What does an economic singularity look like?
Is this something that you ever considered?
We hear discussion about the technological singularity. Many are targeting the 2040s for that to occur. The basic idea is that we will reach a time when computers will advance at a rate that far exceeds human capabilities. We are talking about knowledge in all fields, with compute that is able to tackle some of the largest problems humanity faces.
Whether we get there, and how soon, is hotly debated.
Another factor, somewhat tied to this, is the economic singularity. It is something that does not get covered much but is worthy of deeper analysis.
In this article, we will lay out some ideas about what AI, robotics, cryptocurrency, and the Web 3.0 world might look like.
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Economic Singularity: Economy Doubling Each Month
Over the last century and a half, we saw a 3% growth rate being strong. This is the average from the start of the industrial revolution. The last decade saw this taper off. There are reasons for this, part of it due to the fact that GDP is an obsolete metric.
That said, it is the metric we are stuck with so we will use it for the examples.
China has become a major economic power, garnering the world's second largest economy. It went from 3rd world status to near $20 trillion in annual GDP. This was achieved with a 10%+ growth rate over the period of many decades. Like the rest of the world, China slowed down, yet still can top 5%.
While this is impressive, it is nothing compared to an economic singularity.
Consider, for a moment, what it would be like to have the global economy doubling every year. As of 2023, the total GDP was $105 trillion. A yearly doubling would equate to $200 trillion after 1 year; $400 trillion in year 2; $800 trillion in year 3; and so on.
As we can see, the numbers get rather outlandish very quickly.
To really take this to the absurd, what happens if we get to the point of that occurring, not yearly, but monthly.
We basically would have an $800 trillion economy after one quarter.
This is a theory proposed by the economist Robert Hanson. He believes this might be the case in a century.
Technological Evolution
Naturally, to achieve this, we are talking about some rather advanced technology. It also highlights why GDP is a dying metric.
Technology is deflationary. That means we see the cost per unit decline over time. The best example of cost per minute of global communication. This is essentially free unlike a few decades ago, where there was a charge for each minute on the phone.
When we look at what is happening with generative AI, we realize how the cost for information is plummeting. If we go back 40 years ago, there was an enormous cost to this. Today, we can have a chatbot spit out a few thousand words detailing most topics in a matter of seconds. This can be done for free, using a variety of services.
If GDP is rather useless for this discussion, what metric can we utilize. At this point, there is not one. That is how disruption works. New metrics for quantification are required. For example, same store sales is not very useful when looking at a retail landscape where Amazon is one of the largest players.
Here we simply will use the idea of the economy doubling, however that is quantified.
Cryptocurrency: The Need For More Money
As the economy grows, more money is required. This is a point that is lost on most. It is especially true if the velocity of money is declining, which has been the case for the last 40 years.
An economy is basically a series of transactions. The faster and the larger the amount of money that flows through an economy, the more productive it will be. As we can see with the proposed spending on data centers, we are looking at numbers that will be entering the trillions over the next decade.
AI and robotics are going to fundamentally change the structure of the economy. What we saw so far is but a glimpse into the next few decades. Computerization completely changed the economy from 40 years ago. The world is radically different due to this one innovation (and all that was built on top of it). We can view generative AI as a new form of computer.
Imagine what things will look like in a few decades when developers build on top of it.
If we have an economy that is even attaining a double each year, this means the money supply will have to keep pace. Naturally, the velocity of money could change, something that is likely to happen with AI agents.
For this reason, AI and cryptocurrency are linked. I do not see how we have the former without the latter.
Our present system for expanding the money supply, i.e. loans from commercial banks, simply cannot keep pace. Cryptocurrency provides the ability to scale, unlike the present system which slowed by friction.
Therefore, an economic singularity will require a completely new monetary system. Cryptocurrency could fulfill this role although it might also be replaced by something more advanced.
Life Under The Economic Singularity
People tend to look at things in the short term.
When we look at the world over the past couple centuries, we see how technology changed everything. This provides insight into where our future resides.
Technology put the majority of the population in a position where it far eclipsed those from 3 generations ago.
Anyone who is connected to the Internet is now richer than Cornelius Vanderbilt. Think about that for a second. Just look at this list:
- electricity
- airplanes
- satellites
- smartphones
- computers
- television
- video games
- movies
- air conditioning
- automobiles
If you ever rode in a car, you experienced something one of the richest men in human history never had. He was relegated to traveling by stage coach or train.
We simply take for granted what we have. Anyone with a smart phone can listen to millions of songs. Ole Cornelius died 10 years before the phonograph (the predecessor to the record player) was patented.
Can you imagine the world where the only music heard is from a person (people) playing it live?
To contrast, we are at the point where software can churn out a song in a matter of seconds.
The next few decades will make life as completely different. We are going to see a huge step as compared to the 1980s (let alone the 1880s). Life is radically different compared to our great-grandparents. By the 2040s, that will be the case for our parents.
From an economic standpoint, we will likely see an explosion here also. AI and robotics will cause a singularity for the economy also. Will it be a doubling each month? Not likely. We could see, however, 30% annually within 20 years.
That would be a 10x in the growth rate since the Industrial Revolution. It is possible that we see two economic singularities in the next 100 years. To put that in perspective, we have seen 3 (or 5 depending upon the definition) in human history.
The first was the shift from hunter and gather to agriculture. Next was the move into industrialization. Finally, we saw computerization.
Could generative AI and robotics be the 4th? Many believe that. What comes after that, is anyone's guess.
Either way, we are embarking upon a massive shift in society. The focus is often on the technological but we are seeing the structure of the economy changing.
Posted Using InLeo Alpha
