Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Sunday, December 23, 2018

AI Summary. Research attributes longer US working hours than Germany's to inequality, with steeper income gradients giving individuals more incentive to work hard to climb the income ladder. The US output-per-person advantage over Belgium is attributed to hours worked rather than productivity per hour, and work habits are also influenced by peers.

Ryan Avent The Economist
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Research by Bell & Freeman shows inequality drives longer US working hours, as steeper income gradients push individuals to work harder to climb the income ladder.

Does greater inequality explain why Americans work longer hours?

Core argument: Bell and Freeman argue that inequality contributes to longer working hours in the US than in Germany, as steeper income gradients give individuals stronger incentives to work harder to climb the income ladder.

Research by Bell and Freeman highlights that inequality significantly influences the longer working hours in the US compared to Germany, as steeper income gradients drive individuals to work harder to climb the income ladder. This contributes to higher GDP, as seen in the output per person difference between the US and Belgium, which is attributed to hours worked rather than productivity per hour. The "social-multiplier" effect, described by Glaeser, Sacerdote, and Scheinkman, suggests that work habits are influenced by peers, making it costly to miss work when others are present. This peer influence, combined with individual flexibility in work time, underscores the societal challenge of balancing work with other life aspects.

Takeaways by Macro Roundup® AI

  1. Bell and Freeman argue that inequality contributes to longer working hours in the US than in Germany, as steeper income gradients give individuals stronger incentives to work harder to climb the income ladder.
  2. The difference in output per person between the US and Belgium is attributed to hours worked rather than productivity per hour.
  3. Glaeser, Sacerdote and Scheinkman describe a "social-multiplier" effect in which work habits are shaped by peers, making it costly for an individual to miss work when colleagues are present.

Economist reports on the Bell/Freeman hours worked research you cited inUpside

Ryan Avent, "Why Americans and Britons work such long hours,"The Economist, December 18, 2018, https://www.economist.com/finance-and-economics/2018/12/22/why-americans-and-britons-work-such-long-hours

"...Research by Linda Bell of Barnard College and Richard Freeman of Harvard University, for example, concluded that inequality accounts for much of the difference in hours worked between America and Germany. When the income gradient in an economy or within an occupation is steeper, people work longer and harder in order to increase their chances of moving up the income ladder. Inequality might thus contribute to higher GDP (the difference in output per person between America and Belgium, for example, is entirely down to differences in hours worked rather than output per hour). But as a result, success in elite professions often hinges as much on a willingness to focus on work to the exclusion of all else as on other factors....Just as importantly, individual decisions regarding work inevitably evolve in response to choices made by peers. Edward Glaeser of Harvard University, Bruce Sacerdote of Dartmouth College and José Scheinkman of Columbia University describe a “social-multiplier” effect, which boils down to the notion that spending time in a particular way is more enjoyable when others do the same. It is costly to miss work when others are there, and more fun to attend festivals when others are also free to do so. Individual flexibility in choosing working time is important; different people have different needs and preferences. But at some level, society as a whole must judge whether or not there is more to life than work..."

AI Summary. The authors estimate that the decline in US manufacturing employment reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, while lowering marriage rates by 4.6 percentage points for black men and 5.1 points for black women. They find it widened racial gaps in income, employment, health, and family formation.

Eric Gould Center for Economic and Policy Research
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Decline in manufacturing jobs in the US disproportionately affected less-educated workers, with a larger impact on black Americans due to lower education levels compared to whites.

Has manufacturing's decline widened racial gaps in wages, employment, and marriage?

Core argument: The decline in US manufacturing employment from 1960 to 2010 reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, with less-educated workers most affected.

The decline in manufacturing jobs in the US has disproportionately affected less-educated workers, with a larger impact on black Americans due to lower education levels compared to whites. From 1960 to 2010, this decline led to a 13.3% drop in black male wages and a 5.6 percentage point decrease in black male employment rates. Additionally, it widened racial gaps in income, employment, health, marriage, and family formation. The marriage rate for black men fell by 4.6 percentage points and by 5.1 percentage points for black women. This trend has exacerbated inequality both within and between black and white communities, highlighting the need for targeted economic policies to address these disparities.

Takeaways by Macro Roundup® AI

  1. The decline in US manufacturing employment from 1960 to 2010 reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, with less-educated workers most affected.
  2. The decline in manufacturing lowered marriage rates by 4.6 percentage points for black men and 5.1 percentage points for black women, and widened racial gaps in income, employment, health, marriage, and family formation.
  3. Lower education levels among black Americans relative to whites meant the loss of manufacturing jobs affected them disproportionately, raising inequality within and between black and white communities.

