4 min read

Ignoring the fundamental lesson

Policymakers are ignoring the inflation lessons of the 1980s; where to for blockchain; capping coal prices will be a costly experiment; and as AI writes more, human editing becomes even more important.
Ignoring the fundamental lesson

1—Ignoring the fundamental lesson

After it raised the cash rate by another 25 basis points yesterday, the Reserve Bank of Australia repeated the statement that "Global factors explain much of this high inflation," forecasting a peak by the end of 2022. And it's in good company:

"Central bankers hope their job will not be too hard. The Fed's projections suggest that by 2024 inflation will be close to target, at the price of just a small rise in unemployment. The current period of high inflation is relatively short, so the hope is that expectations of price pressure are not entrenched. Others say that price rises are in large part driven by supply-side disruptions, which should soon fade."

That's according to the Economist, which worries that while central banks might be hopeful, "the inflationary surge appears to be broadening almost everywhere. In many places expectations are starting to look stubbornly high".

Drawing from the lessons of the 1980s, the magazine cautioned against complacency, both from central banks and politicians:

"First, inflation can take a long time to come down. Second, defeating inflation requires the participation not just of central bankers, but other policymakers too. And third, it will come with huge trade-offs. The question is whether today's policymakers can navigate these challenges."

Central banks might be tightening monetary policy, but what are politicians doing about reining in their profligate pandemic spending? Not much – in fact, many "have gone the other way, and now seem uncomfortable with the notion that anyone should lose out from anything, ever":

"Policymakers are thus ignoring the fundamental lesson of the 1980s. Fighting inflation is hard. It requires all hands on deck, and immense courage over a long period of time. It is also, unfortunately, almost inevitable that some groups lose out, if only in the short term. As politicians run scared, the 2020s risk earning a special place in the history books, too—for failing to tame inflation."

There's plenty more in the full article here (~4 minute read).

2—The future of blockchain

The latest crypto crash has all but dashed dreams of blockchain transforming industrial supply-chains or decentralising Amazon. That and the fact that those projects were going nowhere, riddled with "inconveniences and fees".

But can anything be salvaged from the wreckage? According to Ethereum founder Vitalik Buterin, there are still "a few specific categories of applications that are proving themselves already, and are only getting stronger", such as money:

"Unlike wealthy countries like the United States, where financial transactions are easy to make and 8% inflation is considered extreme, in Argentina and many other countries around the world, links to global financial systems are more limited and extreme inflation is a reality every day. Cryptocurrency often steps in as a lifeline.
There is also the important broader philosophical case for cryptocurrency as private money: the transition to a "cashless society" is being taken advantage of by many governments as an opportunity to introduce levels of financial surveillance that would be unimaginable 100 years ago. Cryptocurrency is the only thing currently being developed that can realistically combine the benefits of digitalization with cash-like respect for personal privacy."

Buterin also sees value in stablecoins (a currency pegged to a 'real' asset), including "a governance-minimised stablecoin [that] could track some non-currency asset like a global average CPI index, and advertise itself as representing abstract 'best-effort price stability'," although "any kind of stablecoin working well would be a boon for many kinds of currency and savings applications that are already concretely useful for millions of people today".

You can read Buterin's full essay here (~23 minute read), which also discusses blockchain's applicability to decentralised finance, identity verification, decentralised autonomous organisations, and voting.

3—A costly experiment

Australia's National Cabinet meets later today to discuss capping domestic coal prices.

4—Editing is the real skill

OpenAI's new ChatGPT tool produces confident, well-cited answers in response to users' questions. But many of those answers are also "completely wrong", leading Stack Overflow – a site where developers can ask the community for help with coding issues they're having – to ban its use:

"The primary problem is that while the answers which ChatGPT produces have a high rate of being incorrect, they typically look like they might be good and the answers are very easy to produce. There are also many people trying out ChatGPT to create answers, without the expertise or willingness to verify that the answer is correct prior to posting. Because such answers are so easy to produce, a large number of people are posting a lot of answers. The volume of these answers (thousands) and the fact that the answers often require a detailed read by someone with at least some subject matter expertise in order to determine that the answer is actually bad has effectively swamped our volunteer-based quality curation infrastructure."

Despite the name, AI isn't actually 'intelligent'. Every answer provided by ChatGPT "is a probabilistic result gleaned from the corpus of Internet data that makes up GPT-3 [its backend]", and:

"ChatGPT doesn't have any internal record of right and wrong, but rather a statistical model about what bits of language go together under different contexts. The base of that context is the overall corpus of data that GPT-3 is trained on, along with additional context from ChatGPT's RLHF training, as well as the prompt and previous conversations, and, soon enough, feedback from this week's release. This can result in some truly mind-blowing results."

ChatGPT doesn't run any calculations or think for itself – it 'knows' things "because they were written down somewhere on the Internet... it's a pattern matcher — and sometimes the pattern gets screwy".

There's plenty more on ChatGPT by Ben Thompson here (~14 minute read), including that while an AI-assisted future will provide "a starting point you can correct... the real skill is editing it into something true or beautiful".

5—Further reading...

😷 China's Vice-Premier, Sun Chunlan, "did not mention the rhetoric of 'dynamic zero', representing a first from a top official in charge of China's Covid-19 response. Instead, she said the Omicron variant has become less pathogenic".

🏡 "Data from the HILDA (Household, Income and Labour Dynamics in Australia) Survey released on Monday show the proportion of Australians working 'most hours' from home jumped from around 6% before the pandemic to 21% in 2020. Unpublished data available to researchers shows a further jump to 24% in 2021."