The Economy’s Weekly Recap

9/22/23 - 9/29/23

Raymond Lin

This Week’s Prominent Events

ChatGPT’s Recent Advancements

• ChatGPT, OpenAI’s large language model that transformed the popular perception of AI, has recently had some major changes that have made it more up to date and useful.

• Firstly, ChatGPT was formerly restricted to information from the internet in September 2021, meaning many current events were excluded from its knowledge base. However, it can now browse the web and synthesize essentially real time information. While this is great for getting up to date responses, it has also raised concerns about ChatGPT’s regurgitation of misinformation and the spread of complete falsehoods.

• Secondly, ChatGPT now has the ability to “see” and “talk”. It is able to identify subjects in images and answer one’s questions or requests related to the image. This means ChatGPT’s utility has been broadened and can do even more than before. This feature is still unrefined, but it is a significant development in the advancement of ChatGPT to a more multimodal AI. Adding on to this multimodality is the “talking” aspect of ChatGPT. One can talk to ChatGPT and it can generate a response and have synthetic AI voices communicate to you. The New York Times’ Kevin Roose described ChatGPT’s speaking as superior to Siri or Alexa as well as sounding fluid and natural, although the app was slow and glitchy at times.

• However, although these features have been announced, they will only roll out slowly to ChatGPT Plus and Enterprise users before possibly finally reaching free users.

The WGA Strike Comes To A Close

• After almost 150 days of striking, the Writer’s Guild of America has come to a tentative deal with studios. The vote for ratification will start on Monday and last until October 9th. Once it comes into effect, the deal will continue to last until May 2026.

• While the WGA did not achieve all of their demands, they scored a major victory for their members. Some of the changes include…

  • A 5% pay increase on ratification, followed by 4% in 2024 and 3.5% in 2025.

  • AI not being allowed to write literary material or be considered source material

  • A new more financially rewarding residual, which is similar to a royalty, based on viewership on streaming platforms

• SAG-AFTRA, the union representing actors, is still on strike though and no talks have been scheduled between them and the studios.

The Amazon FTC Lawsuit

• Besides challenging Microsoft’s acquisition of Activision Blizzard again this week, the FTC, along with 17 states, has also launched a landmark lawsuit against Amazon, accusing it of protecting a monopoly on its digital marketplace by promoting its own services over other merchants. It alleges that this has caused harm to American households and the businesses that rely on Amazon.

• The FTC says that Amazon entices sellers via millions of customers and customers through low prices and prime benefits like Amazon Music and Prime Video. The FTC then alleges that Amazon takes advantage of this by forcing sellers to use Amazon fulfillment centers, bloating the search results to force sellers to buy ads, and punishing sellers who sell their goods at lower prices on other platforms, which leads to the creation and sustaining of a monopoly.

• Amazon is likely to challenge this idea of a monopoly by focusing on what defines a market and whether Amazon actually has control over the markets they are in.

• The FTC has yet to announce any punitive measures beyond an injunction to stop its unlawful and anticompetitive conduct as the lawsuit is happening.

• The FTC lawsuit against Amazon is also not the only high profile lawsuit against a tech company happening right now; Google’s DOJ antitrust lawsuit began two weeks ago and is still ongoing, although news has been muted due to Google and other company’s desire to maintain secrecy and limit the public’s knowledge of the case.

The Return of Net Neutrality

• Net neutrality, rules that prevent internet service providers(ISPs) from selectively slowing or blocking internet services, were repealed in 2017. At the time, advocates of net neutrality feared that ISPs would throttle or other prioritize certain websites, giving the ISPs excessive power over consumers; however, that has not come true.

• Despite this seemingly fine status quo, Federal Communications Commission(FCC) Chairwoman Jessica Rosenworcel has challenged it by aiming to restore regulations on ISPs. By reinstating net neutrality, the government will prevent the speeding or slowing down of internet traffic by ISPs.

• However, the FCC is aiming for more than just returning to pre 2017. The regulations it is pushing for will allow the FCC to broaden its regulatory powers and target spam robotexts, internet outages, digital privacy, and high-speed internet access. Additionally, Rosenworcel has questioned why traditional telephone companies cannot sell customer data while ISPs can.

