basil.halperin
AGI and the EMH: markets are not expecting aligned or unaligned AI in the next 30 years
Against using stock prices to forecast AI timelines
(Nothing useful to contribute but wanted to say this seems very nice!)
Any links on the referenced strategic review? Thanks!
I’ll just pop back in here briefly to say that (1) I have learned a lot from your writing over the years, (2) I have to say I still cannot see how I misinterpreted your comment, and (3) I genuinely appreciate your engagement with the post, even if I think your summary misses the contribution in a fundamentally important way (as I tried to elaborate elsewhere in the thread).
It would be interesting if it were possible to disambiguate:
1. Previous forecasters moved up their forecasts to shorter timelines
vs.
2. New forecasters, who have shorter timelines, offered forecasts for the question when they hadn’t forecasted previously
Both are informative, and in a real-money prediction market both are equally informative. But with a forecasting platform, this could “just” be a composition bias?
Pasting some of my replies to this from twitter FWIW:
That’s just not correct, unless I’m misunderstanding—
if you short rates, and next day the market decides you are right, then real rates spike and you make money. Simple as that
So I don’t follow your claim ¯\_(ツ)_/¯Sovereign debt markets are the some of the most well-functioning financial markets ever created by man—this is literal orders of magnitude off. This is just not tether
I like this writeup a lot, but I would say to anyone who’s actually reading this should ignore the advice to not go into academia.
If you’re reading this, you’re probably selected (!) to be someone who is atypical and has a decent shot at succeeding in academia. (See also: SSC on ‘reversing all advice you hear’.) i.e.: if you’re someone who’s taking the time out of your day to read this, you’re probably (probably!) similar to “Anita” here.
1. We would welcome engagement from you regarding our argument that stock prices are not useful for forecasting timelines (the sign is ambiguous and effect noisy).
2. You offer what is effectively a full general argument against market prices ever being swayed by anything—a bit more on this point here. Price changes do not need to be driven by volume! (cf the no-trade theorem, for the conceptual idea)
3. I’m not sure if this is exactly your point about prediction markets (or if you really want to talk about total capital, on which see again #2), but:
Sovereign debt markets are orders of magnitude larger than PredictIt or other political prediction markets. These are not markets where individual traders are capped to $600 max positions and shorting is limited (or whatever the precise regulations are)! Finding easy trades in these markets is …not easy.
Thanks for this—I think you put really nicely the interpretation that we also are pushing for.
Here’s another way of putting things, that I’ll post here for reference:
Suppose I think Google is undervalued, because it is going to have a $1T dividend in 2030, and the market doesn’t realize this.
1. I buy Google today at some cheap price.
2. Possibility 1: before 2030, the market “corrects” and realizes that it was undervaluing Google. The stock price rises, and I receive capital gains.
3. Possibility 2: the market does not “correct” before 2030. I still get the big dividend in 2030, and was able to get it for a cheap price in 2023.
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The above seems exactly analogous to the case with existential risk.
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Suppose I think bonds are overvalued, because in 2030 the world is going to blow up.
1. I short real rates today.
2. Possibility 1: before 2030, the market “corrects” and realizes that it was overvaluing bonds. Rates rise, and I receive capital gains.
3. Possibility 2: the market does not “correct” before 2030. I still was able to take out a cheap loan in 2023 (i.e. by selling short bonds), and don’t have to pay it off in 2030 when the world ends.
^This is an extremely, extremely important point!
Market prices are not a democracy. The logic for the efficiency of markets is emphatically NOT ‘wisdom of the crowds’. It’s that the most knowledgeable traders have the most to gain from trading, and so do so, and determine the price. (I have a riff on this here)
Sorry, I stand by my comment 110%.
If you already knew that belief in AGI soon was a very contrarian position (including amongst the most wealthy, smart, and influential people), I don’t think you should update at all on the fact that the market doesn’t expect AGI.
I want to maximally push back on views like this. The economic logic for the informational efficiency of markets has nothing to do with consensus or ‘non-contrarianness’. Markets are informationally efficient because of the incentive for those who are most informed to trade.
The argument here emphatically cannot be merely summarized as “AGI soon [is] a very contrarian position [and market prices are another indication of this]”.
Thanks Seth, we’ll read your paper carefully. I’ll just highlight that really the purpose of the analysis above is to engage specifically with the extreme scenario you mention at the end
what the effect would be today of a giant anticipated increase in automation in 30 years, or of everyone dying with certainty in 30 years [...] we could try if anyone thinks it would be interesting
Also note we briefly allude to demographic trends, but in the (blog post!) analysis here, we want to ignore them because they seem plausibly swamped by the huge growth/mortality scenarios under consideration. As a quick BOTEC:
We use
If—as you suggest—we model demographic trends in reduced form as a decrease in rho, then
At most the demographic effects could shrink our estimates of the increase in the real rate by one percentage point. Of course, that’s just in this simple rep agent model (TIABPNAJA; econometrica isn’t going to accept this!)
(PS: some of your other papers which I’ve already read before, I’ve found useful to read!)
When you write it like that, it seems obvious :)
Thanks.
Forgive me if I’m just being dumb, but—does anyone know if there is a way in settings to revert to the old font/CSS? I’m seeing a change that (for me) makes things harder to read/navigate.
Thanks for this interesting exercise. The one caveat I’d note is that the multiplier you use is based on annual revenue—if the remittances from OpenAI to MSFT occur over a number of years, we would need to divide the $1T number that you calculate by that number of years.
(PS: amazing tiktoks)
The appendix 3 has a review of some related papers, FWIW!
(And: thanks!)
Personally I agree with the economic forecasts and approximate timelines here, but I haven’t seen a way of reconciling the “accelerating growth” prediction with the efficient market hypothesis.
Low 30-year government bond rates in the US (and 50- or 100-year rates in some other countries!) imply the market expects low growth over this time horizon, not ever-accelerating economic growth rates.
If growth goes up and interest rates rise, these are massively overvalued. It’s possible, but, we’d have to tell some some more elaborate stories (AI-led growth is not broad-based? It’s all captured by one firm...? It FOOMs?) if we want to be consistent with EMH.
Raimondo and the Department of Commerce seem to have been remarkably effective on AI/China issues during the Biden administration. Is there any detailed reporting on how governance became (seemingly) so good there?