LW - Liability regimes for AI by Ege Erdil

The Nonlinear Library

Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Liability regimes for AI, published by Ege Erdil on August 19, 2024 on LessWrong. For many products, we face a choice of who to hold liable for harms that would not have occurred if not for the existence of the product. For instance, if a person uses a gun in a school shooting that kills a dozen people, there are many legal persons who in principle could be held liable for the harm: 1. The shooter themselves, for obvious reasons. 2. The shop that sold the shooter the weapon. 3. The company that designs and manufactures the weapon. Which one of these is the best? I'll offer a brief and elementary economic analysis of how this decision should be made in this post. The important concepts from economic theory to understand here are Coasean bargaining and the problem of the judgment-proof defendant. Coasean bargaining Let's start with Coaesean bargaining: in short, this idea says that regardless of who the legal system decides to hold liable for a harm, the involved parties can, under certain conditions, slice the harm arbitrarily among themselves by contracting and reach an economically efficient outcome. Under these conditions and assuming no transaction costs, it doesn't matter who the government decides to hold liable for a harm; it's the market that will ultimately decide how the liability burden is divided up. For instance, if we decide to hold shops liable for selling guns to people who go on to use the guns in acts of violence, the shops could demand that prospective buyers purchase insurance on the risk of them committing a criminal act. The insurance companies could then analyze who is more or less likely to engage in such an act of violence and adjust premiums accordingly, or even refuse to offer it altogether to e.g. people with previous criminal records, which would make guns less accessible overall (because there's a background risk of anyone committing a violent act using a gun) and also differentially less accessible to those seen as more likely to become violent criminals. In other words, we don't lose the ability to deter individuals by deciding to impose the liability on other actors in the chain, because they can simply find ways of passing on the cost. The judgment-proof defendant However, what if we imagine imposing the liability on individuals instead? We might naively think that there's nothing wrong, because anyone who used a gun in a violent act would be required to pay compensation to the victims which in principle could be set high enough to deter offenses even by wealthy people. However, the problem we run into in this case is that most school shooters have little in the way of assets and certainly not enough to compensate the victims and the rest of the world for all the harm that they have caused. In other words, they are judgment-proof: the best we can do when we catch them is put them in jail or execute them. In these cases, Coaesean bargaining breaks down. We can try to recover something like the previous solution by mandating such people buy civil or criminal insurance by law, so that they are no longer judgment-proof because the insurance company has big coffers to pay out large settlements if necessary, and also the incentive to turn away people who seem like risky customers. However, law is not magic, and someone who refuses to follow this law would still in the end be judgment-proof. We can see this in the following example: suppose that the shooter doesn't legally purchase the gun from the shop but steals it instead. Given that the shop will not be held liable for anything, it's only in their interest to invest in security for ordinary business reasons, but they have no incentive to take additional precautions beyond what make sense for e.g. laptop stores. Because the shooter obtains the gun illegally, they can then go and carry out...