Latest news with #Nobelist
Yahoo
22-05-2025
- Entertainment
- Yahoo
William Watson: Chatbots are changing everything and nothing
The novelist Anthony Horowitz has the 'diary' page in this week's Spectator magazine. The format is amusing occurrences and casual musings as the writer wends his way through his week. Halfway down the column, Horowitz recalls how as a teenager he used to 'slip into' the Old Vic theatre to see plays, experience 'something close to magic' and be left 'breathless.' But then the next entry abruptly announces: 'The last paragraph was written by ChatGPT.' Horowitz had asked it to write 100 words on theatre tickets in the style of Anthony Horowitz. He then analyzes where it did and didn't succeed. 'If I became breathless in a theatre, I'd expect St. John's Ambulance to remove me quickly,' and so on. But you could have fooled me! In fact, it did fool me, and it fooled most readers, I'd guess, which was Horowitz's point. We're well beyond the stage where AI produces oohs and aahs just for putting a noun and verb in each sentence and making sure they agree in number. It's now operating at a high level of fluency (though I should add that no bots were abused in the writing of this column.) It's impossible to imagine where something so powerful will take the world — though I expect Evan Solomon, our new minister of artificial intelligence, will spend lots of money trying. An under-wagered possibility is that after being turned upside down, the world will end up looking more or less the same. This would be consistent with Solow's Paradox, economics Nobelist Robert Solow's famous 1987 observation that: 'You can see the computer age everywhere but in the productivity statistics.' In a new study of AI adoption in Denmark, Anders Humlum of the University of Chicago and Emilie Vestergaard of the University of Copenhagen quote that line from Solow. And they come to a similar conclusion, as indicated by their study's title, 'Large Language Models, Small Labour Market Effects.' (Would a bot have got to such a taut summary of the message? I think not.) Not every occupation lends itself to using ChatGPT or similar chatbots. So the researchers look at only 11 where it's likely to be most handy, including: IT, HR and legal professionals, accountants, teachers, journalists and five others. It turns out Denmark is a very digitized place. Every Dane has 'a digital mailbox that Statistics Denmark can use to distribute survey invitations.' Moreover, Danes seem to check their digital mailboxes. The researchers sent out 115,000 survey invitations and got 25,000 completed responses covering 7,000 workplaces — a big sample and good response rate for this sort of thing. (Completed surveys were entered in a draw for a tax-free cash prize though we're not told how much.) Beyond its paradoxical bottom line, the paper's other (to my mind) surprising finding was just how much chatbots are already being used. Almost two-thirds of workers have used one 'at least a few times' and almost 20 per cent use them daily. Firms 'are now heavily invested,' with 43 per cent of workers 'explicitly encouraged to use them' and only six per cent not allowed to. Firms also do training: 30 per cent of employees have had some. When firms are involved, take-up is higher and there's less of a gender gap. When firms are neutral there's more take-up from men. (One Norwegian study of students found a gender gap largely reflected 'male students continuing to use the tools even when explicitly banned.') Firm-wide investments are 'particularly widespread in journalism and marketing and more limited in teaching.' Journalists (or their bots!) told the researchers they use AI to brainstorm 'story ideas, angles or interview questions,' to draft content, to fact-check and edit, to summarize 'research materials or interview transcripts' and, surprisingly, to ensure 'AI-generated content abides by journalistic ethics and standards.' They use a bot to decide whether their bot has been ethical? What's been the effect of using the new technology? Average reported time saving is 2.8 per cent, which seems low, given how powerful the bots are. What do people do with the time they save? Mainly other tasks. Also somewhat more of the same task. And more or longer breaks or leisure time. It seems no one answered 'mindless screen-scrolling' during the freed-up time, though we all know what a problem that now is. New technology allowing workers to turn to different tasks is a common effect and helps explain why automation typically doesn't displace labour wholesale: firms find new things for their workers to do. Which helps explain the labour market effects, which are: pretty much nothing. The researchers asked people directly whether 'they perceive AI chatbots to have affected their earnings.' No, said 99.6 per cent of respondents. William Watson: Get the Ozempic! Cabinet has grown by almost two-thirds in two months William Watson: Free trade is being replaced by crony trade What people perceive isn't always true, of course. But in this case Denmark's digital connectedness allowed the researchers to check on hours, earnings, total wages, total employment and so on in the firms where bots are used most. And nothing budged. It's early days yet but the papers' last line and the study's bottom line is that 'two years after the fastest technology adoption ever, labour market outcomes — whether at the individual or firm level — remain untouched.'
