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RESEARCH
How artificial intelligence is transforming the world
Darrell M. West and John R. Allen

April 24, 2018

Artificial intelligence (AI) is a wide-ranging tool that enables people to rethink how we integrate
information, analyze data, and use the resulting insights to improve decision making—and already it is
transforming every walk of life. In this report, Darrell West and John Allen discuss AI’s application across
a variety of sectors, address issues in its development, and offer recommendations for getting the most
out of AI while still protecting important human values.

Table of Contents
I. Qualities of artificial intelligence
II. Applications in diverse sectors
III. Policy, regulatory, and ethical issues
IV. Recommendations
V. Conclusion

Most people are not very familiar with the concept of artificial intelligence (AI). As an
illustration, when 1,500 senior business leaders in the United States in 2017 were
asked about AI, only 17 percent said they were familiar with it. 1 (#_edn1) A number of
them were not sure what it was or how it would affect their particular companies. They
understood there was considerable potential for altering business processes, but were
not clear how AI could be deployed within their own organizations.

Despite its widespread lack of familiarity, AI is a technology that is transforming every

walk of life. It is a wide-ranging tool that enables people to rethink how we integrate
information, analyze data, and use the resulting insights to improve decisionmaking.
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Our hope through this comprehensive overview is to explain AI to an audience of

policymakers, opinion leaders, and interested observers, and demonstrate how AI
already is altering the world and raising important questions for society, the economy,
and governance.

In this paper, we discuss novel applications in finance, national security, health care,
criminal justice, transportation, and smart cities, and address issues such as data
access problems, algorithmic bias, AI ethics and transparency, and legal liability for AI
decisions. We contrast the regulatory approaches of the U.S. and European Union, and
close by making a number of recommendations for getting the most out of AI while still
protecting important human values. 2

In order to maximize AI benefits, we recommend nine steps for going forward:

Encourage greater data access for researchers without compromising users’
personal privacy,
invest more government funding in unclassified AI research,
promote new models of digital education and AI workforce development so
employees have the skills needed in the 21st-century economy,
create a federal AI advisory committee to make policy recommendations,
engage with state and local officials so they enact effective policies,
regulate broad AI principles rather than specific algorithms,
take bias complaints seriously so AI does not replicate historic injustice, unfairness,
or discrimination in data or algorithms,
maintain mechanisms for human oversight and control, and
penalize malicious AI behavior and promote cybersecurity.

CHAPTER I
Qualities of artificial intelligence
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Although there is no uniformly agreed upon definition, AI generally is thought to refer

to “machines that respond to stimulation consistent with traditional responses from
humans, given the human capacity for contemplation, judgment and
intention.” 3 According to researchers Shubhendu and Vijay, these software systems
“make decisions which normally require [a] human level of expertise” and help people
anticipate problems or deal with issues as they come up. 4 As such, they operate in an
intentional, intelligent, and adaptive manner.

Intentionality

Artificial intelligence algorithms are designed to make decisions, often using real-time
data. They are unlike passive machines that are capable only of mechanical or
predetermined responses. Using sensors, digital data, or remote inputs, they combine
information from a variety of different sources, analyze the material instantly, and act
on the insights derived from those data. With massive improvements in storage
systems, processing speeds, and analytic techniques, they are capable of tremendous
sophistication in analysis and decisionmaking.

Artificial intelligence is already altering the world and raising important questions for
society, the economy, and governance.

Intelligence

AI generally is undertaken in conjunction with machine learning and data analytics. 5

Machine learning takes data and looks for underlying trends. If it spots something that
is relevant for a practical problem, software designers can take that knowledge and
use it to analyze specific issues. All that is required are data that are sufficiently robust
that algorithms can discern useful patterns. Data can come in the form of digital
information, satellite imagery, visual information, text, or unstructured data.

Adaptability

AI systems have the ability to learn and adapt as they make decisions. In the
transportation area, for example, semi-autonomous vehicles have tools that let drivers
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and vehicles know about upcoming congestion, potholes, highway construction, or

other possible traffic impediments. Vehicles can take advantage of the experience of
other vehicles on the road, without human involvement, and the entire corpus of their
achieved “experience” is immediately and fully transferable to other similarly
configured vehicles. Their advanced algorithms, sensors, and cameras incorporate
experience in current operations, and use dashboards and visual displays to present
information in real time so human drivers are able to make sense of ongoing traffic and
vehicular conditions. And in the case of fully autonomous vehicles, advanced systems
can completely control the car or truck, and make all the navigational decisions.

CHAPTER II
Applications in diverse sectors

AI is not a futuristic vision, but rather something that is here today and being
integrated with and deployed into a variety of sectors. This includes fields such as
finance, national security, health care, criminal justice, transportation, and smart cities.
There are numerous examples where AI already is making an impact on the world and
augmenting human capabilities in significant ways. 6

One of the reasons for the growing role of AI is the tremendous opportunities for
economic development that it presents. A project undertaken by
PriceWaterhouseCoopers estimated that “artificial intelligence technologies could
increase global GDP by $15.7 trillion, a full 14%, by 2030.” 7 That includes advances of
$7 trillion in China, $3.7 trillion in North America, $1.8 trillion in Northern Europe, $1.2
trillion for Africa and Oceania, $0.9 trillion in the rest of Asia outside of China, $0.7
trillion in Southern Europe, and $0.5 trillion in Latin America. China is making rapid
strides because it has set a national goal of investing $150 billion in AI and becoming
the global leader in this area by 2030.

Meanwhile, a McKinsey Global Institute study of China found that “AI-led automation
can give the Chinese economy a productivity injection that would add 0.8 to 1.4
percentage points to GDP growth annually, depending on the speed of adoption.” 8
Although its authors found that China currently lags the United States and the United
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Kingdom in AI deployment, the sheer size of its AI market gives that country
tremendous opportunities for pilot testing and future development.

Finance

Investments in financial AI in the United States tripled between 2013 and 2014 to a
total of $12.2 billion. 9 According to observers in that sector, “Decisions about loans
are now being made by software that can take into account a variety of finely parsed
data about a borrower, rather than just a credit score and a background check.” 10 In
addition, there are so-called robo-advisers that “create personalized investment
portfolios, obviating the need for stockbrokers and financial advisers.” 11 These
advances are designed to take the emotion out of investing and undertake decisions
based on analytical considerations, and make these choices in a matter of minutes.

