A Conversation With Daron Acemoglu

How Liberal Democracy Can Survive an Age of Spiraling Crises. Foreign Affairs. Published on December 18, 2025.

Intro

The world is in the throes of a pervasive crisis:

1. Widening economic inequalities.
2. Breakdown in public trust. 
3. Liberal democracy under strain.
4. Economic alienation.
5. Threat of technological change.

About AI

Thesis: 

• AI will contribute only 1% to US GDP growth over the coming decade (0.1% a year).

Facts: 

• AI limitations in improving productivity.
• Replacing workers with machines and increasing productivity is not revolutionary.
• Technologies need to be integrated into organizations, which is not easy.
• The numbers came out to be quite modest. It's 1% or 10%, not 50%.
• AI is going to have fundamental impacts on our society in 10 to 20 years.

Perceptions:

• A lot of the investment is driven by hype and racing.
• A winner-take-all perception to justify the big investments.
• AI as an unstoppable gale.
• AI is so different from the rest of technologies that we have little to learn from the past. 

Historically, the adoption of new technologies, has been:

• Very slow.
• Unequal for winners and losers.
• The birth pains of any technology are going to be more than what you might first expect. 

For instance, the first 80 or so years of the British Industrial Revolution:

• Waving machines were incredible.
• Real wages fell (the wages of weavers were reduced by two-thirds).
• Working hours lengthened.
• Working conditions became horrible.
• Life expectancy was of 29 years.

Drawing analogies from history:

• We shouldn't expect AI to spread that fast in the production process.
• It might create big winners and losers...
• ...unless democratic oversight and institutional adjustments.
• Caution about that we will all benefit from this technology.
• US are locked into an existential race to AGI.

Use technology in the right way:

• To help when we are undergoing demographic change
• Make the energy sector less fossil fuel intensive 
• Design cities in a more sustainable way.
• To provide new goods and services for an aging population.
• AI to make workers more productive without destroying jobs.

About Geopolitics

The challenges that the world faces are largely global:

1. AI.
2. Pandemics.
3. Climate change.
4. Demographic change.
5. Nuclear nonproliferation.
6. Taxation and regulation of powerful multinational companies.
7. Inequality.
8. Aging of populations.
9. Macroeconomic risks.
10. China-US-Russia rivalry.

All of which require global cooperation. So the racing mentality is dangerous.

About US

The divergence between the U.S. and the rest or between Britain and Southern Europe, between parts of India that industrialized and parts didn't, it's all related to industrializations, new ideas, new technologies. So you have to think of the institution's role in fostering this dynamism.

You see the same pattern inside the US. It's in the Northeast of the United States where you see the patents, the new entrepreneurs, the new machines. It's not because in the south there was slavery, it's because institutions.

US is destroying every valuable part of its economic engine:

• US higher education system:
• Grants are being cut.
• Universities have been declared enemies of the administration.
• Immigration:
• Blocking foreign talent from coming in.
• Legal institutions:
• Courts now are not impartial.
• Special treatment.
• Innovation.
• Discouragment by biased courts, procurements, property rights...
• Weakening of US dollar currency.
• Weakening of institutions.

About China

China's features:

• Infrastructure spending
• Digital infrastructure.
• Education: engineers
• Industrial policy is a double-edged sword.
• Top-down Chinese approach is very costly, it does not allow a competition of ideas.

Bottlenecks for China:

• Institutional structure.
• Hierarchical nature of how entrepreneurship and science is done.
• Authoritarian way in which questions are resolved.

About Growth

Four approaches to explain growth:

• Geographic. Geography didn't change, but wealth did through time.
• Cultural. Culture change, interacting with institutions.
• Institutional. It's institutions what matters.
• Lucky. Europe colonized the right places.

Why Nations Fail Thesis: 

• Authoritarian regimes can grow for short periods of time, for decades sometimes. 
• For sustained growth driven by innovation, it is inclusive institutions that have an advantage.

About Democracy

The crisis of democratic capitalism:

1. Repression.
2. Turbulence.
3. Disintegration of democratic institutions.

People are feeling increasingly that they don't have voice. Declining trust in:

1. Institutions
2. Journalism
3. Academia
4. Congress
5. Presidency
6. Courts

How do we navigate these very turbulent waters?

