Let an ultraintelligent machine be defined as a machine that can far surpass all the intellectual activities of any man however clever. Since the design of machines is one of these intellectual activities, an ultraintelligent machine could design even better machines; there would then unquestionably be an 'intelligence explosion,' and the intelligence of man would be left far behind. Thus the first ultraintelligent machine is the last invention that man need ever make. — Irving John Good, "Speculations Concerning the First Ultraintelligent Machine," 1965
The above quote perhaps best enshrines Ray Kurzweil's concept of accelerating returns. Kurzweil — an inventor and author — penned an empirically observed law which on paper, shares the form of a logarithmic power law. It suggests that an exponential growth in technological progress is currently taking place, and humanity is on the cusp of what mathematician Vernor Vinge calls an "intelligence explosion."[1]
Kurzweil & Company see the pace of technological and scientific change ultimately culminating into a proverbial "point of no return." It is at this point, that humanity will be ushered into a future beyond our current comprehension.[2]
Itsy Bitsy Teeny Weeny Yellow Polka-dot Bikini
Just as our world has become integrated with innovations such as automated robotics, always-on telecommunications, and artificial intelligence — fused into our everyday life — futurists predict with anticipation, a new deluge of creations archetypically concocted by the world of science fiction and Hollywood, each enhancing and surpassing the innovations we are intertwined with today.
From, nanoassemblers (nanometer-sized manufacturing plants) that are capable of constructing nearly anything from anything, to nanobots (robots smaller than blood cells) that will scurry around in your body fighting off diseases, these machinations are just the tip of the iceberg of things that will marshal our progeny into a new era of material overabundance.[3] This article is not going to discuss or judge the feasibility of such engineering feats.[4]
Mental Gymnastics
When constructing their trends, futurists such as Kurzweil assume that ceteris paribus, the regulatory regimes throughout the world will practice a relatively hands-off approach to disruptive technologies. However, the historical record suggests otherwise: incumbent businesses have used government to protect themselves against technological innovation not only via subsidies and tariffs but also through the use of legal monopolies (e.g., patents).[5] Phenomena such as a worldwide recession or more direct state intervention could thus derail this artificial prophecy.[6]
For the sake of argument, however, let us assume two things: first, that barring heavy-handed oversight and apocalyptical world war, these exponential trends will continue; and second, that the futurist position is true — that material scarcity can be boiled down to two elements, matter and information.
Applying knowledge to limited amounts of matter then becomes the paramount task at hand, a task that has arguably existed since time immemorial. Assuming that matter and information are the two scarce resources, the question of how humanity will organize and utilize them has been the topic of several creative stories.
Blink of an Eye
For instance, hard science fiction author Charles Stross published a novel last year entitled Accelerando that tackled the issue of "the Singularity" and its rippling effects throughout society.[7][8]
Initially taking place around 2010, the novel's lead character is Manfred Macx, a computer-nerd-turned-globetrotter who bills himself as a "venture altruist,"[9] building and seeding productive ideas in exchange for mere "reputation points."[10]
Stross manages to mangle a bevy of technical and economic gobbledygook and dress it with an exponentially spiraling plotline,[11] but despite all his valiant efforts, he falls short of his goal of delivering a futurist economics that somehow escapes the economic principles we know today.
Not Exactly Kissing Cousins
During one of his polemical rants, the narrator notes:
Russia has been back under the thumb of the apparatchiks for fifteen years now, its brief flirtation with anarchocapitalism replaced by Brezhnevite dirigisme and Putinesque puritanism, and it's no surprise that the wall's crumbling — but it looks like they haven't learned anything from the current woes afflicting the United States. The neocommies still think in terms of dollars and paranoia. Manfred is so angry that he wants to make someone rich, just to thumb his nose at the would-be defector: See! You get ahead by giving! Get with the program! Only the generous survive! But the KGB won't get the message. He's dealt with old-time commie weak-AIs before, minds raised on Marxist dialectic and Austrian School economics: They're so thoroughly hypnotized by the short-term victory of global capitalism that they can't surf the new paradigm, look to the longer term.
While some self-professed Marxists have allegedly embraced Austrianism — and vice versa — one wonders exactly how to synthesize the Marxist Labor Theory of Value with its polar-opposite subjective theory, as enshrined by the Austrian School.[12][13] Their incompatibility is punctuated best by Das Capital, in which Marx embraces historical materialism as the de facto epistemology to explain how and why historical events occur, in part, through the now-classical bourgeoisie-versus-proletariat class struggle.