Forbes
27-04-2025
- Business
- Forbes
Closed-Loop Demand For Government Bonds
With the whipsawing in the markets over the last month, a concern du jour has arisen. What if the United States cannot sell its bonds to the old reliable ready purchasers, to the same always game counterparties? The Chinese appear to be disgorging themselves of their vast stash of treasuries. (Emphasis on 'appear'—China badly needs to maintain the impression that its currency is convertible in the dollar.) The stodgy economies of Japan and the UK have become the major holders. The United States is supposed to float its massive debt reissues to yesterdays-news buyers such as these? Duck and cover. 'Maybe the Fed will buy it!' he said risibly. How illuminating history can be on these issues. Let us cast our minds back not to the history of federal debt, but to that of the gigantic newcomer in the twentieth century, municipal debt, particularly of the school-bond variety. Readers will recall the column I wrote on the work of recent economics Nobelist Claudia Goldin, work that absolutely lionizes the tremendous boom in school, particularly high school construction over 1910-1940. The Nobelist forgot to tell us what it cost and what were the consequences of the financing model, namely unbelievably jacked-up property and new state-level income taxation. There is quite a case that financing this school-building caused, yes caused, the Great Depression. Thanks a lot, good government types. A few years ago, in the Marxist-adjacent journal Capitalism—quite a good journal, actually—appeared a most delicious article on school-bond financing in the golden era, the 1920s through the 1960s. (Michael R. Glass and Sean H. Vanatta's 'Frail Bonds of Liberalism' may be found here.) The finding of the article was that from the 1920s through most of the 1950s, the unprecedentedly massive new issues of school bonds basically had one buyer: state government employee pension plans. Here was the closed loop: districts planned schools, issued bonds, and raised taxes to in the hope of paying for them. The market was dubious, so another government agency, the pension plans, agreed to buy basically all of the bonds up all the time. It actually was a sound strategy for the funds in the 1930s and 1940s. Who wants to bet on corporate bonds, or stocks, in the 1930s? Property tax levels in 1932 soared to 7 percent of GDP, an absolutely unconscionable number that is utterly inconsistent with maintaining a viable private economy. Corporations were going down the drain in the 1930s. Pension plans wanted governments, governments, governments, because at least they had taxing authority. That authority was being abused to the tune of destroying the private economy, true, but all that meant is make sure you don't buy corporates. It was a ridiculous time, and school districts thought it normal. Governments got a little smaller after World War II (federal spending fell by 75 percent, 1944-46), and private business began to feel out its new place in the world. The stock market finally went up, achieving 1929 levels in the 1950s. Government pension plans noticed and thought it might be time to let their hair down and buy regular market securities, beyond school bonds, real corporates. So they did. The school districts threw a fit. We have a compact for you to back school construction, it's a civic duty to be our buyer, you're just looking out for number one, you're becoming a creature of Wall Street, etc., etc., was the gist of the complaint. One of the problems, a real beauty of one, was that federal tax rates were so high (91 percent at the top in the 1950s), that to hold school bonds, like all munis federally tax exempt, made zero sense in public pension plans, because those plans were also tax exempt. Tax-exempt plans should hold taxable bonds, because those bonds pay enough interest to cover taxation, and tax-exempt plans don't have to pay. So the New York system in particular said bye-bye to munis as the schools in their baby-boom boom cried. The article says that the borrowing costs increased sometimes to the tune of a new school every time a district issued a new tranche. Districts had to raise interest rates on their offerings past four percent on their fixed thirty-year issues in the late 1950s! Give it time—because did these districts ever make out like bandits. When the great inflation hit in the late 1960s, averaging about 9 percent for 13 years, these now silent grinning school districts were paying four percent on their huge long-term obligations. The little old lady holders were getting impoverished, as the districts got fat through the early 1980s on the late 1950s issues they had squealed about—four percent—but it's not about the sucker holders, is it? Government debt is a 'safe asset,' the economy needs it as a 'benchmark,' it is equivalent to a 'riskless security' in the financial models. All of this stuff is impeding the normal maturation of the market economy. Government debt probably caused the Great Depression, it deteriorated the welfare of widows and orphans in the stagflation period, and it is now all told at some unconscionable number in the many tens of trillions. The history of public debt in whatever variety it comes inevitably uncovers some new pathetic, or hapless, or lame, or sordid tale. Just start getting off the stuff.
