by Trevor Chow, Basil Halperin, and J. Zachary Mazlish

In this post, we point out that short AI timelines would cause real interest rates to be high, and would do so under expectations of either unaligned or aligned AI. However, 30- to 50-year real interest rates are low. We argue that this suggests one of two possibilities:

Long(er) timelines. Financial markets are often highly effective information aggregators (the “efficient market hypothesis”), and therefore real interest rates accurately reflect that transformative AI is unlikely to be developed in the next 30-50 years.
Market inefficiency. Markets are radically underestimating how soon advanced AI technology will be developed, and real interest rates are therefore too low. There is thus an opportunity for philanthropists to borrow while real rates are low to cheaply do good today; and/or an opportunity for anyone to earn excess returns by betting that real rates will rise.

In the rest of this post we flesh out this argument.

Both intuitively and under every mainstream economic model, the “explosive growth” caused by aligned AI would cause high real interest rates.
Both intuitively and under every mainstream economic model, the existential risk caused by unaligned AI would cause high real interest rates.
We show that in the historical data, indeed, real interest rates have been correlated with future growth.
Plugging the Cotra probabilities for AI timelines into the baseline workhorse model of economic growth implies substantially higher real interest rates today.
In particular, we argue that markets are decisively rejecting the shortest possible timelines of 0-10 years.
We argue that the efficient market hypothesis (EMH) is a reasonable prior, and therefore one reasonable interpretation of low real rates is that since markets are simply not forecasting short timelines, neither should we be forecasting short timelines.
Alternatively, if you believe that financial markets are wrong, then you have the opportunity to (1) borrow cheaply today and use that money to e.g. fund AI safety work; and/or (2) earn alpha by betting that real rates will rise.

An order-of-magnitude estimate is that, if markets are getting this wrong, then there is easily $1 trillion lying on the table in the US treasury bond market alone – setting aside the enormous implications for...

J. Zachary Mazlish

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