• Strengthen our institutions, starting from local communities to the nation states and then some global cooperation.
• To revive the promise of liberal democracy: working-class liberalism. 
• Scandinavian states as potential models, taking idiosyncrasies into account.

7 libros sobre desigualdad

1. Desigualdades: Por qué nos beneficia un país más igualitario. Raymundo M. Campos Vázquez. 2022.
2. Por una cancha pareja. Igualdad de oportunidades para lograr un México más justo. Roberto Vélez Grajales y Luis Monroy-Gómez-Franco. 2023.
3. No es normal: El juego oculto que alimenta la desigualdad mexicana y cómo cambiarlo. Viri Ríos. 2023.
4. Pobres porque quieren: Mitos de la desigualdad y la meritocracia. Máximo E. Jaramillo Molina. 2024.
5. Desiguales: Una historia de la desigualdad en México. Diego Castañeda Garza. 2024.
6. ✓Los multimillonarios no pagan impuestos sobre la renta y vamos a acabar con eso. Gabriel Zucman. 2025.
7. Equality: What It Means and Why It Matters. Thomas Piketty y Michael J Sandel. 2025.

Directores del CEE

Raymundo Miguel Campos Vázquez
Alejandro Ildefonso Castañeda Sabido
José Antonio Romero Tellaeche
Antonio Yúnez Naude
Jaime Sempere Campello
Horacio Enrique Sobarzo Fimbres
Adalberto García Rocha
José Carlos Roces Dorronsoro
Jaime José Serra Puche
Alain Ize
Jesús Seade Kuri

Macroeconomics propaedeutics

Macroeconomics. Gregory Mankiw.
Macroeconomics. Dornbusch & Fischer.

#	Topic	Mankiw	Dornbusch
1.1	National Accountings	1, 2	1, 2
2.1	Demand and Income	9	3
2.2	Money, Interests, IS-LM	10	4
2.3	Monetary and Fiscal Policies	5	5
2.4	International Relations	7, 11	6
3.1	Aggregated Demand		7
3.2	Aggregated Supply	12	8
3.3	Rational Expectations		9
3.4	Growth	3, 4, 6	10
4.1	Demand and Supply of Money	18	13, 14
4.2	Inflation and Unemployment	5	16, 17
4.3	Exchange Rate and Balance of Payments		18, 19

Edgeworth box

In economics, an Edgeworth box, sometimes referred to as an Edgeworth-Bowley box, is a graphical representation of a market with just two commodities, X and Y, and two consumers. 

1. Francis Ysidro Edgeworth presented it in his book Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences, 1881.
2. The dimensions of the box are the total quantities Ωx and Ωy of the two goods. 
3. Any feasible allocation of the items between the individuals is included as a dot in the box.
4. The individuals’ preferences over the items are represented through indifference curves. 
5. Convex indifference curves are considered to be the usual case. 
6. They correspond to diminishing returns for each good relative to the other. 
7. Exchange within the market starts from an initial allocation known as an endowment. 
8. The main use of the Edgeworth box is to introduce topics in general equilibrium theory in a form in which properties can be visualised graphically. 
9. It can also show the difficulty of moving to an efficient outcome in the presence of bilateral monopoly.
10. In the latter case, it serves as a precursor to the bargaining problem of game theory that allows a unique numerical solution.

Indicadores de crisis

Los indicadores más raros de una crisis económica:

1. Tacones. En una crisis, se buscan lujos accesibles en lugar de grandes compras. Los tacones altos se vuelven más populares.
2. Calzones. Los hombres compran menos ropa interior.
3. Labial. Bajan las compras de lujo, suben las de labiales.
4. Rascacielos. Sube la construcción de rascacielos como refugio a la inversión.
5. Cajas de cartón. Disminuye la producción de cartón, señal de que el comercio se está frenando porque hay menos envíos.

Historia del Banco de México

Historia del Banco de México. Eduardo Turrent Díaz. 2015-2025.

