“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 should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“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 full-throated defense of economic dynamism.” - The Wall Street Journal
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
AI Summary.Prime-age (25–54) and older (55–64) employment rates in Europe exceed those in the U.S., disproving the claim that European welfare systems suppress work. Higher-welfare northern European countries tend to have higher employment rates than lower-welfare southern ones.
Chris GilesFinancial Times
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Despite Europe’s high social spending relative to the US, Chris Giles notes that prime-age adult (25–54) labor force participation in the Eurozone has overtaken that of the US, and there has been a dramatic convergence in the LFP of older workers.
Does European welfare actually discourage work?
Core argument: Prime-age adults (25–54) and older workers (55–64) both achieve higher employment rates in Europe than in the U.S., refuting the premise that generous welfare systems suppress labor force participation.
It does not matter whether you use EU or Eurozone data, prime-age adults (between 25 and 54) in Europe are more likely to be in work than those in the US. Older people (between 55 and 64) also have higher employment rates in Europe. Younger people (between 15 and 24) are more likely to have a job in the US, but that results from Europeans educating themselves for longer. The proportion of young people not in education, employment or training is higher in the US than in Europe. So welfare is not stopping work. More than that, the higher-welfare north of Europe tends to have higher employment rates than the south, although there is convergence within the Eurozone. Spain, in particular, has enjoyed rapid improvements.
Takeaways by Macro Roundup® AI
Prime-age adults (25–54) and older workers (55–64) both achieve higher employment rates in Europe than in the U.S., refuting the premise that generous welfare systems suppress labor force participation.
The U.S. records a higher share of young people (15–24) not in education, employment, or training than Europe, indicating that lower U.S. youth employment reflects weaker human capital investment, not stronger labor markets.
Within Europe, higher-welfare northern economies consistently outperform lower-welfare southern ones on employment rates, though intra-Eurozone convergence is underway, led by rapid gains in Spain.
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Why Do Americans No Longer Work So Much More Than Non-Americans?— The gap in hours worked between Americans and non-Americans has narrowed by half since the 1990s, driven by declining U.S. work hours as expanded government health benefits reduced the need to work, while rising wages and lower barriers to employment increased hours worked in other advanced economies.
AI Summary.AI-driven data-center expansion and related professional hiring have added roughly 1.05m jobs above trend since 2022–2023, spanning electrical contracting, equipment manufacturing, software development, and data science. The job gains exceed what broader construction, manufacturing, and professional employment trends would predict.
Economist StaffThe Economist
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The Economist estimates that so far the AI boom has created ~1mm new jobs in the US, exceeding their estimate of ~200,000 layoffs attributed to AI since mid-2023.
Is artificial intelligence creating a genuine employment boom or temporary hiring surge?
Core argument: AI-linked demand has generated roughly 730,000 above-trend jobs in engineering, software development, and data science since 2022, substantially outpacing near-term displacement effects.
[We] tracked five industries at the heart of the data-centre build-out, from electrical contracting to equipment manufacturing. Since 2023 employment in them has risen by roughly 320,000 more than broader construction and manufacturing trends would suggest. Not all of those jobs owe their existence to AI—grid upgrades and other factory building matters too. [We also] tracked employment in professional occupations closest to the AI boom—engineers, software developers, mathematicians and data scientists—and compared their growth since 2022 with professional employment overall. These roles have added roughly 730,000 jobs above trend in recent years. AI will not have created every single one of them. But it has almost certainly created quite a few.
Takeaways by Macro Roundup® AI
AI-linked demand has generated roughly 730,000 above-trend jobs in engineering, software development, and data science since 2022, substantially outpacing near-term displacement effects.
Data-centre construction has added approximately 320,000 above-trend jobs across electrical contracting and equipment manufacturing since 2023, with grid upgrades and broader factory-building contributing alongside AI demand.
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The College Wage Premium in the Generative AI Era— S. 575 between 2022 and 2026, the first sustained decline in relative demand for college-educated labor in four decades. AI exposure in white-collar occupations accounts for roughly 28% of that drop, as wage growth slowed disproportionately in high-AI-exposure jobs where college graduates are concentrated.
Looking for the Ladder— The downtick in hiring in AI-exposed occupations started 6 months prior to the release of ChatGPT, and is “perfectly” aligned with the start of Fed rate hikes…
AI Summary.U.S. workers earn the most Big Macs annually (10,215), but Swiss workers lead on an hourly basis at 7 Big Macs per hour versus the U.S. at 6, reflecting longer American working hours rather than higher hourly wages.
