Seeing the amount of private capital wasted on generative AI has been painful. (OpenAI alone has raised about $80 billion and the total, global, cumulative investment in generative AI seems like it’s into the hundreds of billions.) It’s made me wonder what could have been accomplished if that money had been spent on fundamental AI research instead. Maybe instead of being wasted and possibly even nudging the U.S. slightly toward a recession (along with tariffs and all the rest), we would have gotten the kind of fundamental research progress needed for useful AI robots like self-driving cars.
Some have claimed that the data center build out is what saved the US from a recession so far. Interestingly, this is valuing the data centers by their cost. The optimists say that the eventual value to the US economy will be much larger than the cost of the data centers, and the pessimists (e.g. those who think we are in an AI bubble) say that the value to the US economy will be lower than the cost of the data centers.
That’s an important point of clarification, thanks. I always appreciate your comments, Mr. Denkenberger.
There’s the idea of economic stimulus. John Maynard Keynes said that it would be better to spend stimulus money on useful projects (e.g. building houses), but as an intellectual provocation to illustrate his point, he said that if there were no better option, the government should pay people to dig holes in the ground and fill them back up again. Stimulating the economy is its own goal distinct from what the money actually gets spent to directly accomplish.
AI spending is an economic stimulus. Even if the data centres sit idle and never do anything economically valuable or useful — the equivalent of holes dug in the ground that were just filled up again — it could have a temporarily favourable effect on the economy and help prevent a recession. That seems like it’s probably been true so far. The U.S. economy looks recessarionary if you subtract the AI numbers.
However, we have to consider the counterfactual. If investors didn’t put all this money into AI, what would have happened? Of course, it’s hard to say. Maybe they just would have sat on their money, in which case the stimulus wouldn’t have happened, and maybe a recession would have begun by now. That’s possible. Alternatively, investors might have found a better use for their money, could have found more productive investments.
Regardless of what happens in the future, I don’t know if we’ll ever be able to know for sure what would have happened if there hadn’t been this AI investment craze. So, who knows.
(I think there are many things to invest in that would have been better choices than AI, but the question is whether, in a counterfactual scenario without the current AI exuberance, investors actually would have gone for any of them. Would they have invested enough in other things to stimulate the economy enough to avoid a recession?)
The stronger point, in my opinion, is that I don’t think anyone would actually defend spending on data centres just as an economic stimulus, rather than as an investment with an equal or better ROI as other investments. So, the general rule we all agree we want to follow is: invest in things with a good ROI, and don’t just dig and fill up holes for the sake of stimulus. Maybe there are cases where large investment bubbles prevent recessions, but no one would ever argue: hey, we should promote investment bubbles when growth is sluggish to prevent recessions! Even if there are one-off instances where that gambit pays off, statistically, overall, over the long term, that’s going to be a losing strategy.[1]
Only semi-relatedly, I’m fond of rule consequentialism as an alternative to act consequentialism. Leaving aside really technical and abstract considerations about which theory is better or more correct, I think, in practice, following the procedure ‘follow the rule that will overall lead to the best consequences over the set of all acts’ is a better idea than the procedure ‘choose the act that will lead to the best consequences in this instance’. Given realistic ideas about humans actually think, feel, and behave in real life situations, I think the ‘follow the rule’ procedure tends to lead to better outcomes than the ‘choose the act’ procedure. The ‘choose the act’ procedure all too easily opens the door to motivated reasoning or just sloppy reasoning, and sometimes gives people, in their minds, a moral license to embrace evil or madness.
The necessary caveat: of course course, life is more complicated than either of these procedures allow, and there’s a lot of discernment that needs to be used on a case-by-case basis. (E.g., just individuating acts and categories of acts and deciding which rules apply to the situation you find yourself in is complicated enough. And there are rare, exceptional circumstances in which the normal rules might not make sense anymore.)
Whenever someone tries to justify something that seems crazy or wrong, like something deceptive, manipulative, or Machiavellian, on consequentialist grounds, which typically you only see in fiction, but you also see on rare occasions in real life (and unfortunately sometimes in mild forms in the EA community), I always see the same sort of flaws in the reasoning. The choice is typically presented as a false binary: e.g. spend $100 billion on AI data centres as an economic stimulus or do nothing.