1. Antecedentes, fundación y despegue (1880-1929)
2. Consolidación y formación de la tormenta (1925-1940)
3. El gran reto regulatorio (1940-1945)
4. Banco central heterodoxo (1940-1945)
5. Reorganización programática (1944-1948)
6. Borrón y cuenta nueva (1948-1954)
7. Los fundamentos de una política exitosa (1954-1962)
8. El Banco de México en acción (1954-1962)
9. Esfuerzos para el desarrollo (1954-1970)
10. Viento en popa (1954-1970)
11. Proyectos constructivos (1954-1970)
12. Barruntos de tormenta (1954-1970)
13. Durante el Desarrollo Compartido (1970-1976)
14. Proyectos notables y gestación de la crisis (1970-1974)
15. Banxico en el remolino del espejismo petrolero (1976-1982)
16. Las consecuencias del inflacionismo (1976-1982)

FedWatch

What is the likelihood that the Fed will change the Federal target rate at upcoming FOMC meetings, according to interest rate traders? Use CME FedWatch to track the probabilities of changes to the Fed rate, as implied by 30-Day Fed Funds futures prices.

Macroeconomía

Macroeconomics. Gregory Mankiw.

I. Contabilidad Nacional.

• Introducción. Chapters 1 & 2.

II. Demanda e Ingreso. 

• Ingreso y gasto. Chapter 10.
• Dinero, interés e ingreso. Chapter 11.
• Política monetaria y política fiscal. 
• Las relaciones internacionales. Chapters 8 & 12.

III. Demanda y Oferta.

• Oferta agregada. Chapter 13.
• Crecimiento económico. Chapters 3, 4, 5 & 7.

IV. Aspectos Monetarios.

• Oferta y demanda de dinero.
• Inflación y desempleo. Chapter 6.
• Déficit, inflación y deuda. Chapter 19.
• Tipo de cambio y balanza de pagos.

Macroeconomics

Macroeconomics. Rudiger Dornbusch & Stanley Fischer.

I. Contabilidad Nacional.

• Introducción. Chapters 1 & 2.

II. Demanda e Ingreso. 

• Ingreso y gasto. Chapter 3.
• Dinero, interés e ingreso. Chapter 4.
• Política monetaria y política fiscal. Chapter 5.
• Las relaciones internacionales. Chapters 6.

III. Demanda y Oferta.

• Introducción. Chapter 7.
• Oferta agregada. Chapter 8.
• Expectativas racionales. Chapter 9. 
• Crecimiento económico. Chapters 10.

IV. Aspectos Monetarios.

• Oferta y demanda de dinero. Chapters 13 & 14.
• Inflación y desempleo. Chapters 16 & 17.
• Déficit, inflación y deuda. Chapters 18 & 19.
• Tipo de cambio y balanza de pagos.

Jean Claude Trichet y Guillermo Ortiz

Jean Claude Trichet (Lyon, 1942). Civil Engineer, was head of the Trésor Public, governor of the Banque de France, president of the European Central Bank, member of the board of directors of the Bank for International Settlements, among others.

• 2008, First Crisis of the New Globalization: Developed economies, former Socialist countries and Developing world. Speed of transmission. Non conventional measures. Magnitude of support: 25% GDP. Progressive deactivation of measure to avoid jumps and falls.
• Fiscal policy must be treated with care and responsibility. Control for deficits and debt in the Eurozone. Surveillance of peers. The Greece Case.
• Europe needs more flexible markets of goods, services and labor. Need of structural reforms.
• Opportunity for growth through globalization. Work needed in the resilience and flexibility of the system.

Alan Greenspan y Guillermo Ortiz

Arquitectos de la economía mundial. 2010.

• Bubbles, by definition, deflate. The subprime bubble was different in that its leverage was considerable higher and spread among the families. 
• Forecasting: Difficult to get it right, more difficult to get it right for the right reasons.
• Subcapitalization of the banking system to face the risks. Bad risk management. The post war system of risk assessment was inadequate.
• Regulation system. Global capital markets. Adequate capital and liquidity requirements to face the problems. Regulate de global market, not just the national markets.
• Recovery of the financial system through the equity market. Regulation does not have to suffocate the innovative activity.
• 25% of homes are mortgaged at a price bigger that its price. Risk of a downturn in the house market. A big proportion of vacant single units for sale.
• Europe. Slow growth. Maastricht: 3% deficit or 60% debt of GDP. Peer pressure.

Trickle-down Economics

Trickle-down economics is an informal theory which states that as the wealth of the rich increases, they will spend more money, which will trickle down to all of society, creating more wealth for everyone.

Autonomía del Banco de México

El 1 de abril de 1994 entró en vigor la reforma al artículo 28 de la Constitución Política de los Estados Unidos Mexicanos, mediante la cual se otorgó autonomía al Banco de México y el mandato prioritario de mantener el poder adquisitivo de la moneda nacional.

