If the Robots Are Coming, Why Aren't Interest Rates Higher?

Mar 10, 2025

The discussion revolves around the puzzling low interest rates in the face of imminent artificial general intelligence (AGI). It delves into market skepticism towards rapid technological shifts and their economic implications. The hosts debate the relationship between AGI, investment opportunities, and growth rates, highlighting differing opinions on future economic dynamics. Additional insights into historical interest rates and the challenges posed by income inequality and existential risks create a thought-provoking examination of our financial landscape.

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INSIGHT

Market Prediction of AGI

Andrey Fratkin is skeptical of using low interest rates to predict AGI.
He suggests prediction markets as a more direct measure of market beliefs about AGI.

INSIGHT

Defining Transformative AI

The paper defines transformative AI as either causing >30% annual GDP growth or human extinction.
These scenarios both predict low real interest rates.

INSIGHT

Constraints on AGI Growth

AGI achieving 30% growth hinges on it acting as an unconstrained entity.
If AGI faces real-world constraints, growth may be lower.

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In this episode, we tackle an intriguing question inspired by a recent working paper: If artificial general intelligence (AGI) is imminent, why are real interest rates so low?

The discussion centers on the provocative paper, "Transformative AI, Existential Risk, and Real Interest Rates", authored by Trevor Chow, Basil Halperin, and Jay Zachary Maslisch. This research argues that today's historically low real interest rates signal market skepticism about the near-term arrival of transformative AI—defined here as either technology generating massive economic growth (over 30% annually) or catastrophic outcomes like total extinction.

We found ourselves initially at odds over the paper's core claim:

* Seth was initially quite convinced (90% prior!) that low interest rates indeed suggest markets doubt imminent AGI. After all, wouldn't the expectation of revolutionary technology dramatically increase investment opportunities—and thus drive interest rates up?

* To clarify: I’m agreeing with the claim about “transformative AI”. The specific “transformative AI” definition entails a 30% growth rate. I do think there is a greater than 10% chance that we get “a country of geniuses on the cloud” but with low interest rates, but only modest increases in growth. In an initial correspondence with Basil about the paper, through Tyler, I initially emphasized this latter point. We’d need ~lots~ of automation to get growth up to 30%.

* Andrey, on the other hand, started with a skeptical 10% prior. While acknowledging the logic of the paper, he argued that markets might simply not be sophisticated enough—or might be too fragmented—to fully price in the highly uncertain prospects of AGI.

Listen to find out how we updated our priors.

Work mentioned:

Transformative AI, Existential Risk, and Real Interest Rates

Digital Abundance Meets Scarce Architects: Implications for Wages, Interest Rates, and Growth

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