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OPINION AND ANALYSIS | 22-03-2023 12:24

Eduardo Porter: Argentina's inflation problem stumped ChatGPT

Artificial intelligence can do a mean verbal tango, channel the immortal Jorge Luis Borges, and parse Peronism. Ease 100% inflation? Not so much.

Alas, GPT-4 can’t fix the Argentine economy.

It was worth a try. Nobody in Argentina seems to be able to do it. It has fallen into disarray so many times that despair has become indifference. Even the jokes are drying up. (ChatGPT offered this one: "Why do Argentine economists make the best magicians? Because they can make your money disappear.")

To be fair, this is (probably) only the first time this century that inflation in Argentina has hit triple digits. It is far from the 1980s price increases in the several-thousand-percent range. Still, the country is on its 22nd bailout from the International Monetary Fund, and the peso is worth half what it was a year ago. 

What’s more, policymakers in Buenos Aires somehow pulled off this train wreck despite robust demand for Argentina’s commodities, not an easy feat.

If human intelligence can’t figure out a way to shake this once-rich country from the shackles of some highbrow pun, it’s hardly crazy to give robot intelligence a shot. And yet, ChatGPT’s answers to the how-do-we-fix-it question seemed no better than those of the many humans who have given it a shot and failed. 

“While Argentina faces multiple challenges, one of the most urgent concerns is its political and economic stability,” ChatGPT said. Allow it some snark and it’ll tell you that bringing inflation under control “might seem like an impossible task, but stranger things have happened.”

The machine’s assessment of Argentina’s ills is not wrong. Ask it what causes intractable inflation and it’ll offer up a pretty standard list: Perennial fiscal deficits financed by money creation, recurrent devaluations, wage and price indexation, a dependency on volatile commodity exports and a weak central bank that bends to the political wind. That and a population that has come to accept abysmal inflation as just the way things are.

GPT-4 understands the problem has political roots: weak institutions, outsized influence of interest groups, resistance to austerity measures, political polarisation and “the torrid affair between Argentina’s politicians and their one true love: short-term economic policies.” 

“One might even say that their government plays musical chairs with its economic strategies,” the AI quipped, “switching from protectionism to laissez-faire faster than you can say ‘Wait, what happened to my savings?’” Actionable solutions, however, are in short supply. 

“The most useful political reform to help bring inflation under control in Argentina would be strengthening the independence and credibility of key economic institutions, particularly the central bank,” was the most specific prescription the AI would offer. But like every other strategist on Wall Street, it got stuck on the pivotal question: How can the Argentine political system deliver on such a radical proposition?

“Argentina has a curious habit of blaming external forces for its economic misfortunes. The International Monetary Fund, global markets, even the weather,” it noted. Not a promising proposition. “While it would be comforting to believe that the next Argentine government could finally tame inflation, the reality is that this is unlikely to happen.” 

Could former president Mauricio Macri, one of the leading opposition candidates, do better? “His previous failure to control inflation during his term raises concerns.” 

It’s not super surprising that an AI developed in Silicon Valley would like Javier Milei, the libertarian candidate with the hair who came out of the blue to unsettle the presidential race: Its prescriptions — addressing fiscal imbalances, strengthening the independence of the central bank, deregulation, privatisation, reducing the role of the state in the economy — match his. 

But the machine knows its history of Argentina. His platform “may face resistance from various interest groups, including labour unions, social organisations, and the public sector.” And Argentines might not like some of the consequences: high unemployment and fewer public services. 

What about the Peronists? “Peronism is often associated with a more interventionist approach,” it argued, laying out a list of reasons why the party in power seems constitutionally incapable of delivering macroeconomic stability. It might want the central bank to do stuff other than control inflation. It might prioritise social spending and income redistribution, rather than fiscal consolidation. It might manage the exchange rate to protect domestic industries, and balk at deregulation, trade liberalization and labor market reform. 

ChatGPT expressed some concern about the anti-inflationary tactics of the previous Peronist president, Cristina Fernández de Kirchner, which included “the manipulation of inflation data” (otherwise known as fibbing about it). Then the technology hallucinated: “A Peronist government can potentially bring Argentine inflation under control,” it said. 

The good news for all the worried emerging market economic analysts on Wall Street is that, unlike sommeliers, they are not about to be replaced en masse by some robot that can do their job better. It does it just as badly as they do, with the same caveats and uncertainties, hums and haws, and occasional shark-jumpings. 

But artificial intelligence can offer some things you would not find on a standard emerging markets report. It can wax lyrical about “Argentina, where the aroma of asado fills the air, and the sweet taste of economic chaos lingers on the tongue.” 

It can do a tango:

As pesos fade like autumn leaves,
The weary souls can only grieve,
A tango born from a love that’s lost,
The price we pay, a heavy cost.

And it can render Argentine inflation in the immortal style of one of Argentina’s great minds, Jorge Luis Borges: “In the beginning was the myth of the Minotaur, that monstrous hybrid which devoured the wealth of a nation. Such is the nature of inflation, that labyrinthine creature which corrodes the value of our currency and lays waste to the prosperity of men.” 

It may not be able to fix Argentina’s inflation. But so far, neither can anybody else. 

by Eduardo Porter, Bloomberg

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