Artículo 28. 

Párrafos 6 y 7.

El Estado tendrá un banco central que será autónomo en el ejercicio de sus funciones y en su administración. Su objetivo prioritario será procurar la estabilidad del poder adquisitivo de la moneda nacional, fortaleciendo con ello la rectoría del desarrollo nacional que corresponde al Estado. Ninguna autoridad podrá ordenar al banco conceder financiamiento. (...)

No constituyen monopolios las funciones que el Estado ejerza de manera exclusiva, a través del banco central en las áreas estratégicas de acuñación de moneda y emisión de billetes. El banco central, (...) regulará los cambios, así como la intermediación y los servicios financieros (...). La conducción del banco estará a cargo de personas cuya designación será hecha por el Presidente de la República con la aprobación de la Cámara de Senadores (...); desempeñarán su encargo por períodos cuya duración y escalonamiento provean al ejercicio autónomo de sus funciones; sólo podrán ser removidas por causa grave y no podrán tener ningún otro empleo, cargo o comisión, con excepción de aquellos que actúen en representación del banco y de los no remunerados en asociaciones docentes, científicas, culturales o de beneficiencia. Las personas encargadas de la conducción del banco central, podrán ser sujetos de juicio político conforme a lo dispuesto por el artículo 110 de esta Constitución.

Minimum Wage on Employment

The effect of doubling the minimum wage on employment and earnings in Mexico. Raymundo M. Campos-Vazquez. Gerardo Esquivel. Economic Letters. 2021.

Context. 2019 increase in minimum wage in the northern border.

Data. Formal workers in summer 2018.

Methods. Construct trajectories of daily wages of workers from 2015 to 2021, use the municipalities in the northern states that are not in the border as a control group, and use of virtual border municipalities without minimum wage increase as counterfactual.

Conclusions. 

1. The doubling of the minimum wage in 2019 had no significant effect on employment. 
2. The increase did raise worker earnings, especially at the bottom of the wage distribution.

Minimum Wage on Inflation

The effect of doubling the minimum wage and decreasing taxes on inflation in Mexico. Raymundo M. Campos-Vazquez. Gerardo Esquivel. Economic Letters. 2020.

Introduction. Doubling the minimum wage and halving taxes in the northern border in 2019. 

Predictions.

1. The significant increase in the minimum wage might increase prices 1.5% approx.
2. The halving of VAT would imply a decrease in prices approx 1.4%

Methods.

1. Construct a synthetic control
2. A fixed effects regression

Results.

1. After application of policies in 2019, inflation started to decrease more in the border municipalities than in the rest of the country. The synthetic control quasi mimicked the treatment group before policies, and changed to adapt more to the rest of the country after policies.
2. The dif. in inflation between treatment group and synthetic control before policies moved around zero. After policies, it started to be negative. Dif. between the control units and its associated synthetic controls move around zero, but after policies, their variances increase. 
3. The two methods produce similar estimates of the joint impact on inflation of the minimum wage and VAT cut.
4. There is no statistically significant positive effect on products without VAT. The effect of the minimum wage increase on prices was either null or very small.

Conclusions.

1. Inflation decreased in border municipalities an average of 1.8 percentage points in the first year. This means that the effect of the cut in VAT predominated over the effect (if any) of the minimum wage increase.
2. The empirical estimates for goods without VAT, suggests that the effect of doubling the minimum wage in the Mexican border municipalities was either very small or null.

Further readings.

• Check Abadie on Synthetic Controls.

Phillips Curve

The Phillips curve is an economic model that correlates reduced unemployment with increasing wages in an economy. It was developed by William Phillips in 1958. Later, Samuelson and Solow made the connection explicit between unemployment and inflation.

References:

• The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957. A. William Phillips. Economica. 1958. 
• Analytical Aspects of Anti-Inflation Policy. Samuelson, P.A. and Solow, R.M. American Economic Review. 1960.

How little we understand about inflation

We now understand better how little we understand about inflation. Honestly, this was unpredicted.

—Fed Chair Jerome Powell as US prices hit their highest peak in more than four decades

June 29, 2022

Peaches and Lemons

The Market for 'Lemons': Quality Uncertainty and the Market Mechanism is a seminal paper which explores asymmetric information in markets. The paper was published in the Quarterly Journal of Economics in 1970 by George Akerlof.