Zach Mazlish

Nice short post from Dan showing why using only an aggregate production function can lead to misleading conclusions about the potential growth effects of AI. Recommended!

5) This is pure speculation, but I am tempted to think the fixed costs of re-optimizing one's portfolio are also the biggest reason financial markets are (surprisingly?) "inelastic"
cowles.yale.edu/sites/defaul...

For evidence that specifically *optimization* costs lead to fixed costs of price changes:
econweb.umd.edu/~stevens/pap...
The fixed costs of wage change papers describe their costs as “negotiation” costs, but I am inclined to think re-optimization costs are also important.

4) Two recent papers have fixed costs in wage adjustments, which help rationalize why workers dislike inflation and why workers' real wages fell in the recent inflation episode:
jadhazell.github.io/website/draf...
www.nber.org/papers/w3323...

3) Arguably, price and wage stickiness is primarily due to fixed re-optimization costs.
@basilhalperin.com shows us that if price rigidities are due to fixed costs, something like NGDP targeting is optimal monetary policy (rather than inflation targeting)
basilhalperin.com/papers/halpe...

2) Default asset allocations in 401(k) plans can have a massive effect on households' stock/bond allocations: typical HH shares of wealth in the stock-market might be ~10-20pp higher if 401(k) defaults were target date funds rather than money market funds
tinyurl.com/47mt6m2k

1) If you give people cash, many stick to a rule of thumb of "spend/save it all" until the transfer crosses some threshold where re-optimizing becomes worthwhile.
=> response of the economy to stimulus checks is very sensitive to the size of those checks
joelflynn.com/wp-content/u...

Hard to overstate how revelatory this paper was for me — one takeaway I had from it was "small fixed costs can really deter people from optimizing."
Which made me think about a few other recent papers where fixed optimization costs are a key ingredient: