Here is our take on the articles summarized below:

For this week’s look at the Day After, we examine four elements forming the world of tomorrow: artificial intelligence, China’s economic stagnation, the growth of the metaverse, and the global carbon transition. The first of these has already diffused into most elements of our lives in a variety of unseen ways. As we have written before, China’s economic instability may be the linchpin upon which its future (and by extension the trajectory of the 2020’s) hinges. The metaverse has come into the public eye more recently but holds profound implications for how we interact with others. And the carbon transition epitomizes the existential threats to human flourishing brought about by poor environmental stewardship, with the costs only now beginning to be felt. While the consequences of these and other factors may not be realized for years or even decades, these forces will nonetheless have a monumental impact on the future. Let us attempt to understand them soberly and with humility, understanding our role and encouraging others to do likewise.

Our AI Odyssey

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– Joseph S. Nye, Jr., Project Syndicate

Written by former US Secretary of State Henry A. Kissinger, former Google CEO Eric Schmidt, and MIT dean Daniel Huttenlocher, The Age of AI: And Our Human Future explores the powerful effects of artificial intelligence (AI) in our current world, and the implications (positive and negative) it has for the future. The modern field of machine learning and AI was born in the 1990s when scientists created a new approach that allowed machines to learn on their own by improving upon imprecise results instead of being programmed to produce precise results. Since then, machine-learning technologies have permeated nearly every area of 21st century life – business, politics, medicine, and even war. Oftentimes, when we think of AI, we think of the grand innovations that lead to life-changing and life-saving solutions. After all, with the ability to model millions of compounds in a day, AI algorithms can be used to discover new antibiotics like halicin, detect diseases, translate languages, model climate change, and a host of other applications. On the other hand, we don’t immediately think of the many modern conveniences we have come to rely on AI for or recognize our growing dependence on it: “In daily life, AI is our partner, helping us to make decisions about what to eat, what to wear, what to believe, where to go, and how to get there…But these and other possibilities are being purchased – largely without fanfare – by altering the human relationship with reason and reality.” A perfect example of this is the use of AI technologies by global network platforms such as Google, Twitter, and Facebook combined with the ever-growing use of such platforms. The AI algorithms used in social media solicit “clicks” and amplify and spread fake news quickly and cheaply. The filtration of social media algorithms has segregated users, thus reinforcing social and political polarization, which is “not encouraging for the health of democracy.” AI has also begun influencing global politics, particularly in the uneven distribution of AI technologies which, as the authors of the book argue, is bound to impact the global balance of power. The US and China are the leading AI powers with three of the top seven global companies in the field of machine-learning being American, and the other four being Chinese. Finally, there are major potential benefits of AI for military competition and warfare, but there are also many dangers. AI will transform military strategy, making conflicts “more intense and unpredictable.” This fact alone demands governments develop, sooner rather than later, arms-control agreements for the use of AI technology in weapons. With the expansive benefits and far-reaching potential of AI for every area of modern life comes much responsibility.

The U.S. Has Some Catching Up to Do on Digital Currencies

Ruchir Sharma, Financial Times

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While China is still the leading global trading partner and the primary buyer of commodities, there are signs that the country is rapidly slowing down. As China has been turning inward, transitioning their economy from a growth model driven by trade to one driven by domestic players, exports have fallen from more than 35% before 2010 to less than 20% today. Furthermore, for the first time in 30 years, China grew significantly slower than other emerging markets. While some attribute the slowdown to the pandemic, there are signs that other emerging economies began to “loosen” about five years ago, signaling that there may be other forces at play. In 2015, the correlation between GDP growth in China and other emerging markets was over 0.9 (nearly perfect). Now, it is under 0.2 (barely noticeable). First of all, China’s struggles with massive debts and a shrinking population have prompted economists to forecast that China’s growth will be slower than other emerging markets in the coming years. Second, other global growth drivers, like the digital revolution, are boosting several emerging economies. The rising demand for semiconductors has increased exports out of Taiwan and South Korea, offsetting some of the consequences of the slowdown in global trade and in China. While India’s share of trade with China is falling, mobile internet technology is transforming its economy. In both Indonesia and India, digital revenue has more than tripled as a share of GDP over the last four years. “Greenflation” – the rise in commodity prices due to efforts to contain global warming – has benefited exporters of green metals, like emerging markets Chile and Peru. Nonetheless, if China’s economy were to “melt down,” the global effects will be inevitable. However, the tremors of China’s domestic woes may not be as consequential as they once were.

The Metaverse Is Going to Be Bigger Than You Think

Eric J. Savitz, Barron’s

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Facebook’s rebranding as “Meta Platforms” has ignited a conversation around the so-called “metaverse” – an ambiguous term that refers to the loose collection of virtual and augmented reality technologies to allow for a form of online society emulating what were previously embodied experiences. Already, pieces of the metaverse exist – hardware like Microsoft’s HoloLens, online communities in video games such as Fortnite and Roblox, and virtual collaboration experiences such as Microsoft Teams’ Mesh, to name a few. The velocity at which these technologies have been developed imply the market may already be worth $2T, but the timing of mass adoption is less clear. The fact remains that the lines between physical and digital worlds are blurring, and as these technologies streamline everyday life, they are likely to be adopted out of convenience. That inflection point may not come for years, but Bernstein analyst Mark Shmulik believes that once that threshold is reached, there will be a wave of new entrants, especially if the push comes from the enterprise space. Other key factors include the interoperability of the hardware and software frameworks upon which the metaverse will ultimately rely and the ability to transfer digital assets seamlessly. Since this streamlining effect between different systems will be such a key component of the metaverse, companies with established platforms – such as Google, Microsoft, Apple, and indeed Meta Platforms – will have a distinct advantage by integrating new mixed-reality applications into their existing frameworks, creating the increased convenience necessary to drive adoption. While many consumers are still wary of the increasing influence of digital society, the wide variety of practical implications will likely drive adoption of at least certain elements of the metaverse. As the world continues to navigate the intersection between the Internet and embodied life, the transition to the “next phase” of digital society may not be smooth, but turbulent or not many see the transition as inevitable.

Europe’s Carbon Price Has Almost Tripled in 2021

Will Mathis and Rachel Morison, Bloomberg Green

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The price of European carbon allowances (certificates which allow companies to emit carbon dioxide CO2 and other greenhouse gases) has more than doubled in the past year, pushing above 80 euros per ton on Friday. This move comes as coal and gas prices have also skyrocketed in response to an energy crunch on the continent earlier this year; with each ton of CO2 emissions generated from these power sources now more expensive, the cost-benefit equation for energy producers is moving towards renewable energy much more quickly than originally expected. Considering the climate pledges made by many world leaders at last month’s climate summit in Glasgow, the move upward in emissions prices has realized the cost of these pledges sooner than anticipated. Still, market analysts think the acceleration has happened too fast to be sustainable for the long term as speculators have bid up the price. While there may be a near-term correction for this, the market is still poised for fundamental growth as global energy needs expand. Policymakers have also expressed concerns that the current carbon market only penalizes existing emissions; it does not directly incentivize reducing emissions, which would require a rework of the market system. As EU leaders are set to meet at a summit later in December, many expect them to discuss such measures. Nevertheless, the explosive growth of the carbon emissions market reflects the growing push for decarbonization and renewable energy initiatives, propelling the market towards a greener future.