New study finds that the decline in manufacturing had a larger impact on blacks

"...Declining manufacturing jobs in the US has a disproportionate impact on less-educated workers. Given that the black population is less educated than the white population, this will have a larger effect on blacks relative to whites. This column uses US Census data to show that the decline has increased inequality both within black and white communities and between black and white communities. It has also widened racial gaps in income, employment, health, marriage, and family formation....the results show that the decline in manufacturing from 1960 to 2010 had the following impact on the black community....13.3% decline in black male wages..5.6 percentage point decline in black male employment rates...a marriage rate decline of 4.6 percentage points for black men, and 5.1 percentage points for black women..."

Eric Gould, "The impact of manufacturing employment decline on black and white Americans,"Center For Economic and Policy Research, December 19, 2018, https://voxeu.org/article/manufacturing-decline-has-hurt-black-americans-more

Monday, December 24, 2018

AI Summary. 23% of felons convicted of violent crimes receive no incarceration, nearly 80% of state prison inmates are released before serving their full terms, and the median time served for violent crimes was 2.4 years. The nationwide incarceration rate stands at its lowest level since 1996, and further reforms risk weakening deterrents and increasing crime.

Barry Latzer Wall Street Journal
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@BarryLatzer US incarceration rate lowest since 1996, despite 23% of violent felons receiving no incarceration & 80% of state prison inmates released early. Murder rate down 45% since 1991.

Would further criminal-justice reform weaken deterrence and increase crime?

Core argument: In the U.S., 23% of felons convicted of violent crimes receive no incarceration, and nearly 80% of state prison inmates are released before serving their full terms.

The U.S. criminal justice system faces scrutiny as 23% of felons convicted of violent crimes receive no incarceration, and nearly 80% of state prison inmates are released before serving full terms. In 2016, the median time served for violent crimes was 2.4 years, with an average of 4.7 years, skewed by long sentences. Despite perceptions of overincarceration, the nationwide incarceration rate is at its lowest since 1996, reflecting declining crime rates. The murder rate in 2017 was 5.4 per 100,000, down 45% from 1991. As states cut criminal-justice expenditures post-recession, further reforms risk weakening deterrents and potentially increasing crime, echoing the late 1960s crime wave.

Takeaways by Macro Roundup® AI

  1. In the U.S., 23% of felons convicted of violent crimes receive no incarceration, and nearly 80% of state prison inmates are released before serving their full terms.
  2. Median time served for violent crimes was 2.4 years in 2016, with an average of 4.7 years skewed upward by long sentences.
  3. The nationwide incarceration rate stands at its lowest since 1996, and the 2017 murder rate of 5.4 per 100,000 is down 45% from 1991.

“….First, 23% of felons convicted of violent crimes are sentenced to no incarceration whatever. Second, nearly 80% of state prison inmates are released before serving their full terms. If we measure punishment by actual time served, the picture is not disturbing. Some might argue that America has an underpunishment problem. The U.S. Bureau of Justice Statistics reports that of inmates released in 2016 from state prisons in 44 states, the median murderer had served 13.4 years in prison. The median for those convicted of any violent crime—murder, manslaughter, rape, robbery or assault—was 2.4 years. The average time served is higher than the median—4.7 years—but the average is skewed upward by a small number of unusually long imprisonments. If we look at all state prisoners released in 2016 regardless of offense, the average stay was 2.6 years and the median was 1.3 years. Seventy-seven percent of state prisoners are freed after less than three years behind bars. While that doesn’t include time spent in jail before trial or while awaiting transfer to prison, the jail time is usually a matter of months and is credited toward the time served in prison….”

Barry Latzer, "Beware the Next Step on Criminal-Justice Reform,"Wall Street Journal, December 23, 2018, https://www.wsj.com/articles/beware-the-next-step-on-criminal-justice-reform-11545598957

Beware the Next Step on Criminal-Justice Reform

The First Step Act, which President Trump signed Friday, is a federal prisoner-leniency measure and a worthy reform. It grants a limited number of federal offenders rational and modest sentence reductions, incentives for rehabilitation, and some humane improvements while they serve their sentences. Yet it contains nothing radical to diminish the criminal-justice system or undermine public safety. The provisions for electronic monitoring of early-release prisoners are a welcome down-payment on the best hope for the future of criminal justice—technology.

But having passed the First Step Act, lawmakers should be cautious about the next step. Progressives believe that the U.S. overincarcerates and needs to cut back sharply on the number of people in jails and prisons. But the “mass incarceration” claim doesn’t withstand much scrutiny.

Even progressives must acknowledge that the overwhelming majority of prison inmates are guilty. Thus if it is true that they are overincarcerated, it must be because too many guilty criminals are locked up, because their punishments are excessive, or some combination of the two.

Since more than half of violent crimes go unreported and police solve only a small percentage of those that are (about 26% of reported robberies, for instance), it is difficult to argue that America incarcerates too many offenders. While perhaps an argument can be made for reducing low-level arrests (think possession of small amounts of marijuana), those offenders, when they are held at all, almost always go to jail, not prison, which is for serious and repeat offenders.

