--- title: "Economics FAQ" description: "Questions and answers on behavioral effects, agent-based simulations, and game theory applied to actual economic decisions." updated: 2026-10-03 author: "Philipp D. Dubach" canonical_url: "https://philippdubach.com/faq/economics/" source_url: "https://philippdubach.com/faq/economics/index.md" --- # Economics FAQ *Philipp D. Dubach · Updated October 3, 2026* --- These come from the Economics posts on the site, ordered by recency. Each answer is a standalone claim that links back to the source post for the simulation code, the model, or the empirical setup. The framing is empirical. More agent-based simulations, fewer thought experiments. The Affine Wealth Model from Bruce Boghosian's group at Tufts shows up repeatedly because it produces falsifiable predictions about wealth concentration that match 27 years of US data within 0.16% average error. Behavioral coverage starts from Kahneman, Thaler, and Ariely and lands in concrete policy questions: the zero price effect in fare-free transit, network effects versus regulatory friction in mobile money, signaling games in Super Bowl auctions. Game theory shows up where strategic structure dominates outcomes, not as a hand wave at "incentives matter." The default failure mode in economics writing is taking a stylized model as a moral claim. The questions below try not to do that. ## Frequently Asked Questions ### What is John Cochrane’s explanation of inflation? Cochrane links inflation to the fiscal backing of government liabilities. In his framework, prices can rise when nominal claims increase without a corresponding increase in expected future primary surpluses, or when expectations of that backing deteriorate. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### What is the fiscal theory of the price level? The fiscal theory of the price level relates the real value of nominal government liabilities to the expected present value of future primary surpluses: taxes minus noninterest spending. Its causal predictions depend on assumptions about fiscal and monetary policy. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### Does government debt cause inflation? More government debt does not mechanically produce inflation. In Cochrane’s framework, expected fiscal backing matters: borrowing can avoid inflation if people expect sufficient future surpluses, while a loss of confidence in that backing can affect prices even without new borrowing. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### Why do prices stay high when inflation falls? Falling inflation means prices are rising more slowly; it does not mean the price level is falling. A temporary inflation burst can therefore leave a permanently higher price level. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### Does John Cochrane support raising interest rates to fight inflation? Yes. In this lecture Cochrane supports raising rates in response to inflation. He questions how models account for the higher government interest costs and the accompanying fiscal response. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### Does AI investment cause inflation? AI investment can increase demand before new productive capacity arrives. Its economy-wide inflation effects depend on supply constraints and policy responses; private borrowing is not equivalent to unbacked government transfers. From [John Cochrane’s Lesson on Inflation](https://philippdubach.com/posts/john-cochranes-lesson-on-inflation/). ### Why did Trump blacklist Anthropic from government contracts? President Trump ordered federal agencies to cease using Anthropic's technology on February 27, 2026, after CEO Dario Amodei refused to strip safety constraints from Claude's Pentagon deployment. Anthropic maintained prohibitions on mass domestic surveillance and fully autonomous weapons. Defense Secretary Pete Hegseth then designated Anthropic a 'Supply-Chain Risk to National Security,' a label previously reserved for foreign adversaries like Huawei and never before applied to an American company. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### How much is the Pentagon spending on AI in 2026? The FY2026 DoD budget request earmarks $13.4 billion for AI and autonomous systems, a roughly 7x increase from the $1.8 billion allocated in FY2025. This marks the first time AI has its own standalone line item inside the defense budget. The total defense request is $892.6 billion. For context, Anthropic's entire annualized revenue as of February 2026 was approximately $14 billion. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### What is the difference between the OpenAI and Anthropic Pentagon deals? Both companies stated similar red lines: no mass domestic surveillance and no fully autonomous weapons. The key difference was framing. Anthropic refused to let the military use its models across 'all lawful use cases' without explicit restrictions. OpenAI agreed to deploy on the Pentagon's classified network while retaining control over technical safeguards, model selection, and deployment environments, limiting deployment to cloud rather than edge systems. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### What happened at the 1993 defense industry Last Supper? In July 1993, Secretary of Defense Les Aspin and Deputy Secretary William Perry invited defense CEOs to dinner at the Pentagon and told them Cold War budget cuts meant most would not survive. Norman Augustine of Martin Marietta named it the Last Supper. Within four years, 51 prime defense contractors consolidated into five: Lockheed Martin, Boeing, Raytheon, General Dynamics, and Northrop Grumman. Between 2011 and 2015, an additional 17,000 U.S. companies exited the defense industry. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### Is Palantir a defense contractor or a tech company? Both, and increasingly the former. Palantir posted $4.48 billion in FY2025 revenue with 53.7% from government contracts, down from a peak of 58.2% in 2021 as its commercial AI platform gained traction. Its $10 billion U.S. Army Enterprise Agreement consolidated 75 existing software contracts. At a $320 billion market cap, Palantir is now worth nearly twice Boeing, making it the clearest example of a tech company operating as a defense prime. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### What are IDIQ defense contracts and why do they matter for AI companies? IDIQ (Indefinite Delivery, Indefinite Quantity) contracts account for roughly 56% of DoD contract award dollars and run five years with extension options. They matter because once an AI company is embedded in classified systems with a security-cleared workforce, switching costs become close to prohibitive. Palantir's Maven Smart System contract, for example, started at $480 million and expanded to nearly $1.3 billion through 2029. A competitor cannot simply offer better inference speed to displace an incumbent with IDIQ access. From [When AI Labs Become Defense Contractors](https://philippdubach.com/posts/when-ai-labs-become-defense-contractors/). ### How much does a 2026 Super Bowl ad really cost? The sticker price is $8 million for a 30-second spot, with premium positions reaching $10 million. But the fully loaded cost is $16–23 million once you add production ($1–4M), celebrity talent ($1–5M), and mandatory companion buys on the same network ($7–10M). Some estimates reach $40–50 million when including agency fees, music licensing, and digital activation. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### Do Super Bowl ads actually increase sales? The evidence is mixed. Stanford researchers Hartmann and Klapper found Budweiser earned a 172% ROI from its Super Bowl ads. But Bridgewise found that a portfolio of Super Bowl advertisers underperformed the S&P 500 by 9.2% after six months. Kantar reports $4.60–$5.20 return per dollar invested. The answer depends heavily on category exclusivity: when two competing brands both advertise, neither gains incremental profit. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### What is the prisoner's dilemma in Super Bowl advertising? Stanford research showed that when two competing brands both advertise in the same Super Bowl, neither gains incremental profit because the effects cancel out. Yet both rationally choose to spend because opting out concedes the benefit to a competitor. This creates a collectively suboptimal but individually rational equilibrium that the NFL exploits to command rising prices. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### What is the Super Bowl's CPM compared to other TV advertising? At $8 million reaching roughly 125 million viewers, the Super Bowl's effective CPM is around $63–65. Standard primetime TV runs $20–30, streaming TV runs $15–35, and TikTok runs $5–10. The premium buys the engagement factor: EDO estimates a single Super Bowl ad generates the same brand-search engagement as 1,056 typical primetime ads. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### Why are Super Bowl ads so expensive? The NFL controls a structural scarcity: the Super Bowl is the last true monoculture event in American media, reaching 125+ million simultaneous viewers in an era of fragmented attention. Inventory sells out months in advance. The prisoner's dilemma among advertisers prevents collective price resistance. And the price itself signals legitimacy, creating a Veblen good dynamic where high cost is part of the value proposition. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### Why is the Super Bowl called the last monoculture in American media? In 2025, NFL games accounted for 83–84 of the top 100 most-watched U.S. telecasts. The Super Bowl drew 127.7 million average viewers, roughly 2x the most-watched presidential debate and 6x the Oscars. No other single moment reaches such a broad cross-section of America simultaneously, making it the last true mass-reach event in an increasingly fragmented media environment. From [Economics of a Super Bowl Ad](https://philippdubach.com/posts/economics-of-a-super-bowl-ad/). ### How much do GLP-1 users reduce their food spending? Per Cornell research published in 2024, households with a GLP-1 user cut grocery spending by 5.3% within six months, with high-income households dropping 8.2%. Fast food spending falls 8.0% per the same data. The reported pattern is reduced consumption rather than brand switching. From [Ozempic is Reshaping the Fast Food Industry](https://philippdubach.com/posts/ozempic-is-reshaping-the-fast-food-industry/). ### Which food categories show the largest decline in GLP-1 user spending? Per the Cornell research, savory snacks see the largest decline at 10.1%, followed by sweets, baked goods, and cookies. Staples including meat, eggs, and bread also decline. Yogurt is the only category showing a statistically significant increase, with fresh fruit and nutrition bars trending up slightly. These are consumer-spending observations, not therapeutic claims. From [Ozempic is Reshaping the Fast Food Industry](https://philippdubach.com/posts/ozempic-is-reshaping-the-fast-food-industry/). --- Canonical: https://philippdubach.com/faq/economics/ This file is the canonical machine-readable variant of https://philippdubach.com/faq/economics/. Author: Philipp D. Dubach (https://philippdubach.com/).