Macro Musings with David Beckworth Basil Halperin on Macroeconomic Policy in an Age of Transformative AI
Apr 27, 2026
Basil Halperin, assistant professor of economics at the University of Virginia who studies macroeconomics and AI, unpacks how transformative AI should affect real interest rates and why markets are skeptical. He critiques viral AI narratives, contrasts menu-cost pricing with Calvo models, and explores AI's fiscal, housing, and global implications in concise, probing conversations.
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Transformative AI Should Raise Real Interest Rates
- Transformative AI expectations should raise long-term real interest rates because higher future consumption reduces current saving and raises demand for capital.
- Halperin points out the 30-year real rate (~2.75%) is normal historically, so markets are not pricing imminent 30%‑per‑year GDP growth scenarios.
Growth And Extinction Risk Both Lift Interest Rates
- Both higher expected growth and higher extinction risk raise the real interest rate via consumption‑smoothing: if you're richer later or dead, you save less today.
- Halperin explains lower saving today tightens the supply of loanable funds and pushes up rates.
Do No Harm With Monetary Policy During AI Transitions
- Monetary policy can help by not making transitions worse, but it cannot solve distributional shifts from AI; fiscal policy must handle redistribution.
- Halperin advises central banks should 'do no harm' and avoid policies that amplify structural unemployment during AI transitions.