In the interview with Professor Laibson, the topic of machine learning briefly came up and I would have loved to ask what he thinks the future of economics will be with enhanced machine learning and artificial intelligence. During the interview, Professor Laibson gave an example of repetition and rationality in which there is a difference between touching a hot pan and investing in the market. When touching a hot pan, after a few repetitions, it would be clear to not touch the pan anymore; however, when investing in the market, one may get lucky and create economical gain without the correct information. Even a person with many years of experience investing in the market may lose money, although making good investment decisions. For this reason, is it at all possible that machine learning and artificial intelligence will be implemented in a way that gives users of this technology an advantage over regular investors?
Yes! Machine learning really should help, and it will be interesting to see what happens over the next few years. I am sure it is already being widely used, partially in the open and partially in proprietary algorithms.
Thanks Daniel—I believe there’s now plenty of AI in economics. It’s early days,so seeing how it most helps/hurts is “for the future.”
I also find the possible impacts of machine learning and AI on the public markets to be fascinating. These innovations could improve the profitability of specific firms/institutions that can afford their services. However, at the same time, the diffusion of the internet and instant access to information/data has started to give power back to individual investors. This dichotomy will be interesting to watch play out as the market continues to adapt to these new technologies. I think it's likely that the market will continue to become more volatile as the spread of information increases in speed and as more machines/algorithms continue to take a larger portion of market trades. These two together will contribute to even faster and more dramatic sell-offs and rallies.