What about overpunishment? Are penalties so harsh that American prisons are filled with men and women who are languishing there for decades because of some youthful indiscretion? That is the image the disincarceration movement wants to conjure up. But it is false.

First, 23% of felons convicted of violent crimes are sentenced to no incarceration whatever. Second, nearly 80% of state prison inmates are released before serving their full terms. If we measure punishment by actual time served, the picture is not disturbing. Some might argue that America has an underpunishment problem.

The U.S. Bureau of Justice Statistics reports that of inmates released in 2016 from state prisons in 44 states, the median murderer had served 13.4 years in prison. The median for those convicted of any violent crime—murder, manslaughter, rape, robbery or assault—was 2.4 years. The average time served is higher than the median—4.7 years—but the average is skewed upward by a small number of unusually long imprisonments.

If we look at all state prisoners released in 2016 regardless of offense, the average stay was 2.6 years and the median was 1.3 years. Seventy-seven percent of state prisoners are freed after less than three years behind bars. While that doesn’t include time spent in jail before trial or while awaiting transfer to prison, the jail time is usually a matter of months and is credited toward the time served in prison.

If these punishments don’t seem excessive, and the overwhelming number of people imprisoned deserve their fate, then what will the “second step” entail? Additional policy changes to accelerate disincarceration appear to be unnecessary. In the past decade, according to Bureau of Justice Statistics figures, nationwide incarceration rates have steadily declined and now are at their lowest rate since 1996.

Undoubtedly the decline reflects falling crime rates. Despite upticks since 2015, the U.S. murder rate—the most accurately counted crime, since there are few unreported murders—has been modest, especially compared with the early 1990s. The 2017 rate (5.4 murders per 100,000 Americans) is down 45% from the 1991 rate (9.8). In addition, since the recession of 2007-09, at least 20 states have cut back on criminal-justice expenditures, most likely as a means of cost-saving.

The risk in the second step of criminal-justice reform is that it goes too far. The justice system, flawed though it is, provides incentives to desist from crime. The weaker it gets, the greater the risk of a significant crime increase. That happened in the late 1960s: When the crime tsunami began, the system caved in. Police arrested fewer offenders, and courts imposed fewer and lighter punishments. That contributed to the 20th century’s worst sustained violent-crime wave.

The saver in all this may be that the First Step Act affects only federal prisoners, and each state can judge for itself whether or not—and how much—the system should be softened as a second step.

AI Summary. A Kansas City Federal Reserve study finds that initial population size has become a key determinant of employment and population growth, with most U.S. communities under 25,000 residents losing both population and jobs while nearly all metropolitan areas above 500,000 grew. The link between city size and growth has intensified.

Jordan Rappaport Wall Street Journal
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A Kansas City Fed study highlights that initial population size has become a crucial factor in determining employment and population growth since 2000.

Does city size increasingly determine population and job growth?

Core argument: From 2000 to 2017, most U.S. communities with fewer than 25,000 residents lost both population and employment, while nearly all metropolitan areas above 500,000 residents grew in both, according to a Kansas City Fed study.

A Kansas City Fed study highlights that initial population size has become a crucial factor in determining employment and population growth since 2000. From 2000 to 2017, most U.S. communities with fewer than 25,000 residents experienced declines in both population and employment, whereas nearly all metropolitan areas with populations exceeding 500,000 saw growth. This shift underscores the increasing importance of city size in economic dynamics, as larger cities continue to attract more residents and jobs, reinforcing their economic dominance. The relationship between city size and growth has intensified post-2000, suggesting that larger urban centers are better positioned to capitalize on economic opportunities and demographic trends.

Takeaways by Macro Roundup® AI

  1. From 2000 to 2017, most U.S. communities with fewer than 25,000 residents lost both population and employment, while nearly all metropolitan areas above 500,000 residents grew in both, according to a Kansas City Fed study.
  2. A Kansas City Fed study finds that initial population size has become a crucial determinant of employment and population growth since 2000, with the relationship between city size and growth intensifying after that year.

WSJ reports on a new Kansas City Fed study, "... Initial population has become a more significant determinant of employment and population growth in recent years than it was in previous decades, a Analysis from the Federal Reserve Bank of Kansas City found. From 2000 to 2017, a majority of U.S. communities with fewer than 25,000 residents saw declining population and employment, while nearly all metropolitan areas with more than 500,000 residents saw their populations rise...“The relationship between size and growth became much more important after 2000,” author and senior economist Jordan Rappaport said....."

Paul Kiernan, "For U.S. Cities, Size Increasingly Matters,"Wall Street Journal,December 24, 2018, https://blogs.wsj.com/economics/2018/12/24/for-u-s-cities-size-increasingly-matters/