Contra Marx, we have the Austrian School's a priori science approach of praxeology[14] whose foundation can be found in Ludwig von Mises's axiom of human action, or purposeful behavior. We learn from praxeology that society is a product of the human urge to remove uneasiness and dissatisfaction as far as possible, and therefore is not a product of social classes, political hierarchies, or various other synthetic structures.
The Calculation Debate 2.0
While introducing the decade of 2070 A.D., the narrator informs us:
The last great transglobal trade empire, run from the arcologies of Hong Kong, has collapsed along with capitalism, rendered obsolete by a bunch of superior deterministic resource allocation algorithms collectively known as Economics 2.0.
It is these algorithms that Manfred earlier sold to an Italian politician, as a means to objectively calculate prices in a command economy. While the mechanics of such equations are never fully fleshed out, the reader is left wondering exactly how a third-party can, in some manner, come to such a measure of the multitudinous subjective values and preferences that individuals intrinsically have towards goods and services.
These "superior resource allocation algorithms" have been conjectured among numerous economists over the past century as it has played a central role in the socialist calculation debate. And while political scientists and technocrats continually busy themselves with tweaking the economic "black box" with various inputs, they fail to grasp how prices arise.[15]
Unfortunately for Stross, the future holds no deus ex machina in store to rescue this storyline, because of the fundamental limitations of matter, in that a finite set of supercomputers cannot encompass a problem set containing infinite sets of possibilities. In this respect, the idealized command economy is a mathematical impossibility.
Misplaced Energies
At one point in the story Macx's French mistress broadcasts news that Macx is in town and giddily notes that,
Oh, and he's promised to invent three new paradigm shifts before breakfast every day, starting with a way to bring about the creation of Really Existing Communism by building a state central planning apparatus that interfaces perfectly with external market systems and somehow manages to algorithmically outperform the Monte Carlo free-for-all of market economics, solving the calculation problem. Just because he can, because hacking economics is fun, and he wants to hear the screams from the Chicago School.
In this passage Stross now makes the error of "solving" Mises's calculational problem with the band-aid solution of copying consumer good prices from a market system and transplanting them into the command economy. The use of this technique only affirms Mises's position, and is hardly a novel solution considering that Soviet planners were already thumbing through Sears catalogs for their coefficients.[16]
But we can still make lemonade out of this sucker — in theory we would have no issue per se with the argument that a super[-human] intelligence could drive entrepreneurial activity, and make smarter choices than a mere human opportunity exploiter. This is where the present and future can possibly diverge — can a two-state computational engine ever approximate human intelligence?[17]
Bursting Bubbles
While discussing what to do with a guest in their spaceship, several characters meander off the deep end,
The orangutan explains: "Economics 2.0 is more efficient than any human-designed resource allocation schema. Expect a market bubble and crash within twelve hours."
Stross is guilty here of the mainstream economic error of cum hoc ergo propter hoc, by attributing the phenomenon of the business cycle to the emergence of capital markets in the industrial revolution. Under such mistaken impressions, it would then be quite natural for him to assume that an immense acceleration of the market process would also speed up the rate of market boom and bust, although never explaining how or why it occurred in the first place.
Contrary to the mainstream, the Austrian Business Cycle Theory posits that cycles are exogenous to the market, a creature wholly belonging to the government's manipulation of the money supply, which by lowering the natural rate of interest, raises the general level of time preference and ultimately misleads entrepreneurs en masse into malinvestment of the capital stock in sub-marginal pursuits.[18]
In contrast to the tenets of the neo-classical error, the condition of a free market would tend toward the evenly rotating economy (ERE), although never achieving equilibrium, as the minor perturbations mirror the transient value preferences on the market.[19] Under such conditions, Stross is incorrect to think that ratcheting up the intelligence and computational speed of the market would have a bearing on the amplitude, rather than only the frequency of misallocation.
However a simpler question may be posed to Stross: if "Economics 2.0" is more efficient than human-based pricing and has perfected an all-encompassing algorithm that allocates resources with near-absolute precision, how can capital malinvestment ever occur?
What is a reputation worth, anyway?
One of the most intriguing concepts found in the novel is that of "reputation markets."[20] While Stross also does not deign to explain in any detail how this concept would function, one can make some guesses, although none of the interpretations seem to add up to anything useful or novel.[21]
Apparently Stross imagines that reputations will supplant the usage of currency and markets in a post-scarcity world as one is led to believe from passages such as the following:
His reputation is up two percent for no obvious reason today, he notices: Odd, that. When he pokes at it he discovers that everybody's reputation — everybody, that is, who has a publicly traded reputation — is up a bit. It's as if the distributed Internet reputation servers are feeling bullish about integrity. Maybe there's a global honesty bubble forming.
