1999 All Over Again?

I started looking at rabbit years because for some reason they have a 12-year pattern of alternating boom-bust, and I've been thinking about how AI is like the 1999 New Economy, and then I looked into the Fed's liquidity pump and...Oops They Did It Again: Fed Repeats 1999

Reproducibility Crisis in AI Too

Science: AI researchers allege that machine learning is alchemy

Ali Rahimi, a researcher in artificial intelligence (AI) at Google in San Francisco, California, took a swipe at his field last December—and received a 40-second ovation for it. Speaking at an AI conference, Rahimi charged that machine learning algorithms, in which computers learn through trial and error, have become a form of "alchemy." Researchers, he said, do not know why some algorithms work and others don't, nor do they have rigorous criteria for choosing one AI architecture over another. Now, in a paper presented on 30 April at the International Conference on Learning Representations in Vancouver, Canada, Rahimi and his collaborators document examples of what they see as the alchemy problem and offer prescriptions for bolstering AI's rigor.

"There's an anguish in the field," Rahimi says. "Many of us feel like we're operating on an alien technology."

The issue is distinct from AI's reproducibility problem, in which researchers can't replicate each other's results because of inconsistent experimental and publication practices. It also differs from the "black box" or "interpretability" problem in machine learning: the difficulty of explaining how a particular AI has come to its conclusions. As Rahimi puts it, "I'm trying to draw a distinction between a machine learning system that's a black box and an entire field that's become a black box."

America's Top Export is Fiat; Software Eats the Trade Deficit Too

If you believe the argument that says automation and robotics will dominate production, if you believe that universal basic income is something to consider because there's a risk of widespread mass unemployment, then you also expect production will eventually be concentrated in fewer and fewer hands (and even no hands if the machines take over). This is usually discussed in domestic terms, but it will also happen internationally. We should expect some nations will see their exports soar and other nations become chronic trade deficit nations or simply become relatively poorer as their economies fall behind. Domestically, the fear is that high-skill white collar labor is next, with lawyers, accountants, financial analysts, writers and such in line to see their jobs automated. Internationally, developing nations that lack highly-advanced sectors will also fall behind as their economies cannot keep pace.

The U.S. has a massive trade deficit because it prints the reserve currency. It's really the #1 export of the United States. Pieces of paper with no value except that other people accept them because the United States is the pre-eminent military, political and economic power in the world. Path dependency could secure that status through many years of decline, but eventually the U.S. will lose this status. The U.S. could collapse the trade deficit at any moment by extracting itself from this role. A long-term global agreement to increase the use of foreign currencies, allowing the dollar to slowly fade away as a share of global finance. Of course, this would weaken the U.S. dollar and make exports more competitive and imports more expensive. It will have a similar impact to passing tariffs. Using tariffs is a way of keeping reserve status (for a time, and only if it doesn't blow up global trade) and mitigating the costs to the long-term health of the economy.

The U.S. can also help itself by dominating in advanced manufacturing, artificial intelligence and software. It needs large domestic industries for applied research though. The software to run an automated steel mill needs a steel mill to automate.

As an advanced manufacturing economy, the U.S. would become like Germany, Japan and China (if there's no major wars or serious national decline, these four nations might produce an unbelievable sum of global GDP in 2100). Instead of buying stuff as a consequence of reserve currency demand, it will offer credit to its buyers (as it did in the 1920s).

The current system is unsustainable. Tariffs aren't a long-term solution, but they are a step in the direction of the future. (They're also close to inevitable in a democracy where unemployed workers can vote. Either that or UBI.) The U.S. must produce more, either because the dollar will lose reserve currency status or because it simply does produce more through advanced manufacturing. Otherwise it goes into terminal decline. I view tariffs as a step towards the death of the dollar as reserve currency. Washington and Wall Street refuse to give that up willingly, so the only way to push things forward is to put the U.S. in a better position when the dollar crisis hits. Or break the global trading system and negotiate the end of reserve currency status as part of a major renegotiation of the global financial and trading systems.