly avoiding certain fields like radiology where machines are often more insightful than human eyes. As technology changes the nature of production, it is no longer just blue-collar jobs that are under threat; the entire structure of the economy is challenged by reorientation. The big question before us now is whether we will step back and allow markets to adapt as they will to rapidly changing technology, or if economists and policy makers, like the technologists, will actively try to address the market steering problem.
The changes being wrought by technology to traditional markets are deep. To name just a few:
• Will the notion of XaaS, or X as a Service, increasingly shift us from ‘stock’ to ‘flow’ concepts as we build a sharing economy?
• As 3D printing begins to convert private goods into public goods, will what was seen as an exception to a market economy increasingly become the norm, undermining the applicability of standard market models?
• Silicon Valley is coming to see the world in terms of an abundance economy as opposed to a scarcity economy; as we shift to a Virtual World will we indeed see greater non-rivalry for goods?
• As artificial general intelligence is developed and robots take over a range of jobs, do the traditional distinctions between labor and capital become increasingly blurred?
• As blockchain technology further develops the use of smart contracts, will the role of governments as enforcers of contracts become less significant?
From the perspective of technology, our current institutions can be seen as clusters running our economic, legal, and cultural code. While economists are partial to the notion of the so-called invisible hand driving markets, we have in fact put robust structures in place to help guide our markets and institutions. The Federal Reserve, for example, can be seen as a modern day Mechanical Turk, with it’s behind the scenes machinations to ensure smooth functioning of our economy. In many ways, though, it feels as if the world of technology is trying to run 21st century code on 20th century institutions. Rather than relying on markets and other institutions to adapt automatically to the changes being wrought by technology, we need to think about how to steer markets to ensure they serve souls rather than treating souls as sub-routines and factors of production.
As we develop economic models as representations of the changing world, it becomes apparent that just like Molière’s bourgeois gentleman, who had been speaking prose his whole life without knowing it, technologists have been speaking and inventing economics all this time. It is now time to build the bridge between academic economics and technologists as we work to formalize what innovators have been developing organically and give voice to these structures that have become increasingly powerful in our lives.
The mission of the Center for Innovation, Growth and Society is to organically co-develop the economics of deep innovation alongside the innovations and innovators themselves.
The economics of the future is already here, it is just unevenly curated. If we get it right we will steer towards a hopeful humanistic future. If we don’t, our technology may steer us according to old maps at accelerating speeds. Let’s get it right.