A prominent example of this is taking place in stock exchanges, where high-frequency

trading by machines has replaced much of human decisionmaking. People submit buy
and sell orders, and computers match them in the blink of an eye without human
intervention. Machines can spot trading inefficiencies or market differentials on a very
small scale and execute trades that make money according to investor instructions. 12
Powered in some places by advanced computing, these tools have much greater
capacities for storing information because of their emphasis not on a zero or a one,
but on “quantum bits” that can store multiple values in each location. 13 That
dramatically increases storage capacity and decreases processing times.

Fraud detection represents another way AI is helpful in financial systems. It sometimes

is difficult to discern fraudulent activities in large organizations, but AI can identify
abnormalities, outliers, or deviant cases requiring additional investigation. That helps
managers find problems early in the cycle, before they reach dangerous levels. 14

National security

AI plays a substantial role in national defense. Through its Project Maven, the
American military is deploying AI “to sift through the massive troves of data and video
captured by surveillance and then alert human analysts of patterns or when there is
abnormal or suspicious activity.” 15 According to Deputy Secretary of Defense Patrick
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Shanahan, the goal of emerging technologies in this area is “to meet our warfighters’
needs and to increase [the] speed and agility [of] technology development and
procurement.” 16

Artificial intelligence will accelerate the traditional process of warfare so

rapidly that a new term has been coined: hyperwar.

The big data analytics associated with AI will profoundly affect intelligence analysis, as
massive amounts of data are sifted in near real time—if not eventually in real time—
thereby providing commanders and their staffs a level of intelligence analysis and
productivity heretofore unseen. Command and control will similarly be affected as
human commanders delegate certain routine, and in special circumstances, key
decisions to AI platforms, reducing dramatically the time associated with the decision
and subsequent action. In the end, warfare is a time competitive process, where the
side able to decide the fastest and move most quickly to execution will generally
prevail. Indeed, artificially intelligent intelligence systems, tied to AI-assisted command
and control systems, can move decision support and decisionmaking to a speed vastly
superior to the speeds of the traditional means of waging war. So fast will be this
process, especially if coupled to automatic decisions to launch artificially intelligent
autonomous weapons systems capable of lethal outcomes, that a new term has been
coined specifically to embrace the speed at which war will be waged: hyperwar.

While the ethical and legal debate is raging over whether America will ever wage war
with artificially intelligent autonomous lethal systems, the Chinese and Russians are
not nearly so mired in this debate, and we should anticipate our need to defend
against these systems operating at hyperwar speeds. The challenge in the West of
where to position “humans in the loop” in a hyperwar scenario will ultimately dictate
the West’s capacity to be competitive in this new form of conflict. 17

Just as AI will profoundly affect the speed of warfare, the proliferation of zero day or
zero second cyber threats as well as polymorphic malware will challenge even the
most sophisticated signature-based cyber protection. This forces significant
improvement to existing cyber defenses. Increasingly, vulnerable systems are
migrating, and will need to shift to a layered approach to cybersecurity with cloud-
based, cognitive AI platforms. This approach moves the community toward a
“thinking” defensive capability that can defend networks through constant training on
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known threats. This capability includes DNA-level analysis of heretofore unknown

code, with the possibility of recognizing and stopping inbound malicious code by
recognizing a string component of the file. This is how certain key U.S.-based systems
stopped the debilitating “WannaCry” and “Petya” viruses.

Preparing for hyperwar and defending critical cyber networks must become a high
priority because China, Russia, North Korea, and other countries are putting
substantial resources into AI. In 2017, China’s State Council issued a plan for the
country to “build a domestic industry worth almost $150 billion” by 2030. 18 As an
example of the possibilities, the Chinese search firm Baidu has pioneered a facial
recognition application that finds missing people. In addition, cities such as Shenzhen
are providing up to $1 million to support AI labs. That country hopes AI will provide
security, combat terrorism, and improve speech recognition programs. 19 The dual-use
nature of many AI algorithms will mean AI research focused on one sector of society
can be rapidly modified for use in the security sector as well. 20

Health care

AI tools are helping designers improve computational sophistication in health care. For
example, Merantix is a German company that applies deep learning to medical issues.
It has an application in medical imaging that “detects lymph nodes in the human body
in Computer Tomography (CT) images.” 21 According to its developers, the key is
labeling the nodes and identifying small lesions or growths that could be problematic.
Humans can do this, but radiologists charge $100 per hour and may be able to
carefully read only four images an hour. If there were 10,000 images, the cost of this
process would be $250,000, which is prohibitively expensive if done by humans.

What deep learning can do in this situation is train computers on data sets to learn
what a normal-looking versus an irregular-appearing lymph node is. After doing that
through imaging exercises and honing the accuracy of the labeling, radiological
imaging specialists can apply this knowledge to actual patients and determine the
extent to which someone is at risk of cancerous lymph nodes. Since only a few are
likely to test positive, it is a matter of identifying the unhealthy versus healthy node.

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AI has been applied to congestive heart failure as well, an illness that afflicts 10
percent of senior citizens and costs $35 billion each year in the United States. AI tools
are helpful because they “predict in advance potential challenges ahead and allocate
resources to patient education, sensing, and proactive interventions that keep patients
out of the hospital.” 22

Criminal justice

AI is being deployed in the criminal justice area. The city of Chicago has developed an
AI-driven “Strategic Subject List” that analyzes people who have been arrested for
their risk of becoming future perpetrators. It ranks 400,000 people on a scale of 0 to
500, using items such as age, criminal activity, victimization, drug arrest records, and
gang affiliation. In looking at the data, analysts found that youth is a strong predictor of
violence, being a shooting victim is associated with becoming a future perpetrator,
gang affiliation has little predictive value, and drug arrests are not significantly
associated with future criminal activity. 23

Judicial experts claim AI programs reduce human bias in law enforcement and leads to
a fairer sentencing system. R Street Institute Associate Caleb Watney writes:

Empirically grounded questions of predictive risk analysis play to the

strengths of machine learning, automated reasoning and other forms of AI.
One machine-learning policy simulation concluded that such programs
could be used to cut crime up to 24.8 percent with no change in jailing
rates, or reduce jail populations by up to 42 percent with no increase in
crime rates. 24

However, critics worry that AI algorithms represent “a secret system to punish citizens
for crimes they haven’t yet committed. The risk scores have been used numerous
times to guide large-scale roundups.” 25 The fear is that such tools target people of
color unfairly and have not helped Chicago reduce the murder wave that has plagued
it in recent years.

