Fear and loathing of artificial intelligence: welcome to the global economy

What people fear about robots and artificial intelligence… is just the tip of an iceberg.

By Delton Chen Ph.D. (20 July, 2017)

The automation of customer service with artificial intelligence (AI), and the replacement of workers with AI robots, appears to be an inevitable development with the advancement of computer software, integrated circuits and robots. The nexus of finance and AI goes much deeper than simply the potential loss of jobs. The nexus is actually founded by the neo-classical worldview of economics and its main objective of economic efficiency. The objective of improving ‘efficiency’ is closely associated with the optimal use of scarce resources and maximisation of utility. This worldview emerged with the industrial revolution which is coming to a close in one of two ways: (a) by substituting dirty energy and unsustainable growth with an alternative system that is regenerative; or (b) civilisational collapse.

The dominant worldview (i.e. neo-classical economics) is focused on efficiency gains, and this idea is driving economic growth at the expense of the working class and the environment. The world economy is known to be unsustainable. Why is it unsustainable? It is because the world economy is structurally designed for growth whether that growth is clean-green or dirty. Standard economic modelling, such as by William Nordhaus (2016), has clarified this point, and he specifically wrote that staying below the 2C ambition of the Paris Agreement is extremely unlikely, and that growth is a major factor that is driving the economy towards dangerous-to-catastrophic climate change.

Given that growth and efficiency are closely coupled, it should be made clear that the loss of jobs under AI is just another extension of a more general and underlying problem. To understand this problem fully, requires a more complete understanding of both the economy as a thermodynamic system, and of the role of the monetary system in the structural design of the economy for growth. The world economy is designed for growth — driven by fossil fuels — and this may be described as a planetary ‘experiment’. The economy needs to be reformed in a way that is politically acceptable and can deliver good governance with financial guarantees.

The AI problem should be a wake-up call for economists and scientists, because it illustrates further that the digital financial system is a form of AI that is fundamental to the sustainability problem. In other words, the robots and the AI will be taking their orders from the financial system which is, by definition, a super-network of mathematical AI. This super network of AI might be termed a ‘super-organism’. This super-organism is hungry for energy and growth, and it is not empathetic to the ‘inefficiencies’ of human beings who can be replaced by more efficient robots and computer systems.

The Holistic Market Hypothesis… answers that are founded in thermodynamics and systems

A theory that resolves this system-level problem is available through a new hypothesis for carbon pricing and for pricing systemic risk. This hypothesis is called the Holistic Market Hypothesis (HMH). When the risks of carbon are fully priced, by taking into account the Social Cost of Carbon (SCC) and the Risk Cost of Carbon (RCC), then dirty-growth and related social and ecological problems can be addressed. They are addressed because the internalisation of the risk-cost of carbon, or RCC, will involve establishing a new regenerative parallel economy with a parallel world currency.   The new currency is called Complementary Currencies for Climate Change (4C). This is explained by Chen, van der Beek and Cloud (2017) as the Global 4C Risk Mitigation policy.

The foundation of the HMH hypothesis is a new micro-foundational relationship, termed the “inefficiency-reward tradeoff”. This is needed to complement the “risk-reward tradeoff” which is the traditional modality for decision making of actors in the economy. By complementing the risk-reward tradeoff with the inefficiency-reward tradeoff, resources can be diverted into the decarbonisation of the economy and into the creation of new employment for social and ecological welfare (and sustainability). These regenerative actions represent the ‘inefficiencies’ that are unable to be valued by neo-classical economics. Justification for the HMH and the new economic model is provided by the laws of thermodynamics and system theory, as explained in Chen, van der Beek and Cloud (2017). A more general justification for the HMH is forthcoming.

Chen, D.B., van der Beek, J. and Cloud, J., 2017. Climate mitigation policy as a system solution: addressing the risk cost of carbon. Journal of Sustainable Finance & Investment, 7 (3): 1-42.

Nordhaus, W. D. 2016. Projections and Uncertainties About Climate Change in an era of Minimal Climate Policies (Cowels Foundation Discussion Paper No. 2057). New Haven, CT: Yale University.