The Dual Future of the Information Age: AI vs Crypto

The Information Age has brought rapid technological change and global connectivity. But emerging technologies also pose a question about the future structure of society: will they decentralize power or concentrate it? The book The Sovereign Individual by William Rees-Mogg and James Dale Davidson envisioned a future where individuals leverage technology to decentralize power away from nation-states. In a globalized world, people would have more options to choose from and move between jurisdictions that best suit their needs. This vision suggests we may see a weaker role for centralized institutions and greater autonomy for individuals. However, the recent rise of China suggests an alternative vision. China has harnessed new technologies to enable authoritarian control and centralized power. Through tight regulation of the internet, investments in surveillance, and social control systems enabled by AI and big data, China has strengthened the Communist party’s grip on power. China seeks to portray its system of control as a new form of “cyber sovereignty.” This tension between the decentralized future envisioned in “The Sovereign Individual” and China’s centralized authoritarian model represents two opposing possibilities for how society develops in the Information Age. The question is whether emerging technologies will primarily drive decentralization or enable greater central control. The answer will shape the balance between individuals and institutions in the digital future.

The Rise of China and Its Embrace of AI

China has emerged as a global superpower in the Information Age, but rather than decentralizing power as envisioned in “The Sovereign Individual,” China has moved in the opposite direction. Under President Xi Jinping, China has centralized control and embraced digital authoritarianism.

China has tightened its grip over Hong Kong, passing a strict national security law in 2020 that criminalizes dissent against Beijing. The law has been used to crack down on pro-democracy protests and speech. This runs counter to the vision of Hong Kong as a “jurisdiction that would flourish in the Information Age. China aims to become the world leader in AI by 2030. In 2017, China released its “New Generation Artificial Intelligence Development Plan,” aiming to build a domestic AI industry worth $150 billion. China has invested heavily in AI through companies like Alibaba, Tencent, and Baidu as well as government funding for R&D at universities and research institutes across the country.

China is deploying AI for surveillance and social control. An estimated 200 million cameras monitor citizens, enabled by AI for facial recognition. China has developed a “social credit system” that aggregates data to assign citizens a rating based on their behavior. “Good” behavior leads to privileges while “bad” behavior leads to restrictions. The system aims to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

China’s rise and embrace of AI suggests a vision in sharp contrast with the decentralization predicted in “The Sovereign Individual.” Instead, China is leveraging new technologies to construct a digital regime of control, monitoring individuals and curbing dissent. For China’s leaders, AI is a means to maximize power through constant surveillance and algorithmically-enhanced authoritarianism. Their ambition is an Orwellian society where people are controlled and power is concentrated at the top.

AI and the Potential Solution to the “Calculation Problem”

The “calculation problem” refers to the challenge of centrally coordinating an economy due to the vast volume of information required to make efficient decisions. As economist Friedrich Hayek argued, the free market is an effective system that leverages decentralized knowledge to allocate resources efficiently, something that centralized planners cannot replicate as effectively.

However, advances in AI could potentially address the calculation problem by enabling governments to aggregate and analyze massive amounts of data, thereby optimizing economic planning. China, in particular, aims to leverage AI for precisely this purpose. The Chinese Communist Party (CCP) envisions AI as a tool to enhance its state-run economy by improving resource allocation, predicting market trends, monitoring supply chains, and facilitating extensive surveillance of citizens in their roles as both consumers and producers.

Yet, this ambitious vision of AI-aided central planning is fraught with significant challenges and risks. Firstly, the sheer scale of data required poses potential privacy and security violations. China’s extensive surveillance systems necessitate access to large volumes of data, some of which include sensitive personal information.

Secondly, AI systems are vulnerable to the prejudices of their human creators. If AI is designed by officials with the primary aim of maximizing state control, the system may prioritize political security over economic efficiency or citizens’ welfare.

Lastly, centralized data repositories present attractive targets for cyber threats, with a breach potentially having systemic impacts. An over-reliance on AI and data for economic coordination could leave China exposed should its systems malfunction, be disrupted, or encounter technical issues.

In theory, AI may offer a solution to Hayek’s calculation problem. However, in practice, AI-aided central planning is risky and fraught with imperfections. While promising an optimally managed state economy, China’s strategy necessitates mass surveillance, concentrates power in the hands of biased systems and human officials, and creates vulnerability due to over-centralization. Therefore, a decentralized free market may hold some advantages over even an AI-enhanced planned economy.

The Promise of Cryptography and Decentralization

Cryptography, the art of secure communication, holds potential for driving decentralization of power. This is particularly true in the context of blockchain technology and cryptocurrencies.

Blockchain technology creates a distributed ledger that allows peer-to-peer transactions without a central authority. This can democratize processes like payments, contracts, and asset management. However, despite its potential, the broad implementation of blockchain technology remains hindered by regulatory challenges, and its adoption is still relatively niche.