Despite these concerns, other countries are moving ahead with rapid deployment in
this area. In China, for example, companies already have “considerable resources and
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access to voices, faces and other biometric data in vast quantities, which would help
them develop their technologies.” 26 New technologies make it possible to match
images and voices with other types of information, and to use AI on these combined
data sets to improve law enforcement and national security. Through its “Sharp Eyes”
program, Chinese law enforcement is matching video images, social media activity,
online purchases, travel records, and personal identity into a “police cloud.” This
integrated database enables authorities to keep track of criminals, potential law-
breakers, and terrorists. 27 Put differently, China has become the world’s leading AI-
powered surveillance state.

Transportation

Transportation represents an area where AI and machine learning are producing major
innovations. Research by Cameron Kerry and Jack Karsten of the Brookings Institution
has found that over $80 billion was invested in autonomous vehicle technology
between August 2014 and June 2017. Those investments include applications both for
autonomous driving and the core technologies vital to that sector. 28

Autonomous vehicles—cars, trucks, buses, and drone delivery systems—use

advanced technological capabilities. Those features include automated vehicle
guidance and braking, lane-changing systems, the use of cameras and sensors for
collision avoidance, the use of AI to analyze information in real time, and the use of
high-performance computing and deep learning systems to adapt to new
circumstances through detailed maps. 29

Light detection and ranging systems (LIDARs) and AI are key to navigation and
collision avoidance. LIDAR systems combine light and radar instruments. They are
mounted on the top of vehicles that use imaging in a 360-degree environment from a
radar and light beams to measure the speed and distance of surrounding objects.
Along with sensors placed on the front, sides, and back of the vehicle, these
instruments provide information that keeps fast-moving cars and trucks in their own
lane, helps them avoid other vehicles, applies brakes and steering when needed, and
does so instantly so as to avoid accidents.

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Advanced software enables cars to learn from the experiences of other

vehicles on the road and adjust their guidance systems as weather, driving,
or road conditions change. This means that software is the key—not the
physical car or truck itself.

Since these cameras and sensors compile a huge amount of information and need to
process it instantly to avoid the car in the next lane, autonomous vehicles require high-
performance computing, advanced algorithms, and deep learning systems to adapt to
new scenarios. This means that software is the key, not the physical car or truck
itself. 30 Advanced software enables cars to learn from the experiences of other
vehicles on the road and adjust their guidance systems as weather, driving, or road
conditions change. 31

Ride-sharing companies are very interested in autonomous vehicles. They see

advantages in terms of customer service and labor productivity. All of the major ride-
sharing companies are exploring driverless cars. The surge of car-sharing and taxi
services—such as Uber and Lyft in the United States, Daimler’s Mytaxi and Hailo
service in Great Britain, and Didi Chuxing in China—demonstrate the opportunities of
this transportation option. Uber recently signed an agreement to purchase 24,000
autonomous cars from Volvo for its ride-sharing service. 32

However, the ride-sharing firm suffered a setback in March 2018 when one of its
autonomous vehicles in Arizona hit and killed a pedestrian. Uber and several auto
manufacturers immediately suspended testing and launched investigations into what
went wrong and how the fatality could have occurred. 33 Both industry and consumers
want reassurance that the technology is safe and able to deliver on its stated
promises. Unless there are persuasive answers, this accident could slow AI
advancements in the transportation sector.

Smart cities

Metropolitan governments are using AI to improve urban service delivery. For

example, according to Kevin Desouza, Rashmi Krishnamurthy, and Gregory Dawson:

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The Cincinnati Fire Department is using data analytics to optimize medical

emergency responses. The new analytics system recommends to the
dispatcher an appropriate response to a medical emergency call—whether
a patient can be treated on-site or needs to be taken to the hospital—by
taking into account several factors, such as the type of call, location,
weather, and similar calls. 34

Since it fields 80,000 requests each year, Cincinnati officials are deploying this
technology to prioritize responses and determine the best ways to handle
emergencies. They see AI as a way to deal with large volumes of data and figure out
efficient ways of responding to public requests. Rather than address service issues in
an ad hoc manner, authorities are trying to be proactive in how they provide urban
services.

Cincinnati is not alone. A number of metropolitan areas are adopting smart city
applications that use AI to improve service delivery, environmental planning, resource
management, energy utilization, and crime prevention, among other things. For its
smart cities index, the magazine Fast Company ranked American locales and found
Seattle, Boston, San Francisco, Washington, D.C., and New York City as the top
adopters. Seattle, for example, has embraced sustainability and is using AI to manage
energy usage and resource management. Boston has launched a “City Hall To Go” that
makes sure underserved communities receive needed public services. It also has
deployed “cameras and inductive loops to manage traffic and acoustic sensors to
identify gun shots.” San Francisco has certified 203 buildings as meeting LEED
sustainability standards. 35

Through these and other means, metropolitan areas are leading the country in the
deployment of AI solutions. Indeed, according to a National League of Cities report, 66
percent of American cities are investing in smart city technology. Among the top
applications noted in the report are “smart meters for utilities, intelligent traffic signals,
e-governance applications, Wi-Fi kiosks, and radio frequency identification sensors in
pavement.” 36

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CHAPTER III
Policy, regulatory, and ethical issues

These examples from a variety of sectors demonstrate how AI is transforming many

walks of human existence. The increasing penetration of AI and autonomous devices
into many aspects of life is altering basic operations and decisionmaking within
organizations, and improving efficiency and response times.

At the same time, though, these developments raise important policy, regulatory, and
ethical issues. For example, how should we promote data access? How do we guard
against biased or unfair data used in algorithms? What types of ethical principles are
introduced through software programming, and how transparent should designers be
about their choices? What about questions of legal liability in cases where algorithms
cause harm? 37

The increasing penetration of AI into many aspects of life is altering decisionmaking

within organizations and improving efficiency. At the same time, though, these
developments raise important policy, regulatory, and ethical issues.

