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In this week’s Grumpy Economist Weekly Rant, John Cochrane challenges an open letter calling on economists, technology leaders, and policymakers to act now to shape the development of artificial intelligence. Although the letter acknowledges AI’s potential to raise living standards, it also warns of large-scale job displacement and urges governments to build the incentives, guardrails, and institutions needed to steer the technology. Cochrane argues that this demand moves too quickly from uncertainty about AI’s effects to confidence in policymakers’ ability to manage them.
Cochrane questions both the economic and institutional assumptions behind the letter. Technological progress has displaced particular forms of labor for centuries without producing permanent mass unemployment, while regulation requires evidence of a market failure and confidence that government intervention can improve the outcome without inviting cronyism or protection. Rather than granting policymakers broad authority over an emerging technology, he argues that the burden should remain on advocates of regulation to explain the specific failure they seek to correct and demonstrate that public institutions are capable of correcting it.
Transcript
Hi, I’m John Cochrane, senior fellow here at the Hoover Institution, and welcome to my Grumpy Economist Weekly Rant.
Today, I’m going to rant about the rush to regulate AI before anyone understands it.
Recently, Stanford’s AI Center spearheaded an open letter that gained a lot of attention. Letter, admirably concise, starts: “AI could drive an unprecedented transformation of our economy. It could bring risks, including large-scale job displacement.”
The letter concedes AI might also bring major gains in living standards. But the letter goes on to demand that economists, policymakers, and technology leaders must act now to understand the economics of transformative AI.
Understanding is nice, but economists don’t seem to need much prodding or more subsidies, given the flood of work on AI, which is getting about as far as we usually do when we speculate about the unknown. Economists can barely agree on minimum wages and taxes. Our climate estimates are all over the map.
But here’s the really important part. It goes on: “We, and especially those policymakers, must also act now to build incentives, guardrails, and institutions needed to steer AI in a direction that complements humans and benefits society.”
Over 250 prominent people signed the letter, including famous economists, Nobel Prize winners, historians, and tech titans. Me, I wrote a scathing tweet.
You must be kidding. Act now before—ha—anybody has any idea what AI will do.
Thank goodness nobody thought it was their business to steer the steam engine to complement humans and benefit society and avoid large-scale job displacement of the horse drivers and sailing ship mariners.
It’s been 300 years since our economy started explosively substituting for human labor, and the unemployment rate is 4%.
Most of all, I reject the basic premise about how our government and society work.
Where are these dispassionate, apolitical, technocratic policymakers who know how to steer AI? This is the crowd that steered our catastrophic COVID policies. It’s now steering a trade war. They’ve already killed AI in Europe.
Let policymakers fix the dumpster fires of our social programs, our building restrictions, our appalling public infrastructure, our broken tax code, our failing schools before they go on to steer some vague AI crusade.
What happened to America? Land of limited government, rule of law, individual rights, where our economic life is not run by policymakers.
What happened to basic economics? Especially for you, the economic signatories.
To regulate, you’re supposed to document a market failure and then document that a regulatory body has the capacity to address that failure without inviting an avalanche of cronyism and protection.
This sort of catastrophizing has a long and sorry history. Only five years ago, remember, they wanted to retrain manufacturing workers to code. And now, coding is dead, and everyone wants to bring back manufacturing.
Think of the population bomb, the resource crisis, nuclear power, genetically modified foods, stem cells—wrong every time.
Cheer up. These letters come and go. They leave behind only a small stain on the reputations of their signatories and associated institutions.
For example, in 2025, Nobel Prize winners signed an unprecedented plea for governments to develop moonshot technologies to avert a hunger catastrophe coming in the next 25 years. Hm, by the way, maybe that’s AI.
In 2021, they demanded a global fossil fuel nonproliferation treaty to shut down fossil fuels.
Sixteen economics Nobel Prize winners wrote a letter decrying Trump in 2024. Twenty-three endorsed Kamala Harris, warning, strangely for economists, that tax cuts would increase inequality and that the economy would fall apart.
Two separate Nobel economist letters predicted disaster should Javier Milei be elected in Argentina.
If you’re wrong about everything often enough, the world tunes out.
Thanks for listening, and if you enjoyed my Weekly Rant, please click to subscribe.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.