Economist StaffThe Economist
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The Economist’s venerable Big Mac Index is indicative of significantly higher after-tax, PPP-adjusted wages for American workers than for their French and German counterparts.
Does working longer hours mask stagnant American wage growth?
Core argument: American workers earn the equivalent of 10,215 Big Macs annually, topping global McWage rankings, but longer working hours reduce U.S. hourly purchasing power to six Big Macs per hour, behind Switzerland’s seven.
On an annual basis, America continues to top our McWages rankings. The average American worker earns enough to buy 10,215 Big Macs a year; Switzerland and Australia are in second and third place, respectively. But American working hours are supersized, too. On an hourly basis, Switzerland comes out on top: the average worker there earns the equivalent of seven Big Macs an hour, compared with America’s six. Australia ranks third, at five burgers for every hour worked.
Takeaways by Macro Roundup® AI
American workers earn the equivalent of 10,215 Big Macs annually, topping global McWage rankings, but longer working hours reduce U.S. hourly purchasing power to six Big Macs per hour, behind Switzerland’s seven.
Switzerland leads all nations in hourly McWage purchasing power at seven Big Macs per hour, with Australia third at five, demonstrating that top annual earnings and top hourly compensation do not always coincide.
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The Big Mac Index At 40— Global currency misalignments are at their widest since the mid-1990s, driven by post-2021 U.S. inflation, an undervalued Chinese currency, and a weakening Japanese yen that has made consumer goods cheaper in Japan than in China.
Why Do Americans No Longer Work So Much More Than Non-Americans?— The gap in hours worked between Americans and non-Americans has narrowed by half since the 1990s, driven by declining U.S. work hours as expanded government health benefits reduced the need to work, while rising wages and lower barriers to employment increased hours worked in other advanced economies.
AI Summary.Over 40% of young men identify as failures, with daily pornography use and daily gambling each associated with failure self-perception rates above 60%.
Joseph Davis, Michael Toscano and Ken BurchfielInstitute For Family Studies
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An ISF survey of 2,000 American men aged 18–29 found 23% reported gambling daily and 27% watch pornography daily. 66% of the men who gambled daily reported feeling like a failure, as well as 63% of the men who watch pornography daily.
Are young men's struggles with addiction driving their sense of failure?
Core argument: 42% of young men identify as failures, with daily pornography viewers (63%) and daily gamblers (66%) reporting self-perceived failure at rates roughly 1.5× the overall average.
More than half of young men in our survey are now gamblers. Nearly 1 in 4 (23%) report that they gamble daily, plus 12% doing so more than several times a week, and a further 21% at least some of the time. 43% of young men say they watch pornography daily (27%) or several times a week (16%), with another 26% about weekly or less. More than 4 in 10 young men (42%) believe that the statement “all in all, I am inclined to think that I am a failure” describes them “very well” (15%) or “somewhat well” (27%). Those who view pornography (63%) and gamble (66%) every day—along with day trading and playing fantasy sports—are significantly more inclined to see themselves as a failure.
Takeaways by Macro Roundup® AI
42% of young men identify as failures, with daily pornography viewers (63%) and daily gamblers (66%) reporting self-perceived failure at rates roughly 1.5× the overall average.
More than half of young men gamble at some frequency, with 23% doing so daily—a pattern concentrated among those also exhibiting compulsive pornography use and self-perceived failure.
43% of young men consume pornography daily or several times a week, with daily users (27%) disproportionately represented among those who describe themselves as failures (63%).
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The Case for Prohibiting Vice— Lehman makes the case for restricting sports gambling, marijuana, and pornography. The costs of vice and its regulation are not limited to individual harm…
AI Summary.Global fertility has fallen below replacement level, meaning population will peak at roughly 9 billion around 2056 and then decline, driven by large existing generations masking the underlying shortfall in births.
Jesús Fernández-Villaverde and Patrick NorrickUniversity of Pennsylvania
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The UN appears to systematically overestimate births; e.g. 33 of 37 countries with high-quality statistics registered fewer births in 2024 than the UN had forecast. Fernández-Villaverde and Norrick infer humanity is below replacement fertility in 2026.
Will declining birth rates eventually shrink the global economy?
Core argument: Global fertility has fallen below replacement level as of 2026, ending humanity’s ability to sustain long-run population stability without a reversal in trends.
In Table A1 we compare the World Population Prospects (WPP) estimates of births in 2022-2023 with the official numbers reported by several countries. [A2 shows the full sample with the deviations.] As of 2026, humanity is likely to be below the replacement fertility level: we are having fewer births than we need to keep population constant in the long run. This astonishing fact does not mean that population has stopped growing. Because of momentum effects (the large cohorts of women born two or three decades ago are having their children now, and their own parents have not died yet), world population will keep growing for another 30 years or so. But unless trends change, it will peak at roughly 9 billion around 2056 and then start falling, first slowly, then fast.
Takeaways by Macro Roundup® AI
Global fertility has fallen below replacement level as of 2026, ending humanity’s ability to sustain long-run population stability without a reversal in trends.
Population momentum—driven by large cohorts of women now in peak childbearing years—will sustain growth for roughly 30 more years before world population peaks at approximately 9 billion around 2056 and begins declining.
The Wealth of Working Nations— Japan achieved GDP growth per working-age adult of 31.9% between 1998 and 2019, slightly faster than the US at 29.5%. @King_ofSweden
AI Summary.Guaranteed income transfers reduce total household earnings by more than the transfer amount, as other household members—particularly partners—work fewer hours and are less likely to advance in their jobs.
Elizabeth Rhodes, David Broockman, Eva Vivalt, Patrick Krause, et al.National Bureau of Economic Research
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In a randomized guaranteed-income experiment, giving one adult a transfer of $1,000/month for two years cut the other household members’ income by ~$1,700/year. Partners worked less and advanced less at work, while schooling and training among others rose.
Does guaranteed income reduce household work effort beyond the transfer amount?
Core argument: Guaranteed income transfers narrowed the gap between participant income and total household income by approximately $1,700 per year, a reduction driven by lower earnings among other household members rather than collective income gains.
Figure 4 summarizes treatment effects on the standardized family-level indices. The transfers’ effects reshaped the income and employment of other household members. The gap between participant income and total household income fell by about $1,700 per year (s.e. $800). The decline appears to reflect lower earnings among other household members. Effects on employment outcomes are consistent with this interpretation. Partner promotions and transitions to better jobs decrease significantly, but these effects are very small in magnitude. Partner hours and employment show more meaningful declines but are not significant in the unconditional analysis. Several other measures provide supporting evidence of negative effects on labor supply. Net transfers—the value given [to extended family] minus the value received—increased by roughly $135 per year. Estimates for household stability, decision-making, and the division of labor cluster near zero.
Takeaways by Macro Roundup® AI
Guaranteed income transfers narrowed the gap between participant income and total household income by approximately $1,700 per year, a reduction driven by lower earnings among other household members rather than collective income gains.
Guaranteed income transfers reduced partner labor supply, with statistically significant declines in promotions and job transitions, though effect sizes were small.
partner hours and employment showed larger but statistically insignificant declines.
Using OECD skills data and the Luxembourg Income Study, Burn-Murdoch finds US workers at the lowest levels of literacy and numeracy earn ~ on par with British workers scoring a 2, ~ a mean score.
30% of US adults have literacy skills typical of a 10-year-old. The same proportion of US workers who score stunningly low on literacy earn an average of almost $30 per hour, and two-thirds of them are in work. Their British counterparts make the equivalent of $20 and fewer than half are employed. This all looks more like the fruits of years of stronger growth than vocational education policy. We should view education as creating potential that a strong economy unleashes (and a weak one disappoints).
Cognitive Skills Beyond Childhood— Data from a British birth cohort followed since 1958 show that cognitive skills early in life predict wages at age 50 better than cognitive skills at age 50…
In advanced economies, increases in labor productivity growth have decoupled from real wage growth, especially post-1980.
In the US, Europe and Japan, pay growth has decoupled from productivity growth, with the latter having pulled ahead. US Labour productivity — measured as real GDP per hour worked — is now more than five times greater than in 1947, whereas real hourly compensation is only about three times greater. Median wage growth has lagged even further behind productivity growth, with inequality pushing the average wage higher than the median. (The figures above show average rather than median wages; plotting median wages would show an even greater divergence.)
Related Articles:
The Record Divide Between Corporate Profits and Worker Pay— Labor's share of national income has fallen to 51%—its lowest recorded level—while corporate profits have reached 12.1% of national income, their highest share since 1950. Inflation-adjusted hourly wages have risen 3% since 2019, while inflation-adjusted corporate profits have risen 50% over the same period.
AI and Productivity— Rising US labor productivity is driven by higher capital utilization—factories, servers, and hotel rooms running harder—rather than new investment or efficiency gains at the individual task level.
