[Crossposted from EA Forum]

This is a linkpost with a summary of the key parts of Caleb’s new paper and its implications for EAs. You can read the original on arXiv here.

TL;DR

This paper analyzes how expectations of Transformative AI (TAI) affect current economic behavior by introducing a novel mechanism where automation redirects labor income from workers to those controlling AI systems, with the share of automated labor controlled by each household depending on their wealth at the time of invention. Using a modified neoclassical growth model calibrated to contemporary AI timeline forecasts, I find that even moderate assumptions about wealth-based allocation of AI labor generate substantial increases in pre-TAI interest rates. Under baseline scenarios with proportional wealth-based allocation, one-year interest rates rise to 10-16% compared to approximately 3% without strategic competition. The model reveals a notable divergence between interest rates and capital rental rates, as households accept lower productive returns in exchange for the strategic value of wealth accumulation. These findings suggest that evolving beliefs about TAI could create significant upward pressure on interest rates well before any technological breakthrough occurs, with important implications for actors in the EA community.

Interpretation. This post develops a model of household and firm decisions that may predict some aspects of economic behavior if beliefs about TAI timelines proliferate across the population. There are plenty of limitations and avenues for further research (explored in the conclusion), but the core findings remain powerful and possibly relevant to readers and philanthropic organizations.

Overview. Section 1 of this post is the introduction from the paper. Section 2 provides an explanation of the model developed in the paper and its intuitive interpretation, focusing on how expectations of a redistribution of labor based on capital imply different savings behavior than with expectations of a continuation of the status quo. Section 3 presents quantitative results, analyzing how different assumptions about TAI arrival probabilities and wealth-sensitivity parameters affect interest rates and capital accumulation. Section 4 explores implications for actors in the EA community. Section 5 concludes and suggests possible directions for future research. Sections 1, 3,...

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