🚨 New paper🚨 How will AI affect the economy via making software engineering cheaper and better? With great coauthors Alex Blumenfeld, @ChenLian92 and Andreas Schaab. (1/9)
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AI's economic impact? By the end of 2025, markets priced in 32.6 percent higher software engineering productivity, implying 3.6–6.5 percent higher GDP. Both more than doubled by mid-2026, from Alex Blumenfeld, @JADHazell, @ChenLian92, and Andreas Schaab
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This is going to be a fantastic conference, jointly organized with @JADHazell and Chen Lian. A special thanks to @ChadJonesEcon for keynoting and to our amazing speakers @alexolegimas @DanialLashkari @_LukasFreund_ @TaniaBabina @gregorschub @laura_veldkamp and @DimitrisPapan20
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Using plausibly exogenous veterans’ payments, new evidence shows stimulus checks generate large, hump-shaped increases in consumption, with multipliers above 2 after a year, from @jptguerreiro, @JADHazell, @drkaenzig, and Ed Manuel
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Very happy to share that my colleagues at LSE have voted to award me tenure!
New CEPR Discussion Paper - DP21941
The Macroeconomic Effect of Stimulus Checks: Evidence from Postwar Veterans’ Payments
@jptguerreiro @UCLA, @JADHazell @LSEnews @LSEEcon, @drkaenzig @NUEconomics @NorthwesternU, Edward Manuel @LSEnews @LSEEcon
#CEPR_IMF# #CEPR_MEF# #EconTwitter#
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New CEPR Discussion Paper - DP21944
The Macroeconomic Effect of AI: Sizing the Software Engineering Channel
Alex Blumenfeld @UCBerkeley, Jonathon Hazell @JADHazell @LSEnews @LSEEcon, Chen Lian, Andreas Schaab @UCBerkeley
#CEPR_MG# #CEPR_AP# #EconTwitter#
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Our paper on the macro effect of stimulus checks—with @jptguerreiro, @drkaenzig, Ed Manuel—now has a replication package!
For researchers trying to estimate the macro effect of stimulus checks: please use, feel free to reach out to us with questions!
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🚨 New paper🚨 What is the effect of stimulus checks on the economy? We study a natural experiment: postwar veterans’ payments. With awesome coauthors @jptguerreiro, @drkaenzig and Ed Manuel. 1/10
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MY MAN: (comes home)
ME: (nervous) how was the store
MY MAN: fine
ME: oh thank g —
MY MAN: ran into jolene
ME: oh no
MY MAN: she mentioned you left kind of an intense voicemail
I had a crazy social experience Thursday night
I was at a semi-professional gathering. Someone, I’ll call him Notable Writer (NW), walked up to me in front of several other people and said hi.
Context: Our last interaction was several years ago, during the period I was (or perceived myself as) “very canceled,” - and from my perspective he was notably cruel to me. The following is mostly not direct quotes but is paraphrased, because I was overwhelmed while this conversation was happening and cannot remember exact details.
NW: “Lydia I haven’t talked to you in years! Hi how are you”
Me: “we haven’t talked in years because you were a giant asshole to me!”
NW: “what?”
Me: (literally shaking) “I can’t believe you’re even talking to me right now”
(I don’t think I raised my voice, but the force of my anxiety and anger was so strong, it radiated off me. A couple of onlookers literally backed away and found something else to do)
NW: “what? what are you talking about? When was I mean to you? Where? If it was public that doesn’t count. People argue in public all the time”
Me: “what??? You were so mean to me - PRIVATELY! In Twitter DMs!! IT WAS MY LOWEST POINT AND YOU WERE SO MEAN TO ME”
NW: “I don’t remember this at all”
Me: “LOOK AT YOUR DMS THEN”
NW: (looks at his DMs)
NW: “… okay yeah I was mean. I’m sorry”
Me: (in shock)
NW: “I’m really sorry. I didn’t mean to hurt you like that. Honestly I was just scared of getting dragged into the situation you were in, so I pushed you away.”
Me: “honestly that’s understandable! it was a very scary situation! I didn’t like being in it either.”
NW: “I never said anything bad about you publicly, you know”
Me: “I know. I really appreciate that.”
(We hug)
…
Here’s what blows my mind about this. When NW and I had this interaction over DMs in 2024, I cycled on that interaction for days. Maybe weeks??? I felt SO HURT
I was so hurt, it never even occurred to me that the interaction was unimportant to him. That he just… forgot
I feel like there’s some Moral of the Story here about reconciliation but I’m not sure what it is 😹
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Oh this makes me teary-eyed. Joe was an undergrad at Cambridge at the same time (I think) as Lukas was a PhD student. I wrote two papers with Lukas, and he is a one-of-a-kind coauthor. Joe was, and is, a sweetheart with an impressive intellect.
Scholars and gentlemen.
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Delighted to get the Lukas Freund treatment for one of our papers! Read on to learn about how financial markets are pricing productivity gains from AI.
One of my favorite papers at the NBER SI so far:
The Macroeconomic Effect of AI: Sizing the Software Engineering Channel by Blumenfeld - @JADHazell - @ChenLian92 - Schaab. (link below)
❓Big question: what are the effect of AI on software engineering productivity and ultimately on GDP?
💡 Key idea: let's infer this from stock prices.
Concretely, firms that rely more heavily on software engineers should benefit disproportionately from AI advances. Stock prices should reflect this: firms with higher software engineering intensity should exhibit higher stock return sensitivity to an AI index. The magnitude of this cross-sectional relationship, i.e. how steeply stock return sensitivity to the AI index rises with software engineering intensity, is informative about the size of the underlying AI-induced software engineering productivity growth.
The paper carefully develops and implements this idea, using stock prices + Revelio payroll data, along with a model that maps the cross-sectional relationship into SWE productivity and GDP.
➕ 2-and-a-half major advantages of this methodology:
(1) Stock prices capitalize the entire expected future path of AI-driven productivity gains - not only the improvements delivered by today's tools.
(2) The estimates can be updated in real time, incorporating new AI-related information.
(3) The approach side-steps the difficult question of how to aggregate from task-level gains to overall software engineering productivity gains. (Of course, this challenge still looms big in the background--it's just ~left to market participants to solve.)
Of course, the approach works only as well as financial markets can price AI-related information - it inherits mis-pricing due to over-reaction, general exuberance, etc. As Joe put in his fantastic talk: "possibly wrong, hopefully useful".
Very exciting and, imho, useful work.
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🚨 New paper🚨 What is the effect of stimulus checks on the economy? We study a natural experiment: postwar veterans’ payments. With awesome coauthors @jptguerreiro, @drkaenzig and Ed Manuel. 1/10
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