Zimbabwe launches new gold-backed currency

by  Tyler Cowen in

Zimbabwe has introduced a new gold-backed currency called ZiG – the name stands for “Zimbabwe Gold”.

It is the latest attempt to stabilise an economy that has lurched from crisis to crisis for the past 25 years.

Unveiling the new notes, central bank governor John Mushayavanhu said the ZiG would be structured, and set at a market-determined exchange rate.

The ZiG replaces a Zimbabwean dollar, the RTGS, that had lost three-quarters of its value so far this year.

Annual inflation in March reached 55% – a seven-month high.

Zimbabweans have 21 days to exchange old, inflation-hit notes for the new currency.

However, the US dollar, which accounts for 85% of transactions, will remain legal tender and most people are likely to continue to prefer this…

He committed to ensuring that the amount of local currency in circulation was backed by equivalent value in precious minerals – mainly gold – or foreign exchange, in order to prevent the currency losing value like its predecessors.

Here is the full story, file under “less than fully credible.”  That said, I do think that many of the important monetary innovations of the future are likely to come in Africa.

Your Subsidies are Undercutting My Subsidies!

by  Alex Tabarrok in

NYTimes: Treasury officials say that they fear that elevated Chinese production targets are causing its firms to produce far more electric vehicles, batteries and solar panels than global markets can absorb, driving prices lower and disrupting production around the world. They fear that these spillovers will hurt businesses that are planning investments in the United States with tax credits and subsidies that were created through the Inflation Reduction Act of 2022, a law that is pumping more than $2 trillion into clean energy infrastructure.

Amazing that Yellen can say this with a straight face:

as an economist, it was her view that China could benefit if it stopped giving subsidies to firms that would fail without government support.

What should I ask Joe Stiglitz?

by  Tyler Cowen in

I will be having a Conversation with him, and please note this is the conversation I want to have, not the one you want me to have.  So what should I ask?  Note that Joe has a new book coming out The Road to Freedom: Economics and the Good Society.  That said, I also would like for the dialogue to cover Joe’s career more generally, starting with 1970 or so.

So what should I ask him?

Lockean homesteading for goats, bonus added

by  Tyler Cowen in

The mayor of an Italian island is attempting to solve an animal overpopulation problem with an unusual offer: free goats for anyone who can catch them.

Riccardo Gullo, the mayor of Alicudi, in Sicily’s Aeolian archipelago, introduced an “adopt-a-goat” program when the small island’s wild goat population grew to six times the human population of about 100.

Gullo said anyone who emails a request to the local government and pays a $17 “stamp fee” can take as many goats as they wish, as long as they transport them off the island within 15 days of approval.

“Anyone can make a request for a goat, it doesn’t have to be a farmer, and there are no restrictions on numbers,” he told The Guardian.

He said the scheme is currently available until April 10, but he will extend the deadline until the goat population is back down to a more manageable number.

The mayor told CNN that officials will not investigate the intentions of prospective goat owners, but “ideally, we would like to see people try to domesticate the animals rather than eat them.”

Here is the full story, via the excellent Samir Varma.

What should I ask Slavoj Žižek?

by  Tyler Cowen in

Yes, I will be doing another Conversation with him.  Here is the first one, in Norway with a live audience.  I am very much enjoying his new book Christian Atheism: How to Be a Real Materialist.  Slavoj is one of the very few CWT guests (can you guess the others?) who can handle pretty much any question about any area, and have something fresh to say in response.

So what should I ask him?

Friday assorted links

by  Tyler Cowen

1. Matt Lakeman on El Salvador, recommended.

2. Paxlovid not having a positive impact for the healthy and already-vaccinated.

3. Under what conditions will every Japanese person be named Sato by 2531?

4. Is “dark energy” weakening? And more from the NYT.

5. The Economist seeks a new economics writer.

6. How to lead coordinated research programs.  A  playbook.

7. A relatively positive view on how lenders are viewing Africa these days.

Algorithmic Collusion by Large Language Models

by  Tyler Cowen in

The rise of algorithmic pricing raises concerns of algorithmic collusion. We conduct experiments with algorithmic pricing agents based on Large Language Models (LLMs), and specifically GPT-4. We find that (1) LLM-based agents are adept at pricing tasks, (2) LLM-based pricing agents autonomously collude in oligopoly settings to the detriment of consumers, and (3) variation in seemingly innocuous phrases in LLM instructions (“prompts”) may increase collusion. These results extend to auction settings. Our findings underscore the need for antitrust regulation regarding algorithmic pricing, and uncover regulatory challenges unique to LLM-based pricing agents.

That is a new paper by Sara Fish, Yannai A. Gonczarowski, and Ran I. Shorrer.  The authors are running too quickly into their policy conclusion there (how about removing legal barriers to free entry in many cases? not worth a mention?), but nonetheless very interesting work.  Via Ethan Mollick.

Generative AI for economists

by  Tyler Cowen in

From Anton Korinek here is a recent paper:

Generative AI, in particular large language models (LLMs) such as ChatGPT, has the potential to revolutionize research. I describe dozens of use cases along six domains in which LLMs are starting to become useful as both research assistants and tutors: ideation and feedback, writing, background research, data analysis, coding, and mathematical derivations. I provide general instructions and demonstrate specific examples of how to take advantage of each of these, classifying the LLM capabilities from experimental to highly useful. I argue that economists can reap significant productivity gains by taking advantage of generative AI to automate micro tasks. Moreover, these gains will grow as the performance of AI systems across all of these domains will continue to improve. I also speculate on the longer-term implications of AI-powered cognitive automation for economic research. The online resources associated with this paper offer instructions for how to get started and will provide regular updates on the latest capabilities of generative AI that are useful for economists.

Here is the home page for Korinek.  Here is related applied work from Benjamin Manning.  Economic research methods are changing right before our eyes, and most of the profession is asleep on this one.

Michael C. Jensen, RIP

by  Tyler Cowen in

Not only was he a major figure in both financial economics and industrial organization, but he did things too:

First, early on Mike decided that the Journal of Finance needed competition to drag it into the era of scientific research. Despite a chockful personal research agenda, Mike started the Journal of Financial Economics that he edited for 20+ years. After its 1974 debut, the JFE quickly became the top journal in finance, and it had the desired effect of upping the game of the JF.

Second, Mike’s foresight was unmatched. With the arrival of the internet, he predicted it would become the conduit for the distribution of new research. He launched SSRN (Social Science Research Network), supported it financially, and guided it for many years, never doubting it would succeed. His unfailing faith was eventually vindicated.

Here is the full tribute from Gene Fama.

Economist Jonathan Levin is the new president of Stanford

by  Tyler Cowen in

Stanford alum, business school dean Jonathan Levin named Stanford president

Thursday more assorted links

by  Tyler Cowen

1. Percentage of women in C-Suite jobs is now declining in the U.S.

2. Short piece by my colleague Dan Klein on misinformation (WSJ).

3. A thread on new minimum wage results, noting that Dube has a response in there as well.  Paper here.

4. Can GPT-4 talk people out of conspiracy theories?  Maybe.

5. Mobile money for bitcoin, for Africa, and not requiring internet connections.

6. Peter Singer Substack.

7. Suno playlist on Spotify.

LLMs vs. ARMA-GARCH

by  Tyler Cowen in

The LLMs basically win:

This paper presents a novel study on harnessing Large Language Models’ (LLMs) outstanding knowledge and reasoning abilities for explainable financial time series forecasting. The application of machine learning models to financial time series comes with several challenges, including the difficulty in cross-sequence reasoning and inference, the hurdle of incorporating multi-modal signals from historical news, financial knowledge graphs, etc., and the issue of interpreting and explaining the model results. In this paper, we focus on NASDAQ-100 stocks, making use of publicly accessible historical stock price data, company metadata, and historical economic/financial news. We conduct experiments to illustrate the potential of LLMs in offering a unified solution to the aforementioned challenges. Our experiments include trying zero-shot/fewshot inference with GPT-4 and instruction-based fine-tuning with a public LLM model Open LLaMA. We demonstrate our approach outperforms a few baselines, including the widely applied classic ARMA-GARCH model and a gradient-boosting tree model. Through the performance comparison results and a few examples, we find LLMs can make a well-thought decision by reasoning over information from both textual news and price time series and extracting insights, leveraging cross-sequence information, and utilizing the inherent knowledge embedded within the LLM. Additionally, we show that a publicly available LLM such as Open-LLaMA, after fine-tuning, can comprehend the instruction to generate explainable forecasts and achieve reasonable performance, albeit relatively inferior in comparison to GPT-4.

This kind of work is in its infancy of course.  Nonetheless these are intriguing results, here is the paper.  Via an MR reader.

My contentious Conversation with Jonathan Haidt

by  Tyler Cowen in

Here is the transcript, audio, and video.  Here is the episode summary:

But might technological advances and good old human resilience allow kids to adapt more easily than he thinks?

Jonathan joined Tyler to discuss this question and more, including whether left-wingers or right-wingers make for better parents, the wisest person Jonathan has interacted with, psychological traits as a source of identitarianism, whether AI will solve the screen time problem, why school closures didn’t seem to affect the well-being of young people, whether the mood shift since 2012 is not just about social media use, the benefits of the broader internet vs. social media, the four norms to solve the biggest collective action problems with smartphone use, the feasibility of age-gating social media, and more.

It is a very different tone than most CWTs, most of all when we get to social media.  Here is one excerpt:

COWEN: There are two pieces of evidence — when I look at them, they don’t seem to support your story out of sample.

HAIDT: Okay, great. Let’s have it.

COWEN: First, across countries, it’s mostly the Anglosphere and the Nordic countries, which are more or less part of the Anglosphere. Most of the world is immune to this, and smartphones for them seem fine. Why isn’t it just that a negative mood came upon the Anglosphere for reasons we mostly don’t understand, and it didn’t come upon most of the rest of the world? If we’re differentiating my hypothesis from yours, doesn’t that favor my view?

HAIDT: Well, once you look into the connections and the timing, I would say no. I think I see what you’re saying now, but I think your view would say, “Just for some reason we don’t know, things changed around 2012.” Whereas I’m going to say, “Okay, things changed around 2012 in all these countries. We see it in the mental illness rates, especially of the girls.” I’m going to say it’s not just some mood thing. It’s like (a), why is it especially the girls? (b) —

COWEN: They’re more mimetic, right?

HAIDT: Yes, that’s true.

COWEN: Girls are more mimetic in general.

HAIDT: That’s right. That’s part of it. You’re right, that’s part of it. They’re just much more open to connection. They’re more influenced. They’re more subject to contagion. That is a big part of it, you’re right. What Zach Rausch and I have found — he’s my lead researcher at the After Babel Substack. I hope people will sign up. It’s free. We’ve been putting out tons of research. Zach has really tracked down what happened internationally, and I can lay it out.

Now I know the answer. I didn’t know it two months ago. The answer is, within countries, as I said, it’s the people who are conservative and religious who are protected, and the others, the kids get washed out to sea. Psychologically, they feel their life has no meaning. They get more depressed. Zach has looked across countries, and what you find in Europe is that, overall, the kids are getting a little worse off psychologically.

But that hides the fact that in Eastern Europe, which is getting more religious, the kids are actually healthier now than they were 10 years ago, 15 years ago. Whereas in Catholic Europe, they’re a little worse, and in Protestant Europe, they’re much worse.

It doesn’t seem to me like, oh, New Zealand and Iceland were talking to each other, and the kids were sharing memes. It’s rather, everyone in the developed world, even in Eastern Europe, everyone — their kids are on phones, but the penetration, the intensity, was faster in the richest countries, the Anglos and the Scandinavians. That’s where people had the most independence and individualism, which was pretty conducive to happiness before the smartphone. But it now meant that these are the kids who get washed away when you get that rapid conversion to the phone-based childhood around 2012. What’s wrong with that explanation?

COWEN: Old Americans also seem grumpier to me. Maybe that’s cable TV, but it’s not that they’re on their phones all the time. And you know all these studies. If you try to assess what percentage of the variation in happiness of young people is caused by smartphone usage — Sabine Hossenfelder had a recent video on this — those numbers are very, very, very small. That’s another measurement that seems to discriminate in favor of my theory, exogenous mood shifts, rather than your theory. Why not?

Very interesting throughout, recommended.  And do not forget that Jon’s argument is outlined in detail in his new book, titled The Anxious Generation: How the Great Rewiring of Childhood is Causing an Epidemic of Mental Illness.