And also:
She doesn't approve of Manfred's jetting around the world on free airline passes, making strangers rich, somehow never needing money. She can see his listing on the reputation servers, hovering about thirty points above IBM: All the metrics of integrity, effectiveness and goodwill value him above even that most fundamentalist of open-source computer companies.
While we can only guess at what Stross means by reputation markets, there are only the two possibilities: either it's a commodity-backed market or it's not.
The problem with the former scenario is two-fold. First, because we are supposedly dealing with a post-scarcity world, the concept of commodity trading is absurd as would be the trading of air or ocean water in our present world, goods which are in superabundance are not subject to the study of praxeology, and certainly not within the scope of catallactics.
It is clear however that the world Stross has created cannot be a post-scarcity world if one still has to exchange in order to acquire the use of goods and services. The exchange of a valued reputation sounds interesting, but is quite problematic as we will explain shortly.
In the latter scenario, if we posit that reputation markets are not commodity-backed, (and ignoring for a moment Stross's apparent confusion over what comprises a post-scarcity world), all Stross has managed to do is recreate the concept of money substitutes, with the nexus of reputation markets to facilitate the exchange of this currency.[22]
In both these scenarios then, the objective exchange value of this money (or money substitute) comes into question without the benefit of the regression theorem to explain its present monetary valuation by the economic actors.
There are other fundamental questions to be asked about a reputation-based currency, and notably, how are reputation monetary units quantified or graded, and who or what intelligence will determine that?[23]
However one can make the case, that although 'reputs' may presently hold no objective exchange value (as essentially all 'reputs' are data patterns stored on a server) they may still hold monetary value, if and only if they once held objective exchange value. [24][25]
In conclusion, Stross, like many other historicists has anthropomorphized events and phenomena. Capitalism is no more a sentient entity than the California coast is. And as intriguing as the technological wizardry within the story may be, the plot is unfortunately riddled with economic misconceptions and non sequiturs.
Tim Swanson is a graduate student at Texas A&M University. Send him mail. Isaac Bergman is a real-estate developer in New York City. Send him mail. Comment on the blog.
[1] For arguably the most concise overview and discussion of this concept, see "The Singularity is Near: When Humans Transcend Biology" by Ray Kurzweil.
[2] Moore's Law is perhaps the best known member of future studies. It is named after Gordon Moore, a founder of Intel, who observed that the number of transistors doubles every 24 months with respect to being able to cram them into commercial microprocessors. However, unlike physical laws such as Relativity or Inertia, trends like Moore's Law are not immune to the laws of economics, namely supply and demand.
[3] Rapid prototypers are and have been a commercial reality in many manufacturing-based industries such aerospace, whose firms can create realistic scale models in a relatively short time span. Furthermore, usable nanofactories have come a long way since Eric Drexler's dissertation (which later became "Engines of Creation") introduced the topic to academia. For commercial applications see Nanorex and Stratasys. Also, the August 2006 edition of Popular Science pictorially discusses several whiz-bang medical applications that are currently in trial phases.
[4] Long-term, some futurists envision a time in which swarms of nanometer-sized robots will assemble and disassemble asteroids or even planets for productive uses (e.g. energy to power computronium). See also, the detailed account of the engineering requirements and throughput of a Matrioshka Brain by Robert J. Bradbury.
[5] Cui bono is Latin for "who benefits." In political-economy it is typically used to determine who will financially gain through legislative acts and policies. See, "Henry George and the Tariff Question" by Karen de Coster and chapter 12 in "Man, Economy, & State" by Murray N. Rothbard. See also the compendium of articles on Intellectual Property by Stephan Kinsella.
[6] The German Historical School is perhaps best summed up by the following example: because the prices of bananas were $1 last week and $1 this week, they will be $1 next week. Trying to extract ironclad immutable formulas from historical data is the same problem that plagues contemporary empiricists every day. The underlying actions of each actor involved in these daily transactions, take place through a continuously changing rank-order preference system that is entirely subjective and presupposes "rationality." See praxeology in "Human Action" as well as section II of "The Historical Setting of the Austrian School of Economics," both by Ludwig von Mises.
[7] Accelerando can be viewed online for free at: www.accelerando.org
[8] While somewhat tangential, Charles Stross operates a Wiki to further explore and explain many of the ideas discussed in Accelerando. Of particular interest is his critique of libertarianism, in which he simply links to Mike Huben's smorgasbord of pro-statist arguments.
