Transformative AI, existential risk, and real interest rates [pdf] (www.basilhalperin.com)

A new study by Trevor Chow, Basil Halperin, and J. Zachary Mazlish explores how financial market prices can serve as indicators for forecasting the timeline of transformative artificial intelligence (AI). This concept, termed "transformative AI," suggests that advanced AI could dramatically accelerate economic growth, akin to the industrial revolution, but also poses existential risks if misaligned with human values. The authors demonstrate that both scenarios—either aligned or unaligned AI—would lead to a significant rise in long-term real interest rates due to the principle of consumption smoothing, contrasting recent findings that downplay the relationship between growth expectations and real rates. The significance of this research lies in its potential to provide a framework for monitoring transformative AI developments through financial indicators. By establishing a strong correlation between higher long-term growth forecasts and increased real interest rates, the authors challenge existing theories that argue for a weak relationship. The study utilizes empirical data from inflation-linked bonds and surveys spanning 59 countries to substantiate its claims, presenting a robust argument that understanding real interest rates could enhance efforts to anticipate the evolution of AI technologies. This research opens new avenues for integrating economic metrics with AI forecasting, highlighting the pressing need for alignment between AI advancements and societal values.