• The catalyst for this sudden action from the FCC is the confirmation of Democrat Anna Gomez earlier this month as the fifth commissioner of the FCC, breaking a years-long 2-2 partisan divide among the commissioners.

Netflix’s DVD Business

• Netflix started as a DVD rental business in 1998 that would ship DVDs via mail to subscribers. For Netflix’s first decade, the DVD rental business was the core of its operations and garnered millions of subscribers, providing the relatively nascent business with the money it needed to expand into streaming.

• Since its aforementioned start in 1998, Netflix has continued its original DVD rental business for the last 25 years, although it has obviously dwindled over time. In 2021, non-streaming revenue, most of which is made up by DVDs, made up just 0.6% of Netflix’s revenue at $182 million.

• But the day of reckoning for Netflix’s original DVD business has come as the company announced its last DVD rental, contained in Netflix’s iconic red envelope, would be sent on Friday. Netflix will continue to accept returns until October 27.

• Netflix plans on donating its DVDs to organizations focused on film and media or recycling them through third parties.

Future Events

American Housing

• Owning a home was once a priority for young people. Homes have served as a vehicle to build generational wealth and achieve the American dream. But with mortgage rates of 7.31%, a 23 year high, housing payments for new buyers have been extraordinarily expensive. Additionally, the prices of the homes themselves are at historic highs, increasing the monthly cost and financial burden of buying a home.

• Due to these two factors, real estate data provider ATTOM found that 99% of homes in 575 counties were beyond the reach of the average person, albeit their definition of unaffordable as housing payments making up more than 28% of one’s income may have inflated the figure.

• However, there has been a recent silver lining to all this. While the housing market is still at historic highs, the price of a new home is falling. In August, the median price of a new construction home was $430,300, down from $436,600 last month. This decrease marks the fifth month of year over year price drops, with it being 2.3% lower than August last year.

• While this has been partially caused by increased supply of homes, this decrease has also been caused by lower demand from high mortgage rates and the construction of smaller and more affordable new homes.

• Housing still remains expensive for many first time buyers. But if interest rates lower in the near future and home builders continue to accommodate first time buyers, there may be an increase in home affordability and ownership soon.

US Government Shutdown

• As previously alluded to in last week’s Phi Fiscal, the US government appears to be facing an imminent shutdown at midnight on Sunday due to hardline Republicans refusing to cooperate with their own party.

• Speaker of the House Kevin McCarthy has tried several options, such as putting a senate bill on the floor, passing a short term bill that excludes aid to Ukraine, and a stop gap bill. However, no consensus has been found and they have all failed to pass. McCarthy is left with two options: continue to compromise with the hard right of his party or work with the Democrats and risk being removed from his position by his own party.

• To reiterate the economic consequences of the shutdown from last week’s Phi Fiscal, some effects might be…

  • Millions of military and civil government workers facing delayed paychecks

  • A number of those workers being furloughed, meaning they don’t work and don’t get paid

  • Shortened or closed federal offices

  • Delays in clinical trials, firearm permits and passport

  • Major economic disruptions to sectors like travel

  • General uncertainty, the bane of investors

US China Relations

• The United States and China have been locked in a sort of “new” cold war where the countries compete geopolitically and aim to target each other’s economies. In fact, earlier this week, the US reported that China has been deceptively spreading its propaganda to shape global news. At best, relations are currently frosty and uncooperative.

• However, that doesn’t mean hopes of a more tolerant stance towards each other should be abandoned. After visits by US officials like Treasury Secretary Janet Yellen and U.S. Commerce Secretary Gina Raimondo, there has been some slight diplomatic warming between the two sides.

• Discussions are now being held about a potential visit by Vice Premier He Lifeng, the top economic-policy aid for Xi Jinping, to Washington. If this does occur, the chances of Xi himself visiting the US for a summit of Asia-Pacific leaders in San Francisco will increase, which would be conducive to establishing cordial relations and repairing economic attacks against each other.

Weekly Question

Which of the following is not a real AI?

• A: Claude 2

• B: Porphyro

• C: LLaMa

• D: Phi-1

Answer: B. Porphyro is not a real AI, while all the others are.z