[9] The nomadic and quasi-Bohemian lifestyle Macx lives has been described as a "serial entrepreneur" however it is arguably closer to the life and times of grey hat hackers such as Adrian Lamo. These individuals attempt to highlight security vulnerabilities at companies, whilst having a credo of operating for little or no personal gain. In the story, Macx's character conveniently is able to side-step these economic uncertainties through a number of entities through the generosity of third-parties (e.g. "a grateful multinational consumer protection group" paid for his hotel visits). Note: one argument surrounding individuals such as Lamo is that they are, in fact, attempting to gain publicity in order to market themselves for monetary contracts.
[10] This is reminiscent to the classical argument that all monetary systems should be scrapped and replaced with a system of credits for hours of labor, as determined as the rate of a person laboring for an hour with a shovel. Not only is this average unrealistic but also ignores the dissimilar, heterogeneous abilities and productive levels each individual is capable of. See also "labor notes" and the Cincinnati Time Store. Reading "Harrison Bergeron" by Kurt Vonnegut may also be instructive.
[11] Apropos Peter Klein, while we enjoy an entertaining storyline, we can only suspend our disbelief so far.
[12] See also Heterodox economics and Heterodox traditions.
[13] The academic discourse comparing the LTV and STV is voluminous. For instance, see chapter 5 in "Epistemological Problems of Economics" by Ludwig von Mises. For a recent layman's explanation of the STV see "Artwork and the Subjective Theory of Value" by Yumi Kim.
[14] See, "Praxeology: The Methodology of Austrian Economics" by Murray N. Rothbard, "Praxeology and Understanding" by G.A. Selgin, and "Human Action" by Ludwig von Mises.
[15] Prices themselves are not fixed points along a line, but rather temporally subjective valuations of goods and services. For more discussion on this paradigm of "perfect information" and what a price "should be" see "Knowledge vs. Calculation" from Stephan Kinsella.
[16] See also Gennady Gerasimov's joke of sparing the markets of New Zealand.
[17] Regarding the centralization of knowledge and prices, see: "Socialism: A Property or Knowledge Problem?" by Hans-Hermann Hoppe and "Why a Socialist Economy is "Impossible"" by Joseph T. Salerno. See also "Knowledge vs. Calculation" from Stephan Kinsella.
[18] For more discussion on the ABCT see, "The Austrian Theory of the Trade Cycle" compiled by Richard M. Ebeling, "Money, Bank Credit, And Economic Cycles" by Jesús Huerta de Soto, and "Expectations and Austrian Cycle Theory" by Frank Shostak.
[19] For more on the ERE see, chapter 14 in "Human Action" by Ludwig von Mises, and the Study Guide to "Man, Economy, and State" from Robert P. Murphy.
[20] This criticism can also be leveled towards the Whuffie system used in "Down in Out in the Magic Kingdom" by Cory Doctrow.
[21] Rating, risk analysis and credit scoring companies exist today; based upon a plethora of metrics they will rate the value of companies, bonds, etc. However these "reputation" companies are providing a service good, not a currency. Incidentally, both Standard & Poor's and Moody's have been erroneously sued in the past for providing debt ratings of government solvency. Stock market's themselves are institutions that — when free of regulation — can also accurately reflect and rate the health of organizations.
[22] One seemingly extraneous example that illustrates the difference between the hypothesized reputation currency and a money or money substitute system is Frequent Flier miles. These miles can arguably be called moneys, since they have monetary exchange value in which people acquire and maintain "cash" balances for future consumption or exchange. In the case of frequent flyer miles, the miles are initially valued for their objective exchange value, because they represents a claim to a specific good; transportation via airplane. However the reputation currency has no such explanation of any historical objective use balance, and is unlikely, if not entirely impossible to become valued for its monetary function. See, "The Theory of Money and Credit" by Ludwig von Mises.
[23] 'Reputs' are to reputation scales what 'utils' are to cardinal value scales. Furthermore, how exactly do you cash in a few points of reputation? Are they redeemable for any material object? So as long as the reputation system is an exchange system, it is subject to economic laws. And assuming that Stross's reputation system somehow solves the "decider" problem, a number of other issues remain unresolved. For instance, how many "points" can each person use throughout the day? Do you get to give someone a point for every time someone does something? Every 5 seconds? Once an hour? Can you remove your vote? Is a point for yawning weighted as much as shooting a bulls-eye in archery? Ad nauseam.
[24] This aggregation mystery belies subjective indices such as BCS football rankings, college rankings, and even GDP. "What is up with GDP," by Frank Shostak, articulates perhaps the clearest account of why the GDP framework is fallacious and misleading.
[25] Regarding the present valuation of money, Ludwig von Mises writes in The Theory of Money and Credit:
Before an economic good begins to function as money it must already possess exchange value based on some other cause than its monetary function. But money that already functions as such may remain valuable even when the original source of its exchange value has ceased to exist. Its value then is based entirely on its function as common medium of exchange.
