EA - No, the EMH does not imply that markets have long AGI timelines by Jakob

Link to original articleWelcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: No, the EMH does not imply that markets have long AGI timelines, published by Jakob on April 24, 2023 on The Effective Altruism Forum.This post is a response to AGI and the EMH: markets are not expecting aligned or unaligned AI in the next 30 years from January 2023, by @basil.halperin , @J. Zachary Mazlish and @tmychow. In contrast to what they argue, I believe that interest rates are not a reliable instrument for assessing market beliefs about AI timelines - at least not the transformative AI described in the former forum post.The reason for this is that savvy investors cannot expect to get rich by betting on short AI timelines. Such a bet simply ties up your capital until it loses its value (either because you're dead, or because you're so rich that it hardly matters). Therefore, a savvy investor with short timelines will simply increase their own consumption. No individual can increase their own consumption enough to affect global capital markets - rather, something like tens of millions of people would need to increase their consumption for interest rates to be affected. Interest rates can therefore remain low even if TAI is near, unless all of these people get worried enough about AI to change their savings rate.Replaying the argument from AGI and the EMHMy understanding of the argument in the former post goes like this:AI is defined as transformative if it either causes an existential risk, or explosive growth (which, presumably, would be broad-based enough that the typical investor would expect to partake in it)If we knew that transformative AI was near, people would not need to save as much as they do today - since they would expect to either be dead or very, very rich in the near futureIf people save less, capital supply goes down, and interest rates go up. Therefore, if we knew transformative AI was near, interest rates should be high.Even if we allow for uncertainty around the timing of transformative AI, a significant probability of near-term transformative AI should increase interest rates, since the equilibrium condition is that the expected utility of consumption today and in the future should be equal (reflecting the full distribution of outcomes).Since interest rates aren't high, if you assume market efficiency, this is evidence against near-term transformative AI.My high-level responseI will start by granting the definition of transformative AI as either an existential risk or a driver of explosive (and broadly shared) growth. This means that I accept the premise that the marginal value of additional money post-TAI is much, much lower than the marginal value of money today, for any relevant investor.Second, I consider the dynamics of how prices in markets can change over time. This is something which the original post glosses over a bit, which is forgivable, since the main social value of markets is that they can work like a black box information aggregation mechanism where you don't need to think too carefully about the gears. However, in this case, this is a crucial reason why their argument seems to fail.Let's consider two possible ways the price of an asset can change. Either, some information becomes available to all players in the market, and they uniformly update their assessment of the value of the asset, and adjust their market positions accordingly. Alternatively, some investor gains private information which indicates the asset is mispriced, and they take a big, directional bet based on said information, unilaterally moving the price. These two situations are extremes on a spectrum, and in most cases, price changes will reflect a situation somewhere in between these extremes.My argument is that this matters in the special context of interest rates. After all, interest rates reflect the aggregate capital supply in the world....