2026-03-03 15:24:21
I thought this was one of the five or six best movies of the millennium so far, comparable in quality to say Uncle Boonmee or Winter Sleep. The soundtrack is one of the very best, ever. The production is joint Spanish and French. The story starts with a Spanish father looking for his lost (grown) daughter at a rave in Morocco. He then meets up with some other parties and a story ensues. I do not consider it a spoiler to report that I consider this a movie about the end of the world, so to speak. Here is the trailer for the film.
It has been playing in NYC and LA for a while, and this Friday it opens for a week in many more cities. The big screen is essential, so see it while you can.
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2026-03-03 13:32:02
We use long-run annual cross-country data for 10 macroeconomic variables to evaluate the long-horizon forecast distributions of six forecasting models. The variables we use range from ones having little serial correlation to ones having persistence consistent with unit roots. Our forecasting models include simple time series models and frequency domain models developed in Müller and Watson (2016). For plausibly stationary variables, an AR(1) model and a frequency domain model that does not require the user to take a stand on the order of integration appear reasonably well calibrated for forecast horizons of 10 and 25 years. For plausibly non-stationary variables, a random walk model appears reasonably well calibrated for forecast horizons of 10 and 25 years.
That is from a new NBER working paper by Kurt G. Lunsford and Kenneth D. West. If you do not know macro, here is a GPT translation in plainspeak. And this new paper suggests macro shocks do not matter that much.
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2026-03-03 04:21:53
2. Just say no to the monopsony model.
3. Your dose of John Cochrane.
4. More on the recent climate change estimate. It seems the paper should not have been published?
5. “During their lives, centenarians rarely get sick.“
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2026-03-03 01:23:07
From my new Free Press column, I see these as the most important facts:
Congress has not passed explicit regulation of AI foundation models, and an executive order from President Trump limited regulation at the state level. But do not think that laissez-faire reigns. In addition to existing (largely pre-AI) laws, which lay out general principles of liability, and laws from a few states, the United States is engaged in a kind of “off the books” soft regulation.
The major AI companies keep the national security establishment apprised of the progress they are making, as has been the case with Anthropic. There is a general sense within the AI industry that if the national security authorities saw anything in the new products that was very concerning or that might undermine the national interest, they would inform the president and Congress. That would likely lead to more formal and more restrictive kinds of regulation, so the major AI companies want to show relatively safe demos and products. An informal back and forth enforces implied safety standards, without the involvement of formal legislation.
That may sound like an unusual way to do regulation, but to date the system has worked relatively well. For one thing, I believe our national security establishment has a better and more sophisticated understanding of the issues than does Congress. Congress right now simply isn’t up to the job, as indeed the institution has been failing more generally. Most representatives seem to know little about the core issues behind AI regulation.
As it stands, AI progress has been allowed to proceed, and the United States has stayed ahead of China, without major catastrophes. The burden on the companies has been manageable, and the system, at least until last week, was flexible.
Another advantage of this system is that both Congress and the administrative state can be very slow to act. The AI landscape can change in just weeks, yet our federal government is used to taking years to issue laws and directives. Had we passed AI legislation in, say, 2024, today it would be badly out of date, no matter what your point of view on what such regulation should accomplish. For instance, in 2024 few outsiders were much concerned with the properties of, or risks from, autonomous AI “agents.” Today that is the number-one topic of concern.
Though it is not driven by legislation, the status quo AI regulatory system is not anti-democratic, as it operates well within the rules passed by Congress and the administrative state. It is more correct to say the current AI guardrails rely on the threat of regulation, rather than regulation itself, with the national security state as the watchdog. The system sticks to a kind of creative ambiguity. The national security state offers no official imprimatur for the new advances, but they proceed nonetheless. Nevertheless, the various components of the national security state reserve the right to object in the future.
It is also correct, however, to believe that such a system cannot last forever. At some point creative ambiguity collapses. Someone or some institution demands a more formal answer as to what is allowed or what is not allowed. At that point a more directly legalistic system of adjudication enters the picture, and Congress likely starts paying more attention.
With the recent dispute between Hegseth and Anthropic, we have taken a step away from the previous regulatory mode of quiet cooperation. Instead, the relationship between the military and the AI companies has become a matter of public concern. Now everyone has an opinion on Hegseth, Anthropic, and OpenAI, and social media is full of debate.
No matter “whose side you take,” it would have been better to have resolved all this behind closed doors.
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2026-03-02 20:19:12
My latest paper, Chaos and Misallocation under Price Controls, (with Brian Albrecht and Mark Whitmeyer) has a new take on price controls:
Price controls kill the incentive for arbitrage. We prove a Chaos Theorem: under a binding price ceiling, suppliers are indifferent across destinations, so arbitrarily small cost differences can determine the entire allocation. The economy tips to corner outcomes in which some markets are fully served while others are starved; small parameter changes flip the identity of the corners, generating discontinuous welfare jumps. These corner allocations create a distinct source of cross-market misallocation, separate from the aggregate quantity loss (the Harberger triangle) and from within-market misallocation emphasized in prior work. They also create an identification problem: welfare depends on demand far from the observed equilibrium. We derive sharp bounds on misallocation that require no parametric assumptions. In an efficient allocation, shadow prices are equalized across markets; combined with the adding-up constraint, this collapses the infinite-dimensional welfare problem to a one-dimensional search over a common shadow price, with extremal losses achieved by piecewise-linear demand schedules. Calibrating the bounds to stationlevel AAA survey data from the 1973–74 U.S. gasoline crisis, misallocation losses range from roughly 1 to 9 times the Harberger triangle.
Brian has a superb write up that makes the paper very accessible. Unfortunately, the paper is timely and relevant.
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2026-03-02 13:56:43
Numerous nations in the Middle East are being pulled into the current conflict and have received missile attacks from Iran. I believe the proper Bayesian update is that Brazil is underrated.
The country has plenty of water, and lots of capacity to grow its own food. It is an agricultural powerhouse. It is developing more and more fossil fuels. No neighbor or near neighbor dares threaten it. You cannot imagine conquering it, because even the government of Brazil has not conquered its own country.
It is big enough that even the United States can push it around to only a limited degree.
Crime rates are high, but on the up side that gives the place a certain resiliency. People are used to bad events, and society is structured accordingly. You cannot write of “Brazil falling into dystopia” without generating a laugh.
If immigration bothers you (not my view), Brazil and Brazilian culture is not going to be swamped by people coming from somewhere else. For better or worse.
Brazil has “stayed Brazil” through both democracy and autocracy.
Worth a ponder. Here is an FT piece on “Brazil’s Dubai.”
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