AI macro forecasting through Lucas and Hayek: infinite regress vs the price system
danielrock · x · 2026-10-29
A substantive economics thread using Lucas and Hayek to analyze AI's ability to forecast the macroeconomy. Lucas: people strategically adjust behavior to expected policy; AI may be perfect forecasters that anticipate the adjustment, but that leads to infinite regress. Hayek: can AI handle local and private information? The price system's genius is compressing that complexity — including strategic responses — into a finite set of market-clearing statistics; the author argues AI would need an actual structural model of every individual's behavior and how they adjust to economic changes to replicate it.
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