Data access problems

The key to getting the most out of AI is having a “data-friendly ecosystem with unified
standards and cross-platform sharing.” AI depends on data that can be analyzed in
real time and brought to bear on concrete problems. Having data that are “accessible
for exploration” in the research community is a prerequisite for successful AI
development. 38

According to a McKinsey Global Institute study, nations that promote open data
sources and data sharing are the ones most likely to see AI advances. In this regard,
the United States has a substantial advantage over China. Global ratings on data
openness show that U.S. ranks eighth overall in the world, compared to 93 for
China. 39

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But right now, the United States does not have a coherent national data strategy. There
are few protocols for promoting research access or platforms that make it possible to
gain new insights from proprietary data. It is not always clear who owns data or how
much belongs in the public sphere. These uncertainties limit the innovation economy
and act as a drag on academic research. In the following section, we outline ways to
improve data access for researchers.

Biases in data and algorithms

In some instances, certain AI systems are thought to have enabled discriminatory or

biased practices. 40 For example, Airbnb has been accused of having homeowners on
its platform who discriminate against racial minorities. A research project undertaken
by the Harvard Business School found that “Airbnb users with distinctly African
American names were roughly 16 percent less likely to be accepted as guests than
those with distinctly white names.” 41

Racial issues also come up with facial recognition software. Most such systems
operate by comparing a person’s face to a range of faces in a large database. As
pointed out by Joy Buolamwini of the Algorithmic Justice League, “If your facial
recognition data contains mostly Caucasian faces, that’s what your program will learn
to recognize.” 42 Unless the databases have access to diverse data, these programs
perform poorly when attempting to recognize African-American or Asian-American
features.

Many historical data sets reflect traditional values, which may or may not represent the
preferences wanted in a current system. As Buolamwini notes, such an approach risks
repeating inequities of the past:

The rise of automation and the increased reliance on algorithms for high-
stakes decisions such as whether someone get insurance or not, your
likelihood to default on a loan or somebody’s risk of recidivism means this is
something that needs to be addressed. Even admissions decisions are
increasingly automated—what school our children go to and what
opportunities they have. We don’t have to bring the structural inequalities of
the past into the future we create. 43
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AI ethics and transparency

Algorithms embed ethical considerations and value choices into program decisions. As
such, these systems raise questions concerning the criteria used in automated
decisionmaking. Some people want to have a better understanding of how algorithms
function and what choices are being made. 44

In the United States, many urban schools use algorithms for enrollment decisions
based on a variety of considerations, such as parent preferences, neighborhood
qualities, income level, and demographic background. According to Brookings
researcher Jon Valant, the New Orleans–based Bricolage Academy “gives priority to
economically disadvantaged applicants for up to 33 percent of available seats. In
practice, though, most cities have opted for categories that prioritize siblings of
current students, children of school employees, and families that live in school’s broad
geographic area.” 45 Enrollment choices can be expected to be very different when
considerations of this sort come into play.

Depending on how AI systems are set up, they can facilitate the redlining of mortgage
applications, help people discriminate against individuals they don’t like, or help
screen or build rosters of individuals based on unfair criteria. The types of
considerations that go into programming decisions matter a lot in terms of how the
systems operate and how they affect customers. 46

For these reasons, the EU is implementing the General Data Protection Regulation
(GDPR) in May 2018. The rules specify that people have “the right to opt out of
personally tailored ads” and “can contest ‘legal or similarly significant’ decisions made
by algorithms and appeal for human intervention” in the form of an explanation of how
the algorithm generated a particular outcome. Each guideline is designed to ensure
the protection of personal data and provide individuals with information on how the
“black box” operates. 47

Legal liability

There are questions concerning the legal liability of AI systems. If there are harms or
infractions (or fatalities in the case of driverless cars), the operators of the algorithm
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likely will fall under product liability rules. A body of case law has shown that the
situation’s facts and circumstances determine liability and influence the kind of
penalties that are imposed. Those can range from civil fines to imprisonment for major
harms. 48 The Uber-related fatality in Arizona will be an important test case for legal
liability. The state actively recruited Uber to test its autonomous vehicles and gave the
company considerable latitude in terms of road testing. It remains to be seen if there
will be lawsuits in this case and who is sued: the human backup driver, the state of
Arizona, the Phoenix suburb where the accident took place, Uber, software
developers, or the auto manufacturer. Given the multiple people and organizations
involved in the road testing, there are many legal questions to be resolved.

In non-transportation areas, digital platforms often have limited liability for what
happens on their sites. For example, in the case of Airbnb, the firm “requires that
people agree to waive their right to sue, or to join in any class-action lawsuit or class-
action arbitration, to use the service.” By demanding that its users sacrifice basic
rights, the company limits consumer protections and therefore curtails the ability of
people to fight discrimination arising from unfair algorithms. 49 But whether the
principle of neutral networks holds up in many sectors is yet to be determined on a
widespread basis.

CHAPTER IV
Recommendations

In order to balance innovation with basic human values, we propose a number of

recommendations for moving forward with AI. This includes improving data access,
increasing government investment in AI, promoting AI workforce development,
creating a federal advisory committee, engaging with state and local officials to ensure
they enact effective policies, regulating broad objectives as opposed to specific
algorithms, taking bias seriously as an AI issue, maintaining mechanisms for human
control and oversight, and penalizing malicious behavior and promoting cybersecurity.

Improving data access

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The United States should develop a data strategy that promotes innovation and
consumer protection. Right now, there are no uniform standards in terms of data
access, data sharing, or data protection. Almost all the data are proprietary in nature
and not shared very broadly with the research community, and this limits innovation
and system design. AI requires data to test and improve its learning capacity. 50
Without structured and unstructured data sets, it will be nearly impossible to gain the
full benefits of artificial intelligence.

In general, the research community needs better access to government and business
data, although with appropriate safeguards to make sure researchers do not misuse
data in the way Cambridge Analytica did with Facebook information. There is a variety
of ways researchers could gain data access. One is through voluntary agreements
with companies holding proprietary data. Facebook, for example, recently announced
a partnership with Stanford economist Raj Chetty to use its social media data to
explore inequality. 51 As part of the arrangement, researchers were required to
undergo background checks and could only access data from secured sites in order to
protect user privacy and security.

In the U.S., there are no uniform standards in terms of data access, data
sharing, or data protection. Almost all the data are proprietary in nature and
not shared very broadly with the research community, and this limits
innovation and system design.

Google long has made available search results in aggregated form for researchers and
the general public. Through its “Trends” site, scholars can analyze topics such as
interest in Trump, views about democracy, and perspectives on the overall
economy. 52 (#_edn52) That helps people track movements in public interest and
identify topics that galvanize the general public.

Twitter makes much of its tweets available to researchers through application

programming interfaces, commonly referred to as APIs. These tools help people
outside the company build application software and make use of data from its social
media platform. They can study patterns of social media communications and see how
people are commenting on or reacting to current events.

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In some sectors where there is a discernible public benefit, governments can facilitate
collaboration by building infrastructure that shares data. For example, the National
Cancer Institute has pioneered a data-sharing protocol where certified researchers
can query health data it has using de-identified information drawn from clinical data,
claims information, and drug therapies. That enables researchers to evaluate efficacy
and effectiveness, and make recommendations regarding the best medical
approaches, without compromising the privacy of individual patients.

There could be public-private data partnerships that combine government and

business data sets to improve system performance. For example, cities could integrate
information from ride-sharing services with its own material on social service
locations, bus lines, mass transit, and highway congestion to improve transportation.
That would help metropolitan areas deal with traffic tie-ups and assist in highway and
mass transit planning.

Some combination of these approaches would improve data access for researchers,
the government, and the business community, without impinging on personal privacy.
As noted by Ian Buck, the vice president of NVIDIA, “Data is the fuel that drives the AI
engine. The federal government has access to vast sources of information. Opening
access to that data will help us get insights that will transform the U.S. economy.” 53
Through its Data.gov portal, the federal government already has put over 230,000
data sets into the public domain, and this has propelled innovation and aided
improvements in AI and data analytic technologies. 54 The private sector also needs to
facilitate research data access so that society can achieve the full benefits of artificial
intelligence.

Increase government investment in AI

According to Greg Brockman, the co-founder of OpenAI, the U.S. federal government
invests only $1.1 billion in non-classified AI technology. 55 That is far lower than the
amount being spent by China or other leading nations in this area of research. That
shortfall is noteworthy because the economic payoffs of AI are substantial. In order to
boost economic development and social innovation, federal officials need to increase
investment in artificial intelligence and data analytics. Higher investment is likely to
pay for itself many times over in economic and social benefits. 56

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Promote digital education and workforce development

As AI applications accelerate across many sectors, it is vital that we reimagine our

educational institutions for a world where AI will be ubiquitous and students need a
different kind of training than they currently receive. Right now, many students do not
receive instruction in the kinds of skills that will be needed in an AI-dominated
landscape. For example, there currently are shortages of data scientists, computer
scientists, engineers, coders, and platform developers. These are skills that are in
short supply; unless our educational system generates more people with these
capabilities, it will limit AI development.

For these reasons, both state and federal governments have been investing in AI
human capital. For example, in 2017, the National Science Foundation funded over
6,500 graduate students in computer-related fields and has launched several new
initiatives designed to encourage data and computer science at all levels from pre-K to
higher and continuing education. 57 The goal is to build a larger pipeline of AI and data
analytic personnel so that the United States can reap the full advantages of the
knowledge revolution.

But there also needs to be substantial changes in the process of learning itself. It is not
just technical skills that are needed in an AI world but skills of critical reasoning,
collaboration, design, visual display of information, and independent thinking, among
others. AI will reconfigure how society and the economy operate, and there needs to
be “big picture” thinking on what this will mean for ethics, governance, and societal
impact. People will need the ability to think broadly about many questions and
integrate knowledge from a number of different areas.

One example of new ways to prepare students for a digital future is IBM’s Teacher
Advisor program, utilizing Watson’s free online tools to help teachers bring the latest
knowledge into the classroom. They enable instructors to develop new lesson plans in
STEM and non-STEM fields, find relevant instructional videos, and help students get
the most out of the classroom. 58 As such, they are precursors of new educational
environments that need to be created.

Create a federal AI advisory committee

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Federal officials need to think about how they deal with artificial intelligence. As noted
previously, there are many issues ranging from the need for improved data access to
addressing issues of bias and discrimination. It is vital that these and other concerns
be considered so we gain the full benefits of this emerging technology.

In order to move forward in this area, several members of Congress have introduced
the “Future of Artificial Intelligence Act,” a bill designed to establish broad policy and
legal principles for AI. It proposes the secretary of commerce create a federal advisory
committee on the development and implementation of artificial intelligence. The
legislation provides a mechanism for the federal government to get advice on ways to
promote a “climate of investment and innovation to ensure the global competitiveness
of the United States,” “optimize the development of artificial intelligence to address the
potential growth, restructuring, or other changes in the United States workforce,”
“support the unbiased development and application of artificial intelligence,” and
“protect the privacy rights of individuals.” 59

Among the specific questions the committee is asked to address include the following:
competitiveness, workforce impact, education, ethics training, data sharing,
international cooperation, accountability, machine learning bias, rural impact,
government efficiency, investment climate, job impact, bias, and consumer impact.
The committee is directed to submit a report to Congress and the administration 540
days after enactment regarding any legislative or administrative action needed on AI.

This legislation is a step in the right direction, although the field is moving so rapidly
that we would recommend shortening the reporting timeline from 540 days to 180
days. Waiting nearly two years for a committee report will certainly result in missed
opportunities and a lack of action on important issues. Given rapid advances in the
field, having a much quicker turnaround time on the committee analysis would be quite
beneficial.

Engage with state and local officials

States and localities also are taking action on AI. For example, the New York City
Council unanimously passed a bill that directed the mayor to form a taskforce that
would “monitor the fairness and validity of algorithms used by municipal agencies.” 60
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The city employs algorithms to “determine if a lower bail will be assigned to an

indigent defendant, where firehouses are established, student placement for public
schools, assessing teacher performance, identifying Medicaid fraud and determine
where crime will happen next.” 61

According to the legislation’s developers, city officials want to know how these
algorithms work and make sure there is sufficient AI transparency and accountability.
In addition, there is concern regarding the fairness and biases of AI algorithms, so the
taskforce has been directed to analyze these issues and make recommendations
regarding future usage. It is scheduled to report back to the mayor on a range of AI
policy, legal, and regulatory issues by late 2019.