This type of thinking overlooks that the number of possible options is almost always immensely large, and is mostly filled up by options you can’t currently imagine. People are creative and intelligent to the point of being unpredictable by you (or by anyone), so you simply can’t anticipate the alternative options that might arise if you don’t ram through your ‘for the greater good’ plan. But, anyway, that’s a big philosophical digression.
Some have claimed that the data center build out is what saved the US from a recession so far. Interestingly, this is valuing the data centers by their cost. The optimists say that the eventual value to the US economy will be much larger than the cost of the data centers, and the pessimists (e.g. those who think we are in an AI bubble) say that the value to the US economy will be lower than the cost of the data centers.
That’s an important point of clarification, thanks. I always appreciate your comments, Mr. Denkenberger.
There’s the idea of economic stimulus. John Maynard Keynes said that it would be better to spend stimulus money on useful projects (e.g. building houses), but as an intellectual provocation to illustrate his point, he said that if there were no better option, the government should pay people to dig holes in the ground and fill them back up again. Stimulating the economy is its own goal distinct from what the money actually gets spent to directly accomplish.
AI spending is an economic stimulus. Even if the data centres sit idle and never do anything economically valuable or useful — the equivalent of holes dug in the ground that were just filled up again — it could have a temporarily favourable effect on the economy and help prevent a recession. That seems like it’s probably been true so far. The U.S. economy looks recessarionary if you subtract the AI numbers.
However, we have to consider the counterfactual. If investors didn’t put all this money into AI, what would have happened? Of course, it’s hard to say. Maybe they just would have sat on their money, in which case the stimulus wouldn’t have happened, and maybe a recession would have begun by now. That’s possible. Alternatively, investors might have found a better use for their money, could have found more productive investments.
Regardless of what happens in the future, I don’t know if we’ll ever be able to know for sure what would have happened if there hadn’t been this AI investment craze. So, who knows.
(I think there are many things to invest in that would have been better choices than AI, but the question is whether, in a counterfactual scenario without the current AI exuberance, investors actually would have gone for any of them. Would they have invested enough in other things to stimulate the economy enough to avoid a recession?)
The stronger point, in my opinion, is that I don’t think anyone would actually defend spending on data centres just as an economic stimulus, rather than as an investment with an equal or better ROI as other investments. So, the general rule we all agree we want to follow is: invest in things with a good ROI, and don’t just dig and fill up holes for the sake of stimulus. Maybe there are cases where large investment bubbles prevent recessions, but no one would ever argue: hey, we should promote investment bubbles when growth is sluggish to prevent recessions! Even if there are one-off instances where that gambit pays off, statistically, overall, over the long term, that’s going to be a losing strategy.[1]
Only semi-relatedly, I’m fond of rule consequentialism as an alternative to act consequentialism. Leaving aside really technical and abstract considerations about which theory is better or more correct, I think, in practice, following the procedure ‘follow the rule that will overall lead to the best consequences over the set of all acts’ is a better idea than the procedure ‘choose the act that will lead to the best consequences in this instance’. Given realistic ideas about humans actually think, feel, and behave in real life situations, I think the ‘follow the rule’ procedure tends to lead to better outcomes than the ‘choose the act’ procedure. The ‘choose the act’ procedure all too easily opens the door to motivated reasoning or just sloppy reasoning, and sometimes gives people, in their minds, a moral license to embrace evil or madness.
The necessary caveat: of course course, life is more complicated than either of these procedures allow, and there’s a lot of discernment that needs to be used on a case-by-case basis. (E.g., just individuating acts and categories of acts and deciding which rules apply to the situation you find yourself in is complicated enough. And there are rare, exceptional circumstances in which the normal rules might not make sense anymore.)
Whenever someone tries to justify something that seems crazy or wrong, like something deceptive, manipulative, or Machiavellian, on consequentialist grounds, which typically you only see in fiction, but you also see on rare occasions in real life (and unfortunately sometimes in mild forms in the EA community), I always see the same sort of flaws in the reasoning. The choice is typically presented as a false binary: e.g. spend $100 billion on AI data centres as an economic stimulus or do nothing.
This type of thinking overlooks that the number of possible options is almost always immensely large, and is mostly filled up by options you can’t currently imagine. People are creative and intelligent to the point of being unpredictable by you (or by anyone), so you simply can’t anticipate the alternative options that might arise if you don’t ram through your ‘for the greater good’ plan. But, anyway, that’s a big philosophical digression.