The welfare of every being on the planet is dependent upon the integrity of the global financial system which in turn is dependent on the existing technological platform upon which it rests. Significant changes in artificial intelligence
related technologies and capabilities could threaten the existing technology base on which the global financial system rests. Consider for a moment the implications of a global economic system collapse.
Nation state central bankers seek through regulation of the banking system to maximize consumer wellbeing. They do not and cannot alter non-financial economic structures. The latter domain is the province of legislators and to a lesser degree judicial systems.
Central bankers (economists) seek to understand the mechanics of economic systems so that they can maintain economic stability in what is inherently a fluid, dynamic system. The globalization of economic activity means that the central banks in nation states have seen significant erosion of their ability to determine domestic levels of economic activity. This is as true for the large players like the U.S. and China as it is for the small players. This has forced central bankers to attempt to harmonize their activity through the Group of 20 and inevitably political leaderships (Finance Ministers).
The 2008 global economic downturn has been a great teacher. Old habits die hard though and nationalist insularity is as strong as ever. Nevertheless the G20's Financial Stability Board has made important progress on making the world's financial systm safer and is representative of necessary global financial institution building.
Central bankers (economists) recognize the influence of technological change on economic activity but reluctantly and hesitantly in part because their goals of price stability and financial stability as means of maximizing consumer wellbeing do not admit the limitations of current metrics which do not measure non-material forms of consumer well being where the bulk of information technology gains are now occuring.
Central bankers (economists) are for the most part "old men" and skeptical in their outlook - not surprisingly since they carry great responsibility in their societies and must take great care in their prescriptions. Events however are challenging their current paradigms - a fact that some recognize. A great deal of theoretical work in economics needs to be done for central bankers to understand what is afoot and to adjust policy.
A cautionary note. Central bankers have to a significant degree been "can carriers" for national governments that have been unable or unwilling to exercise political leadership in matters of fiscal policy (budgetary deficits) and structural reform.
(dealing with monopolies, oligopolies, non-tariff barriers and restrictive labour policies). They have to a significant degree reached the limits of their powers to alter economic growth rates absent national governments
weighing in effectively with economc reforms.
For students of the social and economic implications of artifical general intelligence and the emergence of superintelligence, there are critical aspects to the role of central banking in coping with the changes occurring and risks to the integrity of the system itself.
What are the risks? If the integrity of global system of payments is threatened by groups or states levered by a variety of technologies then global economic collapse might ensue with all its implications. If the acceleration of technological change undermines the confidence of business to make captial investments because of heightened risk uncertainties then economic stagnation may well occur. If the acceleration of technological change leads to a growing meritocracy where significant portions of the population are left unemployed, socially disadvantaged or culturally estranged then the social fabric of societies may break down and social disorder ensue, leading to domestic and interstate conflict.
A second cautionary note. It is apparent that some of the current problems of slow economic growth and the rise in inequality in the global economy have to do not with innovation issues but with demographics - the most salient of which is the aging populations of the OECD economies and the very high levels of "investment/consumption" in health care in the last years of life as opposed to "investment" in infrastructure, education and research.
Aging populations and declining birth rates are going to create severe labour shortages. Sorting out economic policy in the decades ahead is going to be extremely complex. Add too the challenges posed both political and technological of "climate change"
See Too late, too sudden: Transition to a low-carbon economy and systemic risk. It is for this reason that the G20 under the Financial Stability Board has set up the Task Force on Climate-related Financial Disclosures.
Overlapping technology revolutions are about to shake a number of global industries and with it asset values. A central problem of our time has been the rise of global debt.
“The big picture here is that from about 1870 through to about 1950 or 1960, banks lent about a third of their money against real estate and the rest to non-real estate finance. But after about 1950, that relentlessly grew to reach 60% by 2007, and this actually understates the case because this is primarily residential real estate. There’s quite a lot of commercial real estate on top.”
There is a risk of global deflation (possibly via another housing bubble collapse) and/or technological deflation.
The stakes then are considerable, and the need to invest in understanding the economic forces at play, critical.
Solutions going forward will require action not only by the central banks but by legislators and academics.