Some observers already are worrying that the taskforce won’t go far enough in holding
algorithms accountable. For example, Julia Powles of Cornell Tech and New York
University argues that the bill originally required companies to make the AI source
code available to the public for inspection, and that there be simulations of its
decisionmaking using actual data. After criticism of those provisions, however, former
Councilman James Vacca dropped the requirements in favor of a task force studying
these issues. He and other city officials were concerned that publication of proprietary
information on algorithms would slow innovation and make it difficult to find AI
vendors who would work with the city. 62 It remains to be seen how this local task
force will balance issues of innovation, privacy, and transparency.

Regulate broad objectives more than specific algorithms

The European Union has taken a restrictive stance on these issues of data collection
and analysis. 63 It has rules limiting the ability of companies from collecting data on
road conditions and mapping street views. Because many of these countries worry
that people’s personal information in unencrypted Wi-Fi networks are swept up in
overall data collection, the EU has fined technology firms, demanded copies of data,
and placed limits on the material collected. 64 This has made it more difficult for
technology companies operating there to develop the high-definition maps required
for autonomous vehicles.

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The GDPR being implemented in Europe place severe restrictions on the use of
artificial intelligence and machine learning. According to published guidelines,
“Regulations prohibit any automated decision that ‘significantly affects’ EU citizens.
This includes techniques that evaluates a person’s ‘performance at work, economic
situation, health, personal preferences, interests, reliability, behavior, location, or
movements.’” 65 In addition, these new rules give citizens the right to review how
digital services made specific algorithmic choices affecting people.

By taking a restrictive stance on issues of data collection and analysis, the

European Union is putting its manufacturers and software designers at a
significant disadvantage to the rest of the world.

If interpreted stringently, these rules will make it difficult for European software
designers (and American designers who work with European counterparts) to
incorporate artificial intelligence and high-definition mapping in autonomous vehicles.
Central to navigation in these cars and trucks is tracking location and movements.
Without high-definition maps containing geo-coded data and the deep learning that
makes use of this information, fully autonomous driving will stagnate in Europe.
Through this and other data protection actions, the European Union is putting its
manufacturers and software designers at a significant disadvantage to the rest of the
world.

It makes more sense to think about the broad objectives desired in AI and enact
policies that advance them, as opposed to governments trying to crack open the
“black boxes” and see exactly how specific algorithms operate. Regulating individual
algorithms will limit innovation and make it difficult for companies to make use of
artificial intelligence.

Take biases seriously

Bias and discrimination are serious issues for AI. There already have been a number of
cases of unfair treatment linked to historic data, and steps need to be undertaken to
make sure that does not become prevalent in artificial intelligence. Existing statutes
governing discrimination in the physical economy need to be extended to digital

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platforms. That will help protect consumers and build confidence in these systems as
a whole.

For these advances to be widely adopted, more transparency is needed in how AI

systems operate. Andrew Burt of Immuta argues, “The key problem confronting
predictive analytics is really transparency. We’re in a world where data science
operations are taking on increasingly important tasks, and the only thing holding them
back is going to be how well the data scientists who train the models can explain what
it is their models are doing.” 66

Maintaining mechanisms for human oversight and control

Some individuals have argued that there needs to be avenues for humans to exercise
oversight and control of AI systems. For example, Allen Institute for Artificial
Intelligence CEO Oren Etzioni argues there should be rules for regulating these
systems. First, he says, AI must be governed by all the laws that already have been
developed for human behavior, including regulations concerning “cyberbullying, stock
manipulation or terrorist threats,” as well as “entrap[ping] people into committing
crimes.” Second, he believes that these systems should disclose they are automated
systems and not human beings. Third, he states, “An A.I. system cannot retain or
disclose confidential information without explicit approval from the source of that
information.” 67 His rationale is that these tools store so much data that people have to
be cognizant of the privacy risks posed by AI.

In the same vein, the IEEE Global Initiative has ethical guidelines for AI and
autonomous systems. Its experts suggest that these models be programmed with
consideration for widely accepted human norms and rules for behavior. AI algorithms
need to take into effect the importance of these norms, how norm conflict can be
resolved, and ways these systems can be transparent about norm resolution. Software
designs should be programmed for “nondeception” and “honesty,” according to ethics
experts. When failures occur, there must be mitigation mechanisms to deal with the
consequences. In particular, AI must be sensitive to problems such as bias,
discrimination, and fairness. 68

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A group of machine learning experts claim it is possible to automate ethical

decisionmaking. Using the trolley problem as a moral dilemma, they ask the following
question: If an autonomous car goes out of control, should it be programmed to kill its
own passengers or the pedestrians who are crossing the street? They devised a
“voting-based system” that asked 1.3 million people to assess alternative scenarios,
summarized the overall choices, and applied the overall perspective of these
individuals to a range of vehicular possibilities. That allowed them to automate ethical
decisionmaking in AI algorithms, taking public preferences into account. 69 This
procedure, of course, does not reduce the tragedy involved in any kind of fatality,
such as seen in the Uber case, but it provides a mechanism to help AI developers
incorporate ethical considerations in their planning.

Penalize malicious behavior and promote cybersecurity

As with any emerging technology, it is important to discourage malicious treatment

designed to trick software or use it for undesirable ends. 70 This is especially
important given the dual-use aspects of AI, where the same tool can be used for
beneficial or malicious purposes. The malevolent use of AI exposes individuals and
organizations to unnecessary risks and undermines the virtues of the emerging
technology. This includes behaviors such as hacking, manipulating algorithms,
compromising privacy and confidentiality, or stealing identities. Efforts to hijack AI in
order to solicit confidential information should be seriously penalized as a way to deter
such actions. 71

In a rapidly changing world with many entities having advanced computing

capabilities, there needs to be serious attention devoted to cybersecurity. Countries
have to be careful to safeguard their own systems and keep other nations from
damaging their security. 72 According to the U.S. Department of Homeland Security, a
major American bank receives around 11 million calls a week at its service center. In
order to protect its telephony from denial of service attacks, it uses a “machine
learning-based policy engine [that] blocks more than 120,000 calls per month based
on voice firewall policies including harassing callers, robocalls and potential fraudulent
calls.” 73 This represents a way in which machine learning can help defend technology
systems from malevolent attacks.

