The political economy of d/acc

[Music] all right get slides all right there we go uh everybody I'm thrilled to be here I am Eli Dorado I'm a chief Economist at uh the uh abundance Institute uh and it's a real pleasure to to be here to talk about uh diac I'm approaching this uh through my training as a sort of political Economist and uh kind of give going to give a high level overview of how I see uh this space uh I want to start by talking about our instincts for both control and freedom um we all have these instincts and in the last few years um with uh AI Innovation we've seen this kind of like control narrative or this kind of control uh uh Instinct be uh on display like we need an enforced pause uh on AI development we need to shut down data centers we need a kill switch uh we need regulation we need to restrict model releases or we need to impose bans on open- Source uh AI models or exp export controls and uh and sort of the counter reaction to that is like no we need freedom of speech uh are we really going to regulate matrix multiplication and this is a slippery slope to totalitarianism and then I think that there's an interesting uh conclusion at the end that therefore I'm going to not believe the premise right I'm not going to believe that there is any risk here and I think that this uh conclusion is is very natural uh it's really bad epistemic hygiene but it's common and we need to acknowledge it right and you see this um in completely different contexts with things like climate right like people will say like oh I just don't believe in it because they don't want to like like accept the the sort of control oriented uh uh beliefs of of of the other side um so just because freedom is good doesn't mean that the problem raised by the anti-freedom ites is fake right so diac approaches both like AI SA and biosafety from the perspective that they are genuine public goods but crucially just because we acknowledge the existence of safety as a public good doesn't mean that we think the right approach is to generate it through top- down coercive means right we're going to take both freedom and public goods seriously and I think that's the ethos behind diac and about a lot of ethereum uh in general so that brings us to the next part of the talk uh the private provision of public KS so uh what is a public good in In classical economic terms a public good is one that is neither excludable nor rival risk so like the canonical example is the lighthouse right a lighthouse on a coastline provides guidance for all the ships uh whether or not they pay right so so the a lighthouse is not an excludable good and at the same time one ship relying on the lighthouse for guidance does not diminish the ability of any other ship to uh to rely on the lighthouse for guidance so the lighthouse is non-rival RIS so game theoretically here we have a free rider problem and we should not expect the lighthouse to be produced by the market right you must rely on governments to produce lighthouses so one of the great economists of the 20th century uh Ronald Coos got interested uh in this example and he decided to actually collect data on lighthouses in Britain and uh astonishingly he found that every single one of them was privately constructed so we have a free rider problem it's not supposed to happen uh but every single lighthouse in in the in Britain was privately constructed so how can this be what Co found is that lighthouses were vertically integrated with ports so uh the port operator would build a lighthouse so that people could come to their port and then they would recoup the costs through Port port fees and what this example shows is that creative structuring uh can turn a public good problem into a private in private good provision um another closely related idea is a common pool resource right with the classic example being irrigation systems so um irrigation systems are arguably one of the things that led to the creation of states in the first place so the Carl uh wi foggle in his book Oriental despotism right advances the concept of a hydraulic Empire right a powerful State uh as in Egypt or Mesopotamia or China that's built around irrigation right and and maintenance of this common pool resource is a public good and it's worth it to accept some coercion if it means you get the benefits of of irrigation um so just like with the lighthouse there's a Twist um so later particularly Elanor Ostrom uh figured out that many complex irrigation systems uh like in the Philippines or this one in Valencia Spain uh were cooperatively maintained there W without an autocrat without you know this one goes back a thousand years uh and and so she won a Nobel Prize for figuring out uh the conditions under which uh such cooperation is possible um another example of non-coercive public good provision is standard setting uh so standards are a public good but because the value of the standard goes up when other people use it there's an incentive to cooperate in in standard production uh standard development so um one of the explicit powers reserved for the government in the US Constitution is to develop standards but it turns out that private uh standard setting happens all the time uh this is an example from ietf but we're here at Devcon and uh ethereum itself uh involves a lot of cooperatively produced uh standards um I'm not going to do a long spiel on on each of these modalities but there's a lot of different ways in which um public good production can be incentivized without relying on sort of centralized top- down government coercion um we've talked about like the first three already but you can think of a lot of like open- Source software uh development as scratching an itch um sometimes people do things to accumulate prestige uh sometimes people give money to to causes they believe in my organization the abundance Institute is a 501c3 nonprofit our budget is fun entirely funded by donors who get very little public recognition usually usually they don't want it and they give just because they believe in the mission um Norms like politeness or not engaging in petty theft are are also a source of U of public goods and and of course uh you know mechanism design is an important one for ethereum right we can think of consensus as as a public good and the consensus protocol as a as a mechanism that incentivizes coming to consensus so public goods like AI safety and bios safety uh can be provided non- coercively without government involvement and it happens all the time uh and it's possible that by some accountings most public goods are in fact privately produced um and so now I want to show the flip side uh when public goods and particularly safety is provided coercively top down by the state the results are often pretty bad um so let's look first at nuclear energy uh in the 1950s and 60s we experienced cost reductions as we uh as we deployed more uh more nuclear plants so this is common in industry it's called The Learning rate and then in the 1970s the trend reversed um and costs started to to explode right so initially it began in the early 1970s with environmental regulation and then it accelerated in response to the 3M island incident in 1979 which by the way like nobody was harmed by that incident at all um