My little tiff with chatGPT is revealing

I saw an article about a British politician , one who by the way does a great ob on stopping wate that damages our environment, the article was referencing a “circular economy”.
I sensed a problem so I asked a few simple questions that a 1st or 2nd year Economics student might ask. My memory of economics is from many decades ago but this is about chatGPT and AI if you classify chatGPT that way.

Here goes

“what’s the meaning of circular economy?”
Answer:

“A circular economy is a regenerative system designed to minimize waste and make the most of resources. Unlike the traditional linear economy — which follows a ‘take-make-dispose’ model — a circular economy emphasizes keeping products and materials in use for as long as possible. This is achieved through strategies such as maintenance, reuse, refurbishment, remanufacturing, recycling, and composting. ​Home | Forest Stewardship Council+1Chatham House+1Ellen MacArthur Foundation

The core principles of a circular economy include designing out waste and pollution, keeping products and materials in use, and regenerating natural systems. By implementing these principles, the circular economy aims to tackle global challenges such as climate change, biodiversity loss, waste, and pollution, while promoting sustainable economic growth. ​Chatham HouseWikipedia, la enciclopedia libre+2Wikipedia+2Ellen MacArthur Foundation+2

In practice, this approach involves reducing material use, redesigning products to be less resource-intensive, and capturing ‘waste’ as a resource to manufacture new materials and products. By shifting away from the linear model of resource extraction and disposal, the circular economy seeks to create a more sustainable and resilient economic system.​US EPAHome | Forest Stewardship Council+”

Now this struck me as a modern interpretation of the term that once had a very different and super-important meaning, so I pushed it a little.

“Circular economy was used by economists in the past, what were they referring to?“

Answer:
“The concept of a circular economy has evolved over time, with its roots tracing back to various historical practices and economic theories. In earlier times, societies inherently practiced circular principles by reusing and recycling materials out of necessity. For instance, ancient civilizations repurposed broken ceramics, recycled metals, and melted down glass to create new items, effectively minimizing waste and maximizing resource efficiency. ​World Economic Forum

The formalization of the circular economy concept in economic discourse began in the 20th century. In 1976, Swiss architect Walter R. Stahel and Geneviève Reday presented a report to the European Commission titled “The Potential for Substituting Manpower for Energy,” which introduced the notion of extending product lifespans through maintenance, reuse, and refurbishment. This approach aimed to create jobs, conserve resources, and reduce waste, laying the groundwork for what Stahel later termed the “performance economy.” ​Wikipedia+1Wikipedia — Die freie Enzyklopädie+1Wikipedia — Die freie Enzyklopädie

During the same period, British economist David W. Pearce contributed to the development of the circular economy concept by integrating environmental considerations into economic models. His work emphasized minimizing resource use and promoting clean technologies, aligning with the principles of industrial ecology. ​Wikipedia — Die freie Enzyklopädie

These early contributions by economists and researchers provided a foundation for the modern understanding of the circular economy, emphasizing resource efficiency, waste reduction, and the creation of sustainable economic systems.”

My response:
“I don’t agree. The circular economy refers to the fact that money circulates in an economy. Consumers buy products, people, often the same people get paid to make the goods, companies and employees pay taxes that go to pay wages and salaries and money floes in a circular way.”

Answer:

“I understand your perspective, and it’s important to clarify the distinction between the circular economy and the circular flow of income, as they refer to different concepts in economics.

The circular flow of income is an economic model that illustrates how money, goods, and services circulate within an economy. In its simplest form, this model depicts the interactions between two primary sectors:​Corporate Finance Institute+1Wikipedia+1Study Mind+5Wikipedia+5GeeksforGeeks+5

1. Households: Individuals who provide factors of production (such as labor) to firms and receive income in return. They use this income to purchase goods and services.​Wikipedia
2. Firms: Businesses that produce goods and services and pay households for their labor and other resources. They sell their products to households, generating revenue.​

This continuous loop demonstrates how income flows from firms to households and back again, facilitating economic activity. The model can be expanded to include other sectors like government (which collects taxes and provides public services), the financial sector (which manages savings and investments), and the foreign sector (which handles exports and imports). ​Investopedia Wikipedia

On the other hand, the circular economy is a sustainability concept focused on minimizing waste and making the most of resources. It emphasizes keeping products and materials in use for as long as possible through strategies like maintenance, reuse, refurbishment, recycling, and composting. The goal is to create a regenerative system that reduces resource consumption and environmental impact.​

While both concepts involve cycles, the circular flow of income pertains to the movement of money and economic activity, whereas the circular economy relates to sustainable resource management and environmental considerations.”