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CHAPTER V
Conclusion

To summarize, the world is on the cusp of revolutionizing many sectors through

artificial intelligence and data analytics. There already are significant deployments in
finance, national security, health care, criminal justice, transportation, and smart cities
that have altered decisionmaking, business models, risk mitigation, and system
performance. These developments are generating substantial economic and social
benefits.

The world is on the cusp of revolutionizing many sectors through artificial

intelligence, but the way AI systems are developed need to be better understood due
to the major implications these technologies will have for society as a whole.

Yet the manner in which AI systems unfold has major implications for society as a
whole. It matters how policy issues are addressed, ethical conflicts are reconciled,
legal realities are resolved, and how much transparency is required in AI and data
analytic solutions. 74 Human choices about software development affect the way in
which decisions are made and the manner in which they are integrated into
organizational routines. Exactly how these processes are executed need to be better
understood because they will have substantial impact on the general public soon, and
for the foreseeable future. AI may well be a revolution in human affairs, and become
the single most influential human innovation in history.

Note: We appreciate the research assistance of Grace Gilberg, Jack Karsten, Hillary
Schaub, and Kristjan Tomasson on this project.

The Brookings Institution is a nonprofit organization devoted to independent research

and policy solutions. Its mission is to conduct high-quality, independent research and,
based on that research, to provide innovative, practical recommendations for
policymakers and the public. The conclusions and recommendations of any Brookings
publication are solely those of its author(s), and do not reflect the views of the
Institution, its management, or its other scholars.

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Support for this publication was generously provided by Amazon. Brookings

recognizes that the value it provides is in its absolute commitment to quality,
independence, and impact. Activities supported by its donors reflect this commitment.

John R. Allen is a member of the Board of Advisors of Amida Technology and on the
Board of Directors of Spark Cognition. Both companies work in fields discussed in this
piece.

(#_ednref1)

AUTHORS

Darrell M. West Senior Fellow - Governance Studies, Center for

Technology Innovation, Center for Effective Public Management, Douglas
Dillon Chair in Governmental Studies @

John R. Allen

Footnotes
1. Thomas Davenport, Jeff Loucks, and David Schatsky, “Bullish on the Business Value of
Cognitive” (Deloitte, 2017), p. 3 (www2.deloitte.com/us/en/pages/deloitte-
analytics/articles/cognitive-technology-adoption-survey.html).
2. Luke Dormehl, Thinking Machines: The Quest for Artificial Intelligence—and Where It’s
Taking Us Next (New York: Penguin–TarcherPerigee, 2017).
3. Shubhendu and Vijay, “Applicability of Artificial Intelligence in Different Fields of Life.”
4. Ibid.

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4/21/25, 1:39 PM How artificial intelligence is transforming the world

5. Andrew McAfee and Erik Brynjolfsson, Machine Platform Crowd: Harnessing Our
Digital Future (New York: Norton, 2017).
6. Portions of this paper draw on Darrell M. West, The Future of Work: Robots, AI, and
Automation, Brookings Institution Press, 2018.
7. PriceWaterhouseCoopers, “Sizing the Prize: What’s the Real Value of AI for Your
Business and How Can You Capitalise?” 2017.
8. Dominic Barton, Jonathan Woetzel, Jeongmin Seong, and Qinzheng Tian, “Artificial
Intelligence: Implications for China” (New York: McKinsey Global Institute, April 2017),
p. 1.
9. Nathaniel Popper, “Stocks and Bots,” New York Times Magazine, February 28, 2016.
10. Ibid.
11. Ibid.
12. Michael Lewis, Flash Boys: A Wall Street Revolt (New York: Norton, 2015).
13. Cade Metz, “In Quantum Computing Race, Yale Professors Battle Tech Giants,” New
York Times, November 14, 2017, p. B3.
14. Executive Office of the President, “Artificial Intelligence, Automation, and the
Economy,” December 2016, pp. 27-28.
15. Christian Davenport, “Future Wars May Depend as Much on Algorithms as on
Ammunition, Report Says,” Washington Post, December 3, 2017.
16. Ibid.
17. John R. Allen and Amir Husain, “On Hyperwar,” Naval Institute Proceedings, July 17,
2017, pp. 30-36.
18. Paul Mozur, “China Sets Goal to Lead in Artificial Intelligence,” New York Times, July
21, 2017, p. B1.
19. Paul Mozur and John Markoff, “Is China Outsmarting American Artificial Intelligence?”
New York Times, May 28, 2017.
20. Economist, “America v China: The Battle for Digital Supremacy,” March 15, 2018.
21. Rasmus Rothe, “Applying Deep Learning to Real-World Problems,” Medium, May 23,
2017.
22. Eric Horvitz, “Reflections on the Status and Future of Artificial Intelligence,” Testimony
before the U.S. Senate Subcommittee on Space, Science, and Competitiveness,
November 30, 2016, p. 5.

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4/21/25, 1:39 PM How artificial intelligence is transforming the world