Yahoo
07-03-2025
- Business
- Yahoo
Warren Buffett acts like the U.S. stock market is in bubble territory. He might be onto something
Over the last five years, Americans have watched equity markets soar. Just last month, the S&P 500 reached an all-time high of 6,144, up over 89% from January 2020. Such a precipitous increase in the value of U.S. equities has stirred up the usual cacophony of equity-bears screaming 'bubble!' 'Bubble' is a popular term, but, as it turns out, is rather ill-defined and fuzzy. It is supposed to refer to a period in markets when asset prices are above a level justified by their fundamentals. Indeed, many economists have beefs with bubbles. Peter Garber, the author of Famous First Bubbles: The Fundamentals of Early Manias, argues that so-called bubbles are in fact rhetorical weapons used to argue the markets are 'crazy' and need to be more severely regulated. Nobelist Eugene Fama, colloquially known as the 'father of modern finance,' takes issue with the term 'bubble,' too. He argues that, if bubbles did exist in equity markets, then large increases in a stock's price should predict lower returns going forward, which is usually not the case. Research from Harvard economists Robin Greenwood, Andrei Shleifer, and Yang You lend credence to Fama's claim, although the authors did find that the nature of a stock-price run-up can help predict a future crash. So, is the U.S. stock market in bubble territory? High-profile investors like Warren Buffett seem to think so: Berkshire Hathaway's cash as a percentage of assets hit a record high of 27% last quarter, and Buffett has even offloaded all of Berkshire's market-tracking ETFs. To decide whether we agree with Buffett, we employ Dr. X's Bubble Detector—a concept that was conveyed to one of us (Hanke) in an August 1996 letter by a late Nobel laureate in economics. Dr. X's bubble detector is the wealth-to-income ratio for stocks divided by the wealth-to-income ratio for bonds. The wealth-to-income ratio indicates the length of time it takes for a constant flow of income to "purchase" a given stock of income-producing assets—1,000 shares of Apple, say, or 1,000 T-Bills. As the ratio increases, more time is required to purchase a source of income, implying that assets are becoming more expensive relative to income. Therefore, the bubble detector essentially measures the value of equities relative to that of fixed income securities. The readings for the bubble detector increase when the wealth/income ratio for stocks increases relative to the ratio for bonds. In other words, red lights flash when it becomes significantly more expensive to purchase $1 worth of earnings from stocks than to purchase $1 worth of interest income from bonds. As a proxy for the wealth/income ratio for stocks, Dr. X used the ratio of the S&P 500 to personal income per capita. If stock prices rise and income stays the same, the wealth/income ratio for stocks increases, and it takes more time to purchase a given quantity of stocks. As of December 2024, which is the most current data point calculable for the bubble detector, this component is 5,881.6/73,259, or 0.08. The proxy for bonds is the reciprocal of the 10-year Treasury bill rate, or 1/(interest rate). This component is 1/4.569, or 0.219. Note that you can also arrive at the 'bubble detector' by simply multiplying by the Treasury yield, rather than dividing by its reciprocal (see the chart below). The bubble detector has averaged 0.141 since January 1987. Before the dot-com bubble in the early 2000s, it peaked at 0.3229. Since then, it has dropped as low as 0.0536 in September 2012, and even lower to 0.0306 at the onset of the COVID-19 pandemic. As of December, the bubble detector level is 0.08/0.219, or 0.3655. The decline in Dr. X's bubble detector at the start of COVID-19 is an instructive example of how sensitive the value is to financial market conditions. The S&P 500 fell by 20%, and the 10-year Treasury yield was cut in half. The result was that the wealth-to-income ratio for bonds rose and the wealth-to-income ratio for stocks fell. Dr. X's bubble detector told us it was a great time to buy stocks—and it turned out to be right. The current value of the bubble detector—an all-time high of 0.3655—is a product of the exact opposite dynamic. Thanks to a 'healthy' dose of helicopter money from the Fed during the pandemic, as well as (albeit exciting) AI-related breakthroughs in the U.S. tech industry, stocks have ripped higher for the last five years, outpacing growth in personal income per capita. At the same time, the inflation that resulted from the Fed's monetary excesses has driven bond yields higher. So, we have had a trend opposite to that of the early stages of COVID-19: The wealth-to-income ratio for bonds fell and the wealth-to-income ratio for stocks rose. What we see has all the makings of the dot-com bubble of the late 1990s that popped in 2001. Indeed, the last time the bubble detector has ever come close to its current level of 0.3655 were the months before the dot-com bubble, when it reached 0.3249. In anticipating that the bubble would pop, Nobelist Robert Shiller argued in Irrational Exuberance that bubbles were a psychological phenomenon that resulted from a confluence of factors: a plausible basis for speculators, like a new invention or technology, plus rumors about fortunes people were making, and both being reinforced by media coverage. 'Calling the top' is a dangerous game to play in markets—no one has a crystal ball. At the same time, a good signal should never be ignored. Dr. X's bubble detector leads us to believe that Mr. Buffett might be on to something. Steve H. Hanke is a professor of applied economics at the Johns Hopkins University and the author, with Leland Yeager, of Capital, Interest, and Waiting. Caleb Hofmann is a research scholar at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune. This story was originally featured on Sign in to access your portfolio