Cryptocurrencies, such as Bitcoin, provide a method for decentralized digital payments that exist outside of centralized banking systems. Some countries, like El Salvador, have embraced Bitcoin as legal tender, while others, like China, have outlawed it. Still, the majority of nations are in a state of uncertainty. If widely adopted, cryptocurrencies could disrupt traditional financial systems, ushering in a new era of decentralized global finance.

Nevertheless, cryptocurrencies come with their own set of risks. They are prone to extreme volatility, the technology is often too complex for mainstream adoption, and “mining” cryptocurrency is an energy-intensive process. For instance, the energy consumption of Bitcoin mining rivals that of entire countries, such as Argentina.

While blockchain and crypto offer a vision of decentralization, they also introduce new challenges. Limited applications and adoption mean that, for the time being, most power remains in the hands of centralized institutions. Additionally, decentralized systems can often be slower, less secure, and less equipped to prevent large-scale criminal activity compared to regulated central institutions.

Decentralized technologies are likely to achieve only partial decentralization. Rather than completely upending centralized power structures, they may primarily serve to pressurize traditional institutions to become more transparent and fair. But the degree of decentralization will largely depend on the evolution of regulatory frameworks.

With careful regulation, cryptographic technologies could enable a system of “decentralization with democracy.” This system would empower individuals with greater choice and control, while maintaining institutional checks against misuse. But without adequate safeguards, these tools risk creating chaos and undermining established stability.

Cryptography carries revolutionary potential, but its promise hinges on how responsibly we harness its power. Absolute decentralization seems implausible, which means that a centrally regulated system with room for individual freedom may offer the best balance. Meeting society’s needs requires a careful equilibrium between autonomy and order, a balance that no single technology can establish on its own.

The US Context: A Laboratory of Jurisdictional Competition

The US federal system provides a glimpse into how new technologies may enable greater “jurisdictional competition” as envisioned in “The Sovereign Individual.” States compete to attract businesses and residents. Americans can choose which state’s laws govern them by moving, enabling competition.

Recent examples suggest a move toward more choice. States like Texas, Nevada, and Colorado attract residents and companies with low taxes and regulations. People and businesses “vote with their feet” – escaping states where local governments overstep or mismanage.

However, countervailing pressures also favor centralization. Federal policies like healthcare, education, environmental and labor regulations impose uniform standards and limit interstate competition. There are calls for additional federal policies around tech regulation, wages, and more.

While state competition empowers individuals with more choice over how they are governed, nationwide mandates can restrict choice. There is a tension between state autonomy, federal oversight, and individuals navigating the space between.

The US also shows how technology may intensify small fractures into great divisions if left unchecked. Social media echo chambers and partisan news sources polarize rather than unite. But technologies like AI could also potentially bridge divides by tailoring resources to individuals. Overall, more choice is enabled by technology – but within the bounds of reasonable regulation.

Technology gives people greater leverage to pick and choose from available governance models but also greater freedoms to fissure into echo chambers. The US case suggests decentralization progresses slowly, fitfully, and imperfectly, its pace tied to a nation’s appetite for both autonomy and cohesion. A public coming apart at the digital seams suggests jurisdictions compete most vigorously where societies value both independence and interdependence.

In the US, the push and pull between state competition and federal mandates reflects this delicate balance. Americans want maximum choice, but within reason and regulated order. Total decentralization remains far-fetched but more modest freedoms to choose governance lie within reach, enabled by tech and guided by a shared interest in compromise over fracture. The future may be diverse populations unified only by a common quest for tailored liberty.

Conclusion: Navigating the Future Intersections of Centralization and Decentralization

AI and cryptography represent the dual futures of centralization and decentralization taking shape before us. However, rather than a binary choice between these paths, the reality will likely lie at the intersection where centralization and decentralization co-exist in balance.

Centralized AI could optimize infrastructure and administration, but with individuals in control of their own data and choices. Smart cities may run on AI, but transparency and privacy are prioritized over surveillance. Regulations guide technology, but individuals select their own governance.

Decentralized crypto could enable more autonomy and control but within legal bounds. Digital currencies may operate on open blockchains, but comply with laws. Information flows freely, but “ML fairness” and curbs on misinformation intervene.

We need not see centralization and decentralization as opposed and incompatible. Responsible technology and pragmatic policy could forge a future both monitored and empowering, efficient yet free, transparent yet secure. Where decentralization descends into disorder or centralization crosses into authoritarianism, the public may clamor for course corrections to restore balance.

More likely than any absolutist vision of total control or complete decentralization, the future shall land where each individual’s place on the spectrum from autonomy to security is weighed and respected. The promise of technology is maximized liberty compatible with the common good. The peril is false dichotomies that split society into ideological halves instead of a whole that is decentralized, centralized and, above all, cohesive.

Our shared duty is to realize technology’s promise and avoid its peril. With prudent progress, AI and crypto could enable a future that is open yet orderly, and politically divided but pragmatically united. The future is not decentralization or centralization – but a synthesis of both on terms acceptable to all. Our choice is not ‘whether’ but ‘how’ we shall live free and regulated together. Utopia emerges at the point of tension, where personal and collective interests converge.


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