23. Jeff Asher and Rob Arthur, “Inside the Algorithm That Tries to Predict Gun Violence in
Chicago,” New York Times Upshot, June 13, 2017.
24. Caleb Watney, “It’s Time for our Justice System to Embrace Artificial Intelligence,”
TechTank (blog), Brookings Institution, July 20, 2017.
25. Asher and Arthur, “Inside the Algorithm That Tries to Predict Gun Violence in Chicago.”
26. Paul Mozur and Keith Bradsher, “China’s A.I. Advances Help Its Tech Industry, and
State Security,” New York Times, December 3, 2017.
27. Simon Denyer, “China’s Watchful Eye,” Washington Post, January 7, 2018.
28. Cameron Kerry and Jack Karsten, “Gauging Investment in Self-Driving Cars,”
Brookings Institution, October 16, 2017.
29. Portions of this section are drawn from Darrell M. West, “Driverless Cars in China,
Europe, Japan, Korea, and the United States,” Brookings Institution, September 2016.
30. Ibid.
31. Yuming Ge, Xiaoman Liu, Libo Tang, and Darrell M. West, “Smart Transportation in
China and the United States,” Center for Technology Innovation, Brookings Institution,
December 2017.
32. Peter Holley, “Uber Signs Deal to Buy 24,000 Autonomous Vehicles from Volvo,”
Washington Post, November 20, 2017.
33. Daisuke Wakabayashi, “Self-Driving Uber Car Kills Pedestrian in Arizona, Where
Robots Roam,” New York Times, March 19, 2018.
34. Kevin Desouza, Rashmi Krishnamurthy, and Gregory Dawson, “Learning from Public
Sector Experimentation with Artificial Intelligence,” TechTank (blog), Brookings
Institution, June 23, 2017.
35. Boyd Cohen, “The 10 Smartest Cities in North America,” Fast Company, November 14,
2013.
36. Teena Maddox, “66% of US Cities Are Investing in Smart City Technology,”
TechRepublic, November 6, 2017.
37. Osonde Osoba and William Welser IV, “The Risks of Artificial Intelligence to Security
and the Future of Work” (Santa Monica, Calif.: RAND Corp., December 2017)
(www.rand.org/pubs/perspectives/PE237.html).
38. Ibid., p. 7.
39. Dominic Barton, Jonathan Woetzel, Jeongmin Seong, and Qinzheng Tian, “Artificial
Intelligence: Implications for China” (New York: McKinsey Global Institute, April 2017),
p. 7.

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40. Executive Office of the President, “Preparing for the Future of Artificial Intelligence,”
October 2016, pp. 30-31.
41. Elaine Glusac, “As Airbnb Grows, So Do Claims of Discrimination,” New York Times,
June 21, 2016.
42. “Joy Buolamwini,” Bloomberg Businessweek, July 3, 2017, p. 80.
43. Ibid.
44. Mark Purdy and Paul Daugherty, “Why Artificial Intelligence is the Future of Growth,”
Accenture, 2016.
45. Jon Valant, “Integrating Charter Schools and Choice-Based Education Systems,”
Brown Center Chalkboard blog, Brookings Institution, June 23, 2017.
46. Tucker, “‘A White Mask Worked Better.’”
47. Cliff Kuang, “Can A.I. Be Taught to Explain Itself?” New York Times Magazine,
November 21, 2017.
48. Yale Law School Information Society Project, “Governing Machine Learning,”
September 2017.
49. Katie Benner, “Airbnb Vows to Fight Racism, But Its Users Can’t Sue to Prompt
Fairness,” New York Times, June 19, 2016.
50. Executive Office of the President, “Artificial Intelligence, Automation, and the
Economy” and “Preparing for the Future of Artificial Intelligence.”
51. Nancy Scolar, “Facebook’s Next Project: American Inequality,” Politico, February 19,
2018.
52. Darrell M. West, “What Internet Search Data Reveals about Donald Trump’s First Year
in Office,” Brookings Institution policy report, January 17, 2018.
53. Ian Buck, “Testimony before the House Committee on Oversight and Government
Reform Subcommittee on Information Technology,” February 14, 2018.
54. Keith Nakasone, “Testimony before the House Committee on Oversight and
Government Reform Subcommittee on Information Technology,” March 7, 2018.
55. Greg Brockman, “The Dawn of Artificial Intelligence,” Testimony before U.S. Senate
Subcommittee on Space, Science, and Competitiveness, November 30, 2016.
56. Amir Khosrowshahi, “Testimony before the House Committee on Oversight and
Government Reform Subcommittee on Information Technology,” February 14, 2018.
57. James Kurose, “Testimony before the House Committee on Oversight and Government
Reform Subcommittee on Information Technology,” March 7, 2018.

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58. Stephen Noonoo, “Teachers Can Now Use IBM’s Watson to Search for Free Lesson
Plans,” EdSurge, September 13, 2017.
59. Congress.gov, “H.R. 4625 FUTURE of Artificial Intelligence Act of 2017,” December 12,
2017.
60. Elizabeth Zima, “Could New York City’s AI Transparency Bill Be a Model for the
Country?” Government Technology, January 4, 2018.
61. Ibid.
62. Julia Powles, “New York City’s Bold, Flawed Attempt to Make Algorithms Accountable,”
New Yorker, December 20, 2017.
63. Sheera Frenkel, “Tech Giants Brace for Europe’s New Data Privacy Rules,” New York
Times, January 28, 2018.
64. Claire Miller and Kevin O’Brien, “Germany’s Complicated Relationship with Google
Street View,” New York Times, April 23, 2013.
65. Cade Metz, “Artificial Intelligence is Setting Up the Internet for a Huge Clash with
Europe,” Wired, July 11, 2016.
66. Eric Siegel, “Predictive Analytics Interview Series: Andrew Burt,” Predictive Analytics
Times, June 14, 2017.
67. Oren Etzioni, “How to Regulate Artificial Intelligence,” New York Times, September 1,
2017.
68. “Ethical Considerations in Artificial Intelligence and Autonomous Systems,”
unpublished paper. IEEE Global Initiative, 2018.
69. Ritesh Noothigattu, Snehalkumar Gaikwad, Edmond Awad, Sohan Dsouza, Iyad
Rahwan, Pradeep Ravikumar, and Ariel Procaccia, “A Voting-Based System for Ethical
Decision Making,” Computers and Society, September 20, 2017
(www.media.mit.edu/publications/a-voting-based-system-for-ethical-decision-
making/).
70. Miles Brundage, et al., “The Malicious Use of Artificial Intelligence,” University of
Oxford unpublished paper, February 2018.
71. John Markoff, “As Artificial Intelligence Evolves, So Does Its Criminal Potential,” New
York Times, October 24, 2016, p. B3.
72. Economist, “The Challenger: Technopolitics,” March 17, 2018.
73. Douglas Maughan, “Testimony before the House Committee on Oversight and
Government Reform Subcommittee on Information Technology,” March 7, 2018.
74. Levi Tillemann and Colin McCormick, “Roadmapping a U.S.-German Agenda for
Artificial Intelligence Policy,” New American Foundation, March 2017.
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