My response:

“Circular flow of money ( not income)”

Answer:

I understand your interest in the circular flow of money, which is closely related to the concept of the circular flow of income. Both models illustrate how money moves within an economy, highlighting the continuous interactions between different economic agents.​

In the circular flow model, money circulates between two primary sectors:​Investopedia

1. Households: Individuals who provide factors of production — such as labor, land, and capital — to businesses. In return, they receive income in the form of wages, rent, interest, and profits. Households use this income to purchase goods and services produced by businesses.​
2. Businesses (Firms): Organizations that produce goods and services. They pay households for the use of their factors of production and sell the resulting products back to households, generating revenue.​

This continuous loop demonstrates how money flows from businesses to households (as income) and back to businesses (as consumer spending), facilitating ongoing economic activity. The model can be expanded to include other sectors:​Investopedia

• Government: Collects taxes from households and businesses and injects money back into the economy through public spending.​
• Financial Sector: Manages savings and investments, channeling funds between savers and borrowers.​
• Foreign Sector: Handles trade, with money flowing out of the economy for imports and into the economy from exports.​

By analyzing the circular flow of money, economists can better understand the interdependencies within an economy and assess its overall health. This model underscores the importance of continuous spending and income generation to maintain economic stability and growth. ​Investopedia

My response:

“Financial sector only occasionally channels money as you describe. Money is created out of nothing by banks.”

Answer:

“You’re correct in noting that commercial banks play a significant role in money creation within the economy. When banks issue loans, they effectively generate new money by crediting the borrower’s account with a deposit, thereby increasing the total money supply. ​

This process operates within a fractional-reserve banking system, where banks are required to hold only a fraction of their deposit liabilities as reserves. The extent of money creation is influenced by factors such as reserve requirements set by central banks and the demand for loans from borrowers. ​Wikipedia

It’s important to note that while banks have the capacity to create money through lending, this ability is regulated and constrained by monetary policies and banking regulations to maintain economic stability and control inflation. ​

In summary, commercial banks contribute to the expansion of the money supply by creating deposits through lending activities, a process that is fundamental to the functioning of modern economies.​”

My comment:

“chatGPT is learning all the misguidance that has dogged people for centuries and giving it back to them as knowledge. Thats very worrying.”

Answer:

I understand your concerns regarding the potential for AI models like ChatGPT to perpetuate misinformation. These models are trained on extensive datasets sourced from the internet, which may contain inaccuracies or biases. Consequently, there’s a risk that AI-generated responses can reflect and propagate these issues.​

Studies have highlighted instances where AI tools have produced misleading or false information. For example, research has shown that generative AI models can agree with false statements up to 25% of the time. Additionally, concerns have been raised about AI’s role in amplifying misinformation, especially in sensitive areas like public health. ​The VergeDefense OnePMC

It’s essential to approach AI-generated information critically and cross-verify it with authoritative sources. Developers and researchers are actively working to enhance the accuracy and reliability of AI models. However, as users, maintaining a discerning approach helps mitigate the spread of misinformation.​AP News

In summary.

Its not a discussion on economics, my memory of that subject stretches back too far to take on a current proponent, but it wasn’t hard to become alarmed with the message. Many issues with democracy stem from such ignorance of the world voters live in.
By the way: the reference to Fractional reserve was entirely misplaced in that context also and as such seriously misleading. chatGPT and its growing cousins, only repeat gossip they’ve heard. Theres no more to it. Plenty of A but no I.

In the end, chatGPT gave a valuable warning about using it for research or anything important. If you know how to get the most form it, it can of course save you lots of time. For the moment, I’d suggest learning about prompting and remaining cautious at all times.