Edward Conard

Top Ten New York Times Bestselling Author

  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

AI Summary. About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.

Serdar Birinci, Loukas Karabarbounis, and Kurt See National Bureau of Economic Research
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Work hours of Americans and Europeans were ~ equal in the early 1970s, but by the mid 1990s, Europeans worked much less than Americans. Half of this hours gap had vanished by 2019. The drop in US hours was collinear with an ~ doubling of Medicaid enrollment.

Why has the gap in hours worked between Americans and others narrowed?

Core argument: About half of the U.S.–Europe gap in hours worked that opened by the 1990s had reversed by the end of the 2010s, with the convergence concentrated on the extensive margin and observed for both men and women.

Whereas Americans and Europeans were working roughly the same hours in the early 1970s, by the mid 1990s, Americans were working much more than Europeans. We update Prescott’s observations on hours worked for advanced economies and document that about half of the hours gap in the 1990s has reversed by the end of the 2010s. While the decline in the U.S. hours is well documented in the literature, the increase in non-U.S. hours in the past two decades, both relative to the United States and in absolute levels, has not yet been analyzed systematically. The convergence in hours worked is concentrated on the extensive margin and is observed for both men and women. We offer a comparative study on the convergence of hours worked and ask, “Why do Americans no longer work so much more than non-Americans?” [Employing both nonstructural correlation analysis and a structural model of labor supply, we suggest that] U.S. hours per person declined after the 2000s because of the rise of benefits provided to the non-employed. Among these benefits, we find the most important role for health benefits and, in particular, Medicaid. For non-U.S. countries, the rise of labor supply is generally accounted for by a rise of wages and falling fixed costs and disutility of work.

Takeaways by Macro Roundup® AI

  1. About half of the U.S.–Europe gap in hours worked that opened by the 1990s had reversed by the end of the 2010s, with the convergence concentrated on the extensive margin and observed for both men and women.
  2. The authors attribute the post-2000s decline in U.S. hours per person to the rise of benefits provided to the non-employed, assigning the most important role to health benefits and, in particular, Medicaid.
  3. Rising labor supply outside the United States is generally accounted for by higher wages and falling fixed costs and disutility of work, according to the authors' correlation analysis and structural model of labor supply.

Related Articles:

  • Hours Worked and Lifetime Earnings Inequality — US survey data show large differences in lifetime hours of work, and a calibrated model of labor supply and human capital accumulation implies that nearly 20% of the variance in lifetime earnings is accounted for by these differences, with 90% of that effect due to heterogeneity in preferences for work.
  • Comparing EU-to-US Output Per Hour — European Union output per hour worked has risen from about 72% of the US level in the early 2000s to about 82%. The EU's 28% shortfall in GDP per capita versus the US is roughly two-thirds attributable to lower output per hour and one-third to fewer hours worked; Germany's shortfall reflects fewer hours alone.
  • Europeans ‘Less Hard-Working’ Than Americans, Says Norway Oil Fund Boss — Norway's sovereign wealth fund argues that American companies are outpacing European rivals on innovation and technology because the US more readily accepts failure and risk and because Americans work harder and are more ambitious. US shares now make up almost half of the fund's equity holdings, up from 32% a decade earlier, while UK holdings fell from 15% to 6%.

AI Summary. The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.

Owen Zidar and Eric Zwick The Everywhere Millionaire
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Zidar and Zwick find SCF data show ownership share in private businesses make up between 45–50% of top 0.1% American wealth, and ~80% of US households worth $30mm+ are business owners.

Does official wealth data overstate how much the ultrarich own public stocks?

Core argument: The Survey of Consumer Finances shows private business at roughly 45–50% of top 0.1% wealth, far more than the Federal Reserve's Distribution of Financial Accounts "private business" label implies.

