Will artificial intelligence eliminate money? -

Will artificial intelligence eliminate money?

We forget the true value of money. We usually see it as just a tool, a device that facilitates exchange and stores value over time. Compared to barter, coins and paper notes are very convenient. But money is more than just a tool. As Fyodor Dostoyevsky famously said, “money is freedom minted.” Money underpins our existence as autonomous individuals in a decentralized economy.
But things will be very different when we live in a world dominated by artificial intelligence with perfect information and infinite processing power. In such a situation, the role of money may disappear.
To understand how money frees us, think of a series of transactions. When we receive money, we are in control. It is up to us to hoard it or spend it on anything we want. Only money gives us that ability. Moreover, money is universal. With money, we can buy anything, anytime, from anyone. And its sellers are increasingly anywhere. This particular freedom comes not from wealth, but from the possibility of choice.
This choice should not be taken for granted, since the means of payment are always subject to paternalistic interference. In the 19th century, some companies paid employees with paper money that was only accepted in stores owned by the company. Today, technology makes it possible to issue “programmable money” with special purposes, limited uses, and even pre-emption dates. Such digital tokens could be used to prohibit “non-virtuous” consumption (e.g. alcohol, tobacco) by welfare recipients.
We need money because we live in a market economy, not a pre-programmed world. Having money protects us from uncertainty (in economics terms it has “option value”). Demand for money surges in times of crisis, because people need to prepare for all eventualities.
But let's fast forward to a future where machines organize, decide and carry out all economic activity. Machines transact with each other, depositing and withdrawing funds from each other's accounts, automatically ensuring discipline and the fulfillment of contracts. There is no failure or default. Do we still need money?

Once we receive the money, we are in control of it. It is up to us to keep it or spend it.

Jean-Pierre Landau

We are already seeing parts of such a world: A decade ago, Google's chief economist Hal Varian noted that “computers are at the center of every transaction” across the digitized economy. Many of our daily actions are automated, algorithmic trading has taken over many securities markets, and payments are increasingly programmatic.
If cryptocurrency advocates' vision of the future comes to fruition, “smart contracts” will govern financial intermediation in a world of decentralized finance. Some even say sophisticated algorithms could replace central banks in implementing monetary policy.
But for now, we are simply using machines. Humans are still free agents who make decisions, express preferences, and act on them. Central banks do not blindly follow the rules; they make decisions after considering difficult trade-offs, especially in times of crisis or when faced with supply shocks.
Indeed, in an automated, human-controlled economy, we need money more than ever. But now that digitalization has shortened distance and time, money must adapt. Money must also become digital and take the form of mobile phone tokens: electronic money that can be sent instantly around the world without going through a complex network of accounts and counterparties.
AI will push the boundaries. Some scenarios foresee a universe in which AI goes beyond simply processing information and executing commands to making decisions and determining its own objectives. AI will become “agents” and act based on preferences that don't necessarily align with human preferences.
With these capabilities, the AI could take over resource allocation and income distribution. It would evaluate millions of possible economic equilibria and identify the one it considers desirable. This vision of “technosocialism” is far from the model of a decentralized free society. It is a high-tech version of old-fashioned communist central planning.
Discussions about the future of AI often refer to the “singularity” – the point at which AI gains the ability to improve and enhance itself, rapidly surpassing humans on every measure of intelligence. In this scenario, humans will no longer be in control of their own destiny.
Will that really happen? Opinion is highly divided among AI experts, but money is an ideal indicator: the best sign that AI has effectively taken control will be the irrelevance of money in economic life.
A world without money may be technically possible, but whether it would be worth living in is another question.

Disclaimer: The views expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News.

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