Mark Koyama

Author of Persecution & Toleration ( & How the World Became Rich ( Substack (

[Mark Koyama @MarkKoyama]

I'm setting up a economic history newsletter. If interested please subscribe to How the World Became Rich https://t.co/W9gvwy98C0

[Mark Koyama @MarkKoyama]

Great session at Markets and Society today in Falls Church

[Josh Barro @jbarro]

This is strange. I was told the foreign countries pay the tariffs, so why would this help in the election?

[Jason Furman @jasonfurman]

I'm thrilled to be launching Econvitals today. It's been the main way in which I have been tracking and understanding the economy over the last several months. And I decided I might as well share it with all of you--for free.

Has a combo of website, email lists & social media.

[Paul Novosad @paulnovosad]

> sees new Shukla and Imas essay
> drops everything to read it

[Mark Koyama @MarkKoyama]

@eye_of_newton true. That was probably even worse.

[Mark Koyama @MarkKoyama]

Interfolio is terrible software. I wish we could coordinate on not using it.

[Mark Koyama @MarkKoyama]

Just when I am ready to write letters . . .

[Mark Koyama @MarkKoyama]

Interfolio is terrible software. I wish we could coordinate on not using it.

[Ryan Bourne @MrRBourne]

COMING OCTOBER 29: I'm launching a new economics podcast for the @CatoInstitute called The Economics of It.

Subscribe now to ensure you receive the first episode with @Kalshi CEO @mansourtarek_ direct to your feed.

Links to channels in next tweet.

[Hanno Lustig @HannoLustig]

A cornerstone of modern economics is that governments respond to incentives, just like other agents, and once they have developed and rolled out a new tool to tax people, they're likely to keep using it, regardless of what the law says. They can't credibly commit to not doing that. And billionaires may understand that governments will do just that.
Thinking about incentives rather than just looking at the text of the law is what economists do.

[Jesús Fernández-Villaverde @JesusFerna7026]

Everyone talks about what AI will do. But almost nobody asks who will pay for the machines. Taking advantage of AI will require an extraordinary amount of capital, from data centers to new power plants. Will that capital be around?

I try to address that question in the first draft of my new paper “Saving for the Machines.”

To show how important capital is to fuel the transition to an AI-based economy, I document how the same technology path that generates 11.7% annual growth when households choose their saving rate optimally delivers only 2.2% when the saving rate remains fixed. In other words, if we experience slow growth over the next few years despite fast improvements in AI, this slow growth may reflect too little capital accumulation instead of a technological bottleneck.

The key to this result is that AI raises the capital share by moving tasks from labor to machines, which requires that those machines are built. In comparison, ordinary technical progress makes labor and existing machines better at the tasks they already perform.

To inspect the mechanism, I start from an accounting identity: the saving rate is the capital share times the ratio of investment to capital income. If I take the evolution of the capital share as given, I can ask how much the latter ratio moves in response to that evolution. Crucially, with an optimizing household, this ratio barely moves. As machines take over tasks and the return to capital rises, the household responds by letting consumption grow faster, by the intertemporal elasticity of substitution times the rise in the return. To pay for that faster consumption, capital must also grow faster by the same amount. So, the household keeps investing about the same fraction of what the machines earn. And since machines earn a larger share of output, the saving rate also goes up. With a fixed saving rate, the same accounting identity tells me the opposite: the ratio falls in proportion as the capital share rises.

Will the U.S. and other advanced economies then generate enough capital? For many reasons, I doubt it. We might end up in a situation where many of the opportunities offered by AI are left on the table. This is particularly important for all who think that AI might get us out of many problems, such as fiscal troubles (like in France) or ultra-low fertility. We need to save for the machines, and it is not clear we can do that.

Anyway, this paper has been long in the making (many months of hard work), but I have learned much from it. In particular, working through the model changed my mind about many issues related to AI. Again and again, my intuition said X, but the math said Y. And math always won in the end. That is why we write formal models.

A nice example is Proposition 5, whose proof is the one I like the most in the paper. With improving machines and strong task complementarity, there is no fixed balanced growth path because the target itself keeps moving. The nice part of the proof is to realize that, after the right normalization, the moving target becomes a fixed point, and the saddle gets steeper as machines improve. So instead of falling behind, the economy tracks the moving BGP more and more closely. A fair amount of ODE work to get there, but a very simple economic idea underneath it once you get it.

The paper is here:

https://t.co/zthH4T6nS3

and the slides are here:

https://t.co/VAsvWd9EQn

[Mark Koyama @MarkKoyama]

@MrRBourne one of the worst people on this platform (which is saying a lot)

[Mark Koyama @MarkKoyama]

@JesusFerna7026 I am really focusing my current class on 20th century economic history on socialism and fascism too.

[Brian Albrecht @BrianCAlbrecht]

GDP growth is actually very good and we should aim for more of it

[Noel Johnson @noeldjohnson]

AI is very good at making interactive explainers of research. Here’s what it did for my paper on the impact of the Black Death on printing press adoption.

https://t.co/LLuaTUroIl

HT to @MarkKoyama for the idea.

[alberto bisin @albertobisin]

What's happening with Games Economic Behavior (the journal) ... haven't heard anything after the initial firing of the editors ...

[Mark Koyama @MarkKoyama]

Even if the Normans won a battle or two, is there any doubt that Roman logistics (high empire) were so superior that they would win the war?

[Daniel Franke @medievaldaniel]

Basically the Normans are the answer to "what if the Vikings had cavalry?"

I'm coming around to the Norman side vs the Romans.

[Mark Koyama @MarkKoyama]

@GeorgeSelgin I read Less than Zero but not carefully enough to pick up that point . . . I recall thinking it was weird when I first studied economic history properly back in the early 000s.

[George Selgin @GeorgeSelgin]

In this interview Mr. Ahamed states matter-of-factly that the U.S. was in a recession for "half the period from 1873 to 1896." But for some time now a well-regarded, revised cycle chronology (Joseph Davis's) has the '73 downturn lasting less than 3 years! 1/

[Mark Koyama @MarkKoyama]

Bernstein, Mahler n. 7 https://t.co/CwKxoBoQO7
Masterful.