“Private businesses” make up a declining and now-modest share of top 0.1% wealth in the Federal Reserve’s Distribution of Financial Accounts (DFA), with corporate equities dominating portfolios at the very top. The misleading implication is that the rich are primarily stockholders. In fact, they are not. The issue, we learned, is that the DFA’s “private business” category is much narrower than what most people mean by the term. It covers only proprietor’s equity in noncorporate businesses — partnerships and sole proprietorships. Not S-corporations. Not other private corporations. Not financial partnerships like private equity or hedge funds. Just noncorporate, nonfinancial businesses. Private corporations are valued separately, but the Fed can’t distinguish households’ holdings of private corporate equity from their holdings of publicly traded stocks. They’re all lumped together into “corporate equities.” The Survey of Consumer Finances (SCF) tells a different story about what the top 0.1% actually owns. Private business shows up as roughly 45 to 50% of top wealth — far larger than the DFA’s “private business” label suggests. About 80% of households worth $30 million or more are business owners.

Takeaways by Macro Roundup® AI

  1. The Survey of Consumer Finances shows private business at roughly 45–50% of top 0.1% wealth, far more than the Federal Reserve's Distribution of Financial Accounts "private business" label implies.
  2. The Distribution of Financial Accounts' "private business" category covers only proprietor's equity in noncorporate, nonfinancial partnerships and sole proprietorships, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships.
  3. The Federal Reserve cannot distinguish households' private corporate equity from publicly traded stocks, lumping both into "corporate equities," which makes the top 0.1% appear to be primarily stockholders.

Related Articles:

  • Top Wealth in America: New Estimates and Implications for Taxing the Rich — New estimates put the top 0.1%'s share of US wealth at 15%, up from 12.9% over a 15-year span, a smaller concentration than some earlier estimates but still leaving the top 1% holding nearly as much wealth as the bottom 90%. Pass-through business and public equity dominate top-end wealth, while pension and housing wealth dominate for the bottom 90%.
  • They’re Rich but Not Famous—and They’re Suddenly Everywhere — An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
  • Capitalists in the Twenty-First Century — Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.

AI Summary. Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.

Hendrik Bessembinder Arizona State University
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Btw January 1926 and December 2025, 60% of US firms had negative total returns relative to T-bills. 46 firms accounted for half of the $91T in net wealth creation over the period, and 1,082 firms, 3.7%, accounted for 100% of net wealth creation.

Do a few firms drive a century of stock market wealth?

Core argument: U.S. publicly traded stocks generated some $91 trillion in shareholder wealth enhancement over a 100-year period in the CRSP data, according to the author's calculations.

Two central conclusions emerge from this study of long-term investment outcomes in the CRSP data. First, stocks publicly traded in the U.S. markets were, despite periodic volatility, a tremendous source of wealth enhancement, totaling some $91 trillion by my calculations over the 100-year period. Second, long-term stock market outcomes demonstrate strong positive skewness, and the success of the overall markets is attributable to a substantial extent to very strong outcomes for a relatively few firms. This skewness is of practical importance. Financial planning is often based on expected or mean future returns. The outcome of such an exercise is informative, but it should be recognized that in a skewed distribution most possible future outcomes are less than the expected or mean outcome. While the distribution of possible outcomes to diversified portfolios is less skewed than for individual stocks, positive skewness is present at long time horizons in any case. Analyses focused on the median outcome, or better yet on the entire distribution of potential outcomes, are more informative. The historical U.S. stock return data shows that both buy-and-hold returns and dollar based measures of shareholder wealth enhancement are dominated by relatively few high performing firms.

Takeaways by Macro Roundup® AI

  1. U.S. publicly traded stocks generated some $91 trillion in shareholder wealth enhancement over a 100-year period in the CRSP data, according to the author's calculations.
  2. Long-term U.S. stock market outcomes display strong positive skewness, with overall market success attributable to a substantial extent to very strong outcomes for a relatively few firms.
  3. Because most possible outcomes in a skewed distribution fall below the mean, the author argues that analyses focused on median outcomes or the entire distribution are more informative, noting positive skewness persists for diversified portfolios at long horizons.

