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Is AI on a path to economic catastrophe?

There are warnings that artificial intelligence could precipitate a financial debacle of unprecedented scale.

By Johan Steyn, 15 November 2023


The amazing capabilities that enable artificial intelligence (AI) platforms to streamline operations and churn through data at superhuman speeds could also be its Achilles heel, and ours. As AI systems become more intricate, the financial systems they’re designed to enhance or, in some cases, control, could become impenetrably complex.


The question that looms large in boardrooms and government halls alike is whether our relentless pursuit of AI is leading us down a path of economic ruin. Voices from various sectors — ranging from tech visionaries to seasoned economists — have started to sound the alarm.


The concern is not merely theoretical; it finds its roots in the not-so-distant memories of the 2007-08 financial crisis, in which the opacity and complexity of financial instruments played a notorious role. In this context, AI could become an architect of economic downfall, constructing a labyrinthine financial world that no human can navigate or regulate.


Historian and author Yuval Noah Harari — known for his profound insights in his book Sapiens — has warned that AI could precipitate a financial debacle of unprecedented scale. His concerns were brought to the forefront at the recent global AI safety summit held in Bletchley Park in the UK, where an international cohort of governments and leading AI entities, including OpenAI and Google, convened. They reached a consensus on the necessity of collaborative testing for advanced AI models, a decision that marks a pivotal step towards reining in the technology’s potential perils.


The sophistication of AI — with its ability to independently make decisions, innovate and learn — makes it a formidable force, one that Harari believes is challenging to fully comprehend and, therefore, to regulate.


He underscored the complexity of AI, which is not tethered to a single hazardous scenario but presents a multitude of risks. The financial sphere, Harari posits, is especially susceptible to AI’s dominion. He imagines a not-so-distant future where AI not only wields more control over financial systems but also spawns intricate financial instruments real-time that could baffle human understanding.


To mitigate such risks, Harari advocates the swift creation of robust regulatory bodies with deep insight into AI. These institutions would be tasked with identifying and responding to emerging threats in real time, eschewing the slow-moving and often obsolete traditional regulatory frameworks.


As we find a course through the uncharted waters of advanced AI, the collective wisdom of technology leaders, policymakers, and financial experts converges on a singular point: oversight is not optional — it is essential. The establishment of regulatory bodies, as advocated by Harari, must be more than a reactive measure; it needs to be a visionary blueprint for a future where AI’s capabilities are aligned with economic stability and human welfare.


Transparency in AI’s financial dealings will be the cornerstone of trust and safety. The intricate financial instruments that AI could develop must be understood and managed by human experts equipped with the right tools and regulatory power.


Global co-operation must be ramped up, and regulatory frameworks must evolve at the speed of AI’s advancements. The challenge is formidable, but the stakes — our economic and social fabric — could not be higher. By embracing this proactive stance, we can leverage AI’s transformative power while safeguarding ourselves against a future where we are blindsided by the very tools we created to propel us forward.


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