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Comparing minds and machines: implications for financial stability

Summary:
Marcus Buckmann, Andy Haldane and Anne Caroline Hüser in this Bank of England paper review how artificial intelligence/machine learning is impacting the financial system. More importantly, they point how the mind and machine can combine to deliver better outcomes for the financial system: Is human or artificial intelligence more conducive to a stable financial system? To answer this question, we compare human and artificial intelligence with respect to several facets of their decision-making behaviour. On that basis, we characterise possibilities and challenges in designing partnerships that combine the strengths of both minds and machines. Leveraging on those insights, we explain how the differences in human and artificial intelligence have driven the usage of new techniques in

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Marcus Buckmann, Andy Haldane and Anne Caroline Hüser in this Bank of England paper review how artificial intelligence/machine learning is impacting the financial system.

More importantly, they point how the mind and machine can combine to deliver better outcomes for the financial system:

Is human or artificial intelligence more conducive to a stable financial system? To answer this question, we compare human and artificial intelligence with respect to several facets of their decision-making behaviour. On that basis, we characterise possibilities and challenges in designing partnerships that combine the strengths of both minds and machines. Leveraging on those insights, we explain how the differences in human and artificial intelligence have driven the usage of new techniques in financial markets, regulation, supervision, and policy making and discuss their potential impact on financial stability. Finally, we describe how effective mind-machine partnerships might be able to reduce systemic risks.

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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