Related Articles:

  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • Entire Market Structure Exposed To A Big Move — The share of S&P 500 stocks moving more than 10% in a single day has increased, and high dispersion alongside low implied correlation suggests stocks are trading more on their own fundamentals. Combined with extremely elevated options activity, these larger idiosyncratic moves leave market structure more vulnerable to an abrupt, outsized move.

AI Summary. In the US, increased redistribution has offset rising pre-tax inequality: Congressional Budget Office data show inequality of taxable income near record highs while inequality after taxes and transfers was lower than in several earlier years and only slightly above 1986. The top 1% of earners paid 40% of income tax in 2022, up from 33% in 2001.

Economist Staff The Economist
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Advanced economies have become increasingly redistributive. “While the share of US taxable income going to the top 1% of earners soared, their share of post-tax income has risen only slightly; the 1% paid 40% of income tax in 2022, up from 33% in 2001.”

Has redistribution offset rising pre-tax inequality in America?

Core argument: America's top 1% of earners paid 40% of income tax in 2022, up from 33% in 2001, leaving governments dependent on the wealthiest for revenue as pre-tax inequality and top tax rates both rose.

The vigour of the Robin Hood state varies across countries. In America more redistribution has merely offset rising pre-tax inequality. According to the Congressional Budget Office, for example, 2022—the most recent year for which detailed data are available—was the fourth-most unequal year on record, as measured by the Gini coefficient of taxable income, behind only 2021, 2020 and 2012. But inequality after taxes and transfers was lower than in 2000, 2005-07, 2012, 2014, and 2017-18 and 2021. It was also only a shade higher than in 1986. Even as the share of America’s taxable income going to the top 1% of earners has soared, their share of post-tax income has risen only slightly. Today’s combination of higher pre-tax inequality and higher tax rates on top earners has left governments astonishingly dependent on the wealthiest for their revenue. In America, the 1% paid 40% of income tax in 2022, up from 33% in 2001.

Takeaways by Macro Roundup® AI

  1. America's top 1% of earners paid 40% of income tax in 2022, up from 33% in 2001, leaving governments dependent on the wealthiest for revenue as pre-tax inequality and top tax rates both rose.
  2. According to the Congressional Budget Office, 2022 was the fourth-most unequal year on record by the Gini coefficient of taxable income, behind only 2021, 2020 and 2012.
  3. American inequality after taxes and transfers was lower in 2022 than in 2000, 2005-07, 2012, 2014, 2017-18 and 2021, and only a shade higher than in 1986, as more redistribution offset rising pre-tax inequality.

Related Articles:

  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.
  • Across The Rich World, Fiscal Crises Loom — An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.

AI Summary. A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.

Edward Conard Macro Roundup
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I debate @JasonFurman—Pres. Obama’s Chair of the Council of Economic Advisors—at Harvard over the effect of tax increases on the expected value of innovative risk-taking and the magnitude of changes needed to equilibrate America’s fiscal policy.

Do higher taxes reduce the expected value of innovative risk-taking?

Core argument: In a debate with Jason Furman, Ed Conard argues that driving U.S. debt below 100% of GDP is critical given rising interest rates and CBO's failure to assume periodic budget-busting recessions.

I debate Jason Furman on changes needed to equilibrate America’s fiscal policy. I argue that spending increases slow growth, not tax increases needed to pay for them; that tax cuts are temporary; that, unlike Europe, which lacks investment-worthy ideas, tax increases will reduce the expected value of America’s innovative risk-taking; and that driving debt below 100% of GDP is critical with rising interest rates and CBO’s failure to assume periodic budget-busting recessions. Read more

Takeaways by Macro Roundup® AI

  1. In a debate with Jason Furman, Ed Conard argues that driving U.S. debt below 100% of GDP is critical given rising interest rates and CBO's failure to assume periodic budget-busting recessions.
  2. Conard argues that spending increases, rather than the tax increases needed to pay for them, slow growth, and that tax cuts are temporary.
  3. Conard argues that tax increases will reduce the expected value of America's innovative risk-taking, unlike in Europe, which he contends lacks investment-worthy ideas.

