Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, January 29, 2019

AI Summary. Analysis of 1.2m U.S. inventors finds the top 1% earn over 22% of all inventors' income, with income highly correlated with social impact. The authors' model suggests cutting top income tax rates has limited potential to raise aggregate innovation, while expanding childhood exposure to innovation through mentorship could have larger effects.

Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova and John Van Reenen Center For Economic Performance
Date Posted:
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Analysis of 1.2m U.S. inventors reveals that the top 1% earn over 22% of total inventors’ income, with high correlation btw income and social impact. Reducing top income tax rates has limited potential to boost aggregate innovation, as it primarily influences those already exposed to innovation.

Do lower top tax rates or childhood exposure produce more inventors?

Core argument: Across 1.2m U.S. inventors, the top 1% earn over 22% of total inventors' income, and income is highly correlated with inventors' social impact.

Analysis of 1.2m U.S. inventors reveals that the top 1% earn over 22% of total inventors' income, with high correlation between income and social impact. The model suggests that reducing top income tax rates has limited potential to boost aggregate innovation, as it primarily influences those already exposed to innovation and not star inventors, whose decisions are less sensitive to financial incentives. Star inventors, earning over $1m annually between ages 40-50, are unlikely to be swayed by marginal tax changes. Instead, increasing exposure to innovation, such as through mentorship programs, could significantly enhance innovation by attracting high-impact inventors.

Takeaways by Macro Roundup® AI

  1. Across 1.2m U.S. inventors, the top 1% earn over 22% of total inventors' income, and income is highly correlated with inventors' social impact.
  2. The model suggests that cutting top income tax rates has limited potential to raise aggregate innovation, since it mainly affects those already exposed to innovation rather than star inventors.
  3. Star inventors, earning over $1m annually between ages 40–50, are unlikely to be swayed by marginal tax changes, while expanding exposure to innovation through measures such as mentorship programs could substantially increase the supply of high-impact inventors.

"....Many countries provide financial incentives to spur innovation, ranging from tax incentives to research and development grants. In this paper, we study how such financial incentives affect individuals' decisions to pursue careers in innovation. We first present empirical evidence on inventors' career trajectories and income distributions using de-identified data on 1.2 million inventors from patent records linked to tax records in the U.S. We find that the private returns to innovation are extremely skewed - with the top 1% of inventors collecting more than 22% of total inventors' income - and are highly correlated with their social impact, as measured by citations....The highest-paid 1% of inventors (whose annual incomes exceed $1.6 million per year) earn more than 22% of total inventors' income. The distribution of income among patent-holders is as skewed as the distribution of income in the population as a whole. Individuals with highly cited patents have much higher incomes, suggesting that the private benefits of innovation are correlated with their social returns...Inventors tend to have their most impactful innovations around age 40 and their incomes rise rapidly just before they have high-impact patents. We then build a stylized model of inventor career choice that matches these facts as well as recent evidence that childhood exposure to innovation plays a critical role in determining whether individuals become inventors. The model predicts that financial incentives, such as top income tax reductions, have limited potential to increase aggregate innovation because they only affect individuals who are exposed to innovation and have no impact on the decisions of star inventors, who matter most for aggregate innovation. Importantly, these results hold regardless of whether the private returns to innovation are known at the time of career choice. In contrast, increasing exposure to innovation (e.g., through mentorship programs) could have substantial impacts on innovation by drawing individuals who produce high impact inventions into the innovation pipeline. Although we do not present direct evidence supporting these model-based predictions, our results call for a more careful assessment of the impacts of financial incentives and a greater focus on alternative policies to increase the supply of inventors....Using this model, we compare the impacts of two types of policies on innovation: increasing private financial returns (e.g., by cutting top income tax rates) and increasing exposure (e.g., through mentorship programs). The model implies that the potential to increase innovation by reducing top taxes is limited, for three reasons.First, such policies only affect the subset of individuals who have been exposed to the possibility of an inventor career. Second, if the returns to innovation are forecastable at the point of career choice, such policies would only induce inventors of marginal quality to enter the field rather than star inventors. In our data, the mean annual income of those with patents in the top 1% of the citation distribution is more than $1 million between ages 40-50. The decisions of these star inventors are unlikely to be affected by small changes in financial incentives, making aggregate quality-weighted innovation relatively insensitive to tax rate...Third, if the returns to innovation are uncertain at the point of career choice, the elasticity of innovation with respect to top income tax rates is likely to be small in a standard expected utility model because tax changes only a ect payouts when inventors have very high incomes and low marginal utility...."

Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova and John Van Reenen, "Do Tax Cuts Produce More Einsteins? The Impacts of Financial Incentives vs. Exposure to Innovation on the Supply of Inventors," Center For Economic Performance, January 2019, http://cep.lse.ac.uk/_new/publications/abstract.asp

Wednesday, January 30, 2019

AI Summary. Income inequality is associated with expected health expenditures, with mean household disposable income by decile far more unequal in the US than in Northern Europe. The wider US gap between top and bottom deciles is argued to produce unequal healthcare access and higher health costs for lower-income groups.

R.C.A. Random Critical Analysis
Date Posted:
Is Database:
Database

Income inequality significantly impacts health expenditures, with disparities in mean household disposable income by decile evident btw the US and Northern Europe. @R.C.A.

Does income inequality raise expected health expenditures?

Core argument: Mean household disposable income by decile diverges between the United States and Northern Europe, with the U.S. top decile's income substantially higher than its bottom decile's.

Income inequality significantly impacts health expenditures, with disparities in mean household disposable income by decile evident between the US and Northern Europe. In the US, the top decile's income is substantially higher than the bottom decile, leading to unequal access to healthcare and higher health costs for lower-income groups. Conversely, Northern Europe exhibits a more equitable income distribution, resulting in more uniform health expenditure across deciles. This disparity suggests that countries with greater income inequality may face higher overall health expenditures due to increased demand for public health interventions and support for lower-income households. Policymakers must consider these economic data when designing healthcare systems to ensure equitable access and manage costs effectively.

Takeaways by Macro Roundup® AI

  1. Mean household disposable income by decile diverges between the United States and Northern Europe, with the U.S. top decile's income substantially higher than its bottom decile's.
  2. Northern Europe's more equitable income distribution corresponds to more uniform health expenditure across income deciles, while in the United States unequal access to healthcare accompanies higher health costs for lower-income groups.
  3. Countries with greater income inequality may face higher overall health expenditures through increased demand for public health interventions and support for lower-income households, a consideration for policymakers designing healthcare systems.

Ed, It's from a Random Critical Analysis healthcare post: R.C.A. "On the relevance of the income inequality to expected health expenditures.,"Random Critical Analysis, January 20, 2018, https://randomcriticalanalysis.com/2018/01/20/on-the-relevance-of-the-income-inequality-to-expected-health-expenditures/

On the relevance of the income inequality to expected health expenditures.: Extended Excerpt Image 1


On the relevance of the income inequality to expected health expenditures.: Extended Excerpt Image 2

I’m still looking for the source of this chart but have not had success so far reverse image searching on Google as well as other reverse search pages. I’ve also done a more traditional search for the chart using the info that appears on it.