Quite apart from the application of this argument to AI, the example of a gun shop/manufacturer is quite bad. One reason is that passing on the negative externalities of selling a gun without passing on the positive externalities* (which is never done in practice and would be very difficult to do) creates an assymetry that biases the cost of firearms to be higher than it would have been in rational circumstances.
(*) Positive externalities of manufacturing and selling a gun include a deterrent effect on crime (“I would rather not try to rob that store, the clerk might be armed”), direct prevention of crime by armed citizens (https://en.wikipedia.org/wiki/Defensive_gun_use) or very strong positive effects of population being armed in extreme (rare) scenarios such as foreign invasion or the government turning tyrannical. I would suspect you wouldn’t want to reward firearms manufacturers for all these positive outcomes (or at least it would be difficult, since these effects are very hard to quantify).
In general, I don’t agree with arguments of the form “it’s difficult to quantify the externalities so we shouldn’t quantify anything and ignore all external effects” modulo concerns about public choice (“what if the policy pursued is not what you would recommend but some worse alternative?”), which are real and serious, though out of the scope of my argument. There’s no reason a priori to suppose that any positive or negative effects not currently priced will be of the same order of magnitude.
If you think there are benefits to having a population where most people own guns that are not going to be captured by the incentives of individuals who purchase guns for their own purposes, it’s better to try to estimate what that effect size is and then provide appropriate incentives to people who want to purchase guns. The US government pursues such policies in other domains: for example, one of the motivations that led to the Jones Act was the belief that the market would not assign sufficient value to the US maintaining a large domestic shipbuilding industry at peacetime.
In addition, I would dispute that some of these are in fact external effects by necessity. You can imagine some of them being internalized, e.g. by governments offering rewards to citizens who prevent crime (which gives an extra incentive to such people to purchase guns as it would make their interventions more effective). Even the crime prevention benefit could be internalized to a great extent by guns being sold together with a kind of proof-of-ownership that is hard to counterfeit, similar to the effect that open carry policies have in states which have them.
There’s a more general public choice argument against this kind of policy, which is that governments lack the incentives to actually discover the correct magnitude of the externalities and then intervene in the appropriate way to maximize efficiency or welfare. I think that’s true in general, and in the specific case of guns it might be a reason to not want the government to do anything at all, but in my opinion that argument becomes less compelling when the potential harms of a technology are large enough.
There’s no reason a priori to suppose that any positive or negative effects not currently priced will be of the same order of magnitude.
There are some a posteriori reasons though—there are numerous studies that reject a causal link between the number of firearms and homicides, for example. This indicates that firearm manufacturers do not cause additional deaths, and therefore it would be wrong to only internalize the negative costs.
If you think there are benefits to having a population where most people own guns that are not going to be captured by the incentives of individuals who purchase guns for their own purposes, it’s better to try to estimate what that effect size is and then provide appropriate incentives to people who want to purchase guns.
That’s not true. It is not better, because providing appropriate incentives is very likely impossible in this case, e.g.: - due to irrational political reasons (people have irrational fear of guns and will oppose any efforts to incentivize their purchase, while supporting efforts to disincentivize it); - due to the fact that a reward system for preventing crime can be easily gamed (cobra effect), not to mention the fact that it will probably be very costly to follow up on all cases when crime was prevented; - due to the fact that positive outcomes of gun ownership are inherently hard to quantify, hence in reality they will not be quantified and will not be taken into account (McNamara fallacy).
Quite apart from the application of this argument to AI, the example of a gun shop/manufacturer is quite bad. One reason is that passing on the negative externalities of selling a gun without passing on the positive externalities* (which is never done in practice and would be very difficult to do) creates an assymetry that biases the cost of firearms to be higher than it would have been in rational circumstances.
(*) Positive externalities of manufacturing and selling a gun include a deterrent effect on crime (“I would rather not try to rob that store, the clerk might be armed”), direct prevention of crime by armed citizens (https://en.wikipedia.org/wiki/Defensive_gun_use) or very strong positive effects of population being armed in extreme (rare) scenarios such as foreign invasion or the government turning tyrannical. I would suspect you wouldn’t want to reward firearms manufacturers for all these positive outcomes (or at least it would be difficult, since these effects are very hard to quantify).
In general, I don’t agree with arguments of the form “it’s difficult to quantify the externalities so we shouldn’t quantify anything and ignore all external effects” modulo concerns about public choice (“what if the policy pursued is not what you would recommend but some worse alternative?”), which are real and serious, though out of the scope of my argument. There’s no reason a priori to suppose that any positive or negative effects not currently priced will be of the same order of magnitude.
If you think there are benefits to having a population where most people own guns that are not going to be captured by the incentives of individuals who purchase guns for their own purposes, it’s better to try to estimate what that effect size is and then provide appropriate incentives to people who want to purchase guns. The US government pursues such policies in other domains: for example, one of the motivations that led to the Jones Act was the belief that the market would not assign sufficient value to the US maintaining a large domestic shipbuilding industry at peacetime.
In addition, I would dispute that some of these are in fact external effects by necessity. You can imagine some of them being internalized, e.g. by governments offering rewards to citizens who prevent crime (which gives an extra incentive to such people to purchase guns as it would make their interventions more effective). Even the crime prevention benefit could be internalized to a great extent by guns being sold together with a kind of proof-of-ownership that is hard to counterfeit, similar to the effect that open carry policies have in states which have them.
There’s a more general public choice argument against this kind of policy, which is that governments lack the incentives to actually discover the correct magnitude of the externalities and then intervene in the appropriate way to maximize efficiency or welfare. I think that’s true in general, and in the specific case of guns it might be a reason to not want the government to do anything at all, but in my opinion that argument becomes less compelling when the potential harms of a technology are large enough.
There are some a posteriori reasons though—there are numerous studies that reject a causal link between the number of firearms and homicides, for example. This indicates that firearm manufacturers do not cause additional deaths, and therefore it would be wrong to only internalize the negative costs.
That’s not true. It is not better, because providing appropriate incentives is very likely impossible in this case, e.g.:
- due to irrational political reasons (people have irrational fear of guns and will oppose any efforts to incentivize their purchase, while supporting efforts to disincentivize it);
- due to the fact that a reward system for preventing crime can be easily gamed (cobra effect), not to mention the fact that it will probably be very costly to follow up on all cases when crime was prevented;
- due to the fact that positive outcomes of gun ownership are inherently hard to quantify, hence in reality they will not be quantified and will not be taken into account (McNamara fallacy).