Related Articles:

  • Why the U.S. Economy Is Trouncing Europe’s — Only about 12% of Americans score at the highest levels on international academic tests versus 34% at the lowest, yet the U.S. has created nearly 250 companies worth over $10bn ($30tn in value) against Europe's 14, and median U.S. disposable household income is 25% above Germany's. The author argues expanding high-skilled immigration is the fastest way to accelerate growth.
  • Mitigating Benefits Cliffs for Low-Income Families: District of Columbia Career Mobility Action Plan as a Case Study — The authors estimate that a hypothetical low-income family with children receives $68,686 in government support at an income of $11,000 but only $22,709 at $65,000, while its tax liability rises from $842 to $12,835. The lost assistance plus higher taxes fully offsets the $54,000 income gain.
  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.

AI Summary. Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.

Hendrik Bessembinder Arizona State University
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Hendrik Bessembinder finds that from 1925 to 2023 51.6% of equities had a negative return; however, 17 stocks had cumulative returns greater than $50,000 per dollar invested, led by Altria Group with a return of $2.65mm for each dollar invested.

How do the best long-term stock returns compare with typical outcomes?

Core argument: Of the 29,078 U.S. common stocks in the CRSP database from December 1925 to December 2023, 51.6% delivered negative cumulative returns.

This report describes compound return outcomes for the 29,078 publicly-listed common stocks contained in the CRSP database from December 1925 to December 2023. The majority (51.6%) of these stocks had negative cumulative returns. However, the investment performance of some stocks was remarkable. Seventeen stocks delivered cumulative returns greater than five million percent (or $50,000 per dollar initially invested), with the highest cumulative return of 265 million percent (or $2.65 million per dollar initially invested) accruing to long-term investors in Altria Group. Annualized compound returns to these top performers relatively were modest, averaging 13.47% across the top seventeen stocks, thereby affirming the importance of “time in the market.” The highest annualized compound return for any stock with at least 20 years of return data was 33.38%, earned by Nvidia shareholders.

Takeaways by Macro Roundup® AI

  1. Of the 29,078 U.S. common stocks in the CRSP database from December 1925 to December 2023, 51.6% delivered negative cumulative returns.
  2. Altria Group accrued the highest cumulative return at 265 million% ($2.65 million per dollar invested), one of seventeen stocks exceeding five million% ($50,000 per dollar invested).
  3. Annualized compound returns for the top seventeen performers averaged 13.47%, while Nvidia earned the highest annualized compound return, 33.38%, among stocks with at least 20 years of return data.

Related Articles:

  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • Birth, Death, and Wealth Creation — The median age at which US companies went public rose from 7.9 years in 1976–2000 to 9.5 years in 2001–2022, implying that more wealth creation now occurs in private markets. Research on more than 28,000 US-listed companies since 1926 finds that just under 60% destroyed $9.1tn of wealth while about 2% created $50tn.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Nvidia's founder says that had he known how hard building the company would be, he would not have started it, calling entrepreneurs' ignorance of the coming difficulty their "superpower." He argues a company is always on the way to going out of business, and internalizing that sensibility is necessary for survival.

Ben Cohen Wall Street Journal
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A @WSJ interview with Jensen Huang, founder of @Nvidia, highlights why motivating properly trained talent to bear risk is foundational to growth. Failure is by far the most likely outcome of high-impact entrepreneurial efforts.

Is not knowing how hard building a company is entrepreneurs' superpower?

Core argument: Jensen Huang said he would not have founded Nvidia, now one of the world's most valuable companies, had he known three decades ago that building it would turn out to be "a million times harder" than he expected.

Had Huang known three decades ago what he knows today, he never would have founded Nvidia, one of the world’s most valuable companies. “The reason is simple,” Huang said recently. “Building Nvidia turned out to be a million times harder than I expected. If you realized the list of all the things that will go wrong, the challenges you’re going to endure, and the pain and suffering, vulnerability, embarrassment, and shame you’re going to feel, nobody in their right mind would do it. That’s the superpower of an entrepreneur. They don’t know how hard it is going to be. He didn’t know that the original business plan had no chance of success, how many times he would fail, and how much he didn’t know. “You’re always on the way to going out of business. If you don’t internalize that sensibility, you will go out of business.”

