AI Bubble, Inflation, and the Limits of Monetary Policy | Jason Furman

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Dec 15, 2025

In a fascinating discussion, Jason Furman, a Harvard professor and former economic adviser, analyzes the current economic landscape. He warns of an AI bubble while forecasting productivity gains primarily in the service sector. Furman debates the complexities of inflation and critiques the Fed's models, suggesting it may be more flexible with its targets than previously thought. Their conversation also tackles affordability politics and the challenges faced by younger generations in pursuing the American dream, along with the efficacy of price controls.

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INSIGHT

Domain-Specific AI Regulation

Jason Furman argues AI should be regulated by domain, not by a single super-regulator.
Evaluate AI systems like cars or medical devices within existing regulatory frameworks, comparing them to human alternatives.

INSIGHT

Policy Shapes AI Leadership

Furman credits U.S. policy and permissive regulation for fostering leading foundational AI models.
He contrasts that with Europe's slower approach, implying policy influences technological leadership.

ADVICE

Remove Permitting Bottlenecks

The government's biggest role is to get out of the way on infrastructure and permitting for energy and chips.
Do not over-subsidize; ensure permitting allows at least one viable path for industry scaling.

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In Episode 453 of Hidden Forces, Demetri Kofinas speaks with Jason Furman, the former chair of the Council of Economic Advisers, about the state of the U.S. economy, the AI Bubble, monetary policy, inflation, price controls, and much more.

Jason and Demetri spend the first hour of their conversation exploring his economic framework, what he learned from his time working inside the Clinton and Obama White Houses, and how these experiences shaped his perspective on the role of government in the economy.

The two then delve into Furman's thoughts on artificial intelligence. They discuss whether we're living through an AI bubble, where Jason anticipates the greatest productivity gains from the adoption of AI in the U.S. service sector, and his perspective on AI regulation. They also discuss the limitations of our inflation models, whether we have a good working understanding of the causes of inflation, whether the Fed has implicitly raised its inflation target, and how large, structural deficits and political constraints will shape the Fed's ability to manage that target in the years ahead.

In the second hour, Kofinas and Furman shift to a discussion about the politics of affordability and a growing sense, especially among younger Americans, that the costs associated with achieving the American dream have become insurmountable for almost all but the very wealthy. They debate the political appeal and efficacy of price controls, as well as the extent to which tariffs, industrial policy, and currency depreciation can or should be used to reshape global supply chains and rebuild U.S. domestic manufacturing in areas deemed critical for national security. They also discuss the US trade deficit and capital account surplus, what a weaker dollar may tell us about the government's policy objectives, how corruption, rule of law, and institutional decay might eventually feed back into foreign appetite for US assets, and what is at stake in the choice of the next Fed chair—both for the independence of the central bank and for the long-term credibility of American monetary policy.

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Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou

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Episode Recorded on 12/08/2025