Ecotheoretica
241 posts
Very big deal. @HyunSongShin is a legit rock star of financial and monetary economics. Reminiscent of Raghuram Rajan being named to run the Reserve Bank of India or Stan Fischer to run the Bank of Israel.
There's an economics theorem called Alchian-Allen. And it has the very interesting implication that AI labs will be able to charge *higher* margins on their best models as compute gets scarcer. As compute gets more expensive, the cost of running any model goes up. So you might as well pay a bit more to make sure you're running the very best model. Which means the economics of being at the frontier improve, because if you’re not running the very best model, then you’re underutilizing this very precious compute. This pushes the AI model market towards winner-take-all; if you're the best, you can get away with charging an even higher margin. @dylan522p tells me that we’re already seeing this today: all the revenue in the industry is on the best models. That’s the Alchian-Allen effect. If there’s a cost increase that’s roughly the same for all products, then the relative difference in price between higher and lower quality goods actually goes down. Consumers become relatively more willing to pay for the premium product. And it means that as the compute shortage hits, AI labs can capture more margin - not less, as you might expect - because consumers are choosing premium models more often.
We are back! Our first talk after the winter break is on Monday, 16 March 2026, at 3 pm UK time. 🔸Andrea Prat🔸 from Columbia will present "Competing Ideologies: Fit, Simplicity, and Fear", with José Luis Montiel Olea. @andreapratnyc
Our working paper: we design algorithms for proportional representation in clustering. Our algo for the unconstrained setting is also the first known P-time approx algo for the well-studied PF axiom (Chen et al., ICML 2019). @bartonelee2 cse.unsw.edu.au/~haziz/fairclu…