Takeaways by Macro Roundup® AI

  1. Jensen Huang said he would not have founded Nvidia, now one of the world's most valuable companies, had he known three decades ago that building it would turn out to be "a million times harder" than he expected.
  2. Huang described entrepreneurs' "superpower" as not knowing how hard the undertaking will be, since no one aware of the challenges, pain and suffering, vulnerability, embarrassment, and shame ahead would do it.
  3. Huang said Nvidia's original business plan had no chance of success, and that a founder who fails to internalize the sensibility of being "always on the way to going out of business" will go out of business.

Related Articles:

  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • Birth, Death, and Wealth Creation — The median age at which US companies went public rose from 7.9 years in 1976–2000 to 9.5 years in 2001–2022, implying that more wealth creation now occurs in private markets. Research on more than 28,000 US-listed companies since 1926 finds that just under 60% destroyed $9.1tn of wealth while about 2% created $50tn.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Analysis of over 5,000 German World War II fighter pilots finds that public peer recognition was associated with higher victory scores among skilled pilots without higher mortality, while average pilots gained little in victories but died at higher rates. The authors conclude status-based awards can have uneven effects in high-risk settings.

Leonardo Bursztyn National Bureau of Economic Research
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Analysis of >5k German fighter pilots reveals that awards & status competition significantly influenced performance, with disparities across skill levels. Skilled pilots increased victory scores without higher mortality rates, while average pilots showed minimal improvement in victories & higher mortality.

Does public recognition improve performance equally across skill levels?

Core argument: Analysis of over 5,000 German WWII fighter pilots finds that awards and status competition, conveyed through peer recognition in military bulletins, influenced performance, with effects differing across skill levels.

During WWII, analysis of over 5,000 German fighter pilots reveals that awards and status competition significantly influenced performance, with notable disparities across skill levels. Skilled pilots, when motivated by peer recognition in military bulletins, increased their victory scores without a corresponding rise in mortality rates. Conversely, average pilots showed minimal improvement in victories but experienced a higher mortality rate. This suggests that nonfinancial incentives like awards can have complex effects on performance, particularly in high-risk environments where both risk and output are critical to overall success. The findings highlight the nuanced role of status competition in enhancing productivity among top performers while potentially endangering less skilled individuals.

Takeaways by Macro Roundup® AI

  1. Analysis of over 5,000 German WWII fighter pilots finds that awards and status competition, conveyed through peer recognition in military bulletins, influenced performance, with effects differing across skill levels.
  2. Skilled German pilots responded to peer recognition by raising their victory scores without a corresponding rise in mortality, while average pilots showed minimal gains in victories and experienced higher mortality.
  3. Nonfinancial incentives such as awards can have complex effects in high-risk settings where both risk and output matter, raising productivity among top performers while potentially endangering less skilled ones.

this is a hell of a Churchill quote“,,, medal glitters, but it also creates a shadow….”

Philipp Ager, Leonardo Bursztyn, Hans-Joachim Voth, “Killer Incentives: Status Competition and Pilot Performance during World War II,”The National Bureau of Economic Research, December 2016, http://www.nber.org/papers/w22992

“…Fighter pilots in wartime are subject to substantial principal-agent problems. To fulfill their duty, they have to risk death. How can they be motivated to do so? We study the role of awards and of status competition. We collect and compile new, detailed data on monthly victory scores of over 5,000 German pilots during World War II.Our results suggest that awards may have been an important incentive. Crucially, we find evidence of status competition: When the daily bulletin of the German armed forces mentioned the accomplishments of a particular fighter pilots, his former peers perform markedly better. Outperformance is differential across skill groups. The best pilots try harder, score more, and die no more frequently when a former squadron peer is mentioned; average pilots try win only very few additional victories, but die at a markedly higher rate.Our results suggest that the incentive effects of nonfinancial rewards can beambiguous in settings where both risk and output affect aggregate performance….”

whole paper is interesting