uh another domain uh which uh vitalic referenced uh is in which safety regulation has had enormous costs is pharmaceutical development so um and and by the way this is uh adjusted for inflation just like the last chart was also um so these higher costs of bringing drugs to Market represent thousands of missing drugs right we're missing thousands of drugs and people die because of the lack of of drugs um but these people are not identifi identifiable uh victims and my friend and former Professor Alex tabarok calls it the invisible graveyard of people people dying because of lack of of drugs brought to Market um aside from nuclear and far Pharmaceuticals the other major industry that is regulated via like pre-market approval is Aviation so everyone thought like after World War II that there was going to be a a growing uh personal aviation industry that like anybody people coming back from World War II like knew how to fly they could buy uh Surplus military airplanes and and you know we would all just have essentially flying cars just personal aircraft that would take us wherever we wanted to go um and it you know could have happened but we had uh in increased regulation at at a couple different points along the way here in the mid 1960s and early 80s and this strangled the industry um unfortunately uh FAA has recognized that they've gone too far with personal aircraft regulation they're beginning to actually loosen the rules and and it something that's super interesting is that they actually think that loosening the rules for a category called light sport aircraft will on net increase safety through both uh through both Innovation uh so the more you innovate the the safer the aircraft get but also through increasing the changing the composition of of the fleet and and sort of increasing the use of manufactured airplanes this is a way that uh deregulation can lead to um to actually higher levels of safety and it's interesting to see a major uh Federal regulator um recognize that um so there's a lot of reasons a lot of a lot of different examples in which coercive safety regulation doesn't actually make us safer so um we talked about nuclear but let's compare it to Coal so so we have um nuclear is is highly regulated highly safe and meanwhile we have coal plants still operating and um contributing to to thousands and thousands of deaths I I estimate in the US we have about 16,000 deaths a year from coal emissions which is like 5 911s uh every year and everyone's apparently okay with that and but but not with not with uh bringing uh making lowering the bar for nuclear plants um you know uh experimental drugs uh can be certainly can be unsafe but um a lot of times drugs are substitutes for other medical procedures and if you have to have a a surgery or a hospital State those are risky also and we don't we don't balance the risks uh in those in those kinds of um we don't make that comparison in our regulatory system um one thing that strikes me as really interesting is uh in Europe you can buy a contact lens from a vending machine uh but in the US you have to you have to uh you have to go it's not safe to do that so you have to go to a an optometrist and get a prescription first before you're allowed to do that and so it's thin thinly veiled protectionism um there is research that shows uh by an economist named Parker Rogers that shows that deregulated and downregulated medical devices are actually safer than than the sort of more regulated device types he looks at cases where device types are uh are where the regulation changes on the device types and he finds out that the the less regulated types increase entry into the market they increase competition and they um and and ultimately they turn out to be both safer and cheaper and uh and I already mentioned like the over regulation of manufactured aircraft means that people select for experimental aircraft a lot of times amateur homebuilt uh aircraft so the background here uh among all and all this uh all this Carnival of uh of of of stagnant uh negative effects from safety regulation is uh what's called the Great stagnation um this is a period in the US and much of the West know uh known as the great stagnation and if we hadn't experienced it beginning around 1973 uh the US would be about twice as Rich today uh as as it um as it is so it's a major major economic event and a lot of my work focuses on ending the great stagnation by enabling innovation in sort of these four sectors Health housing energy Transportation which together make up about half of the economy in the US and I think of the stagnation as the result of sort of three separate pathologies but like one of them is the way that we do uh safety regulation in the west I think the other is is sort of more generalized vcy and then protectionism but uh today we're talking about safety and um and so so yeah so safety the way we this sort of top down model of safety is is a major cause I think so it's worth thinking about an alternative to that and that alternative I I believe is to build um I think that the responsibility is on us to show that there is another way if we don't have a good answer for how to deal with real or perceived risks in a decentralized and non-coercive way people will continue to agitate for the coercive way right and um you know I'm showing these modalities again for the different way that we can uh we can sort of privately or non- coercively or non-top down uh provide public goods and we can think about how we can apply each of these to different aspects of the of the public goods problem right so um you know maybe there are safety resources that can be created um that can be done just via firms uh that can internalize things maybe there's um there are maybe there's a risk that AI will uh be able to use sophisticated fishing attacks that need to be addressed and we can do that through uh better protocols new standards uh authentication uh Comm authenticated communication standards um maybe uh air filtration systems as as valalik mentioned can protect against uh biological attacks but also provide ancillary benefits in the form of reduced illness so that they don't require like mandates or or uh you know top down regulation so I think another aspect of the of the solution of the build solution is to focus on uh concrete and near-term problems I think a lot of attention is focused on the most fanciful scenarios but a lot of the near-term solutions also have a bearing on those risks and so working on things that are concrete and yield tangible benefits now can and uh you know if we ever if those other more extreme scenarios ever materialize we can be uh more prepared for them than than we otherwise would be by focusing on the um on some stuff that's more near-term concrete tangible and finally um I think a lot of times people think about you know what can go wrong with uh with with uh um with new technologies uh a Ai and biotech in particular right and I would think that this needs to be balanced by what can go right and I don't mean that in a trait way that shuts down um thinking about risks but as um as a counterweight to the Panic that sometimes people feel and as a motivation uh to to build the future and to build an exciting future that uh that we all want