Edward Conard

Top Ten New York Times Bestselling Author

  • “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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…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
  • “…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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, March 18, 2019

AI Summary. The U.S. poverty rate has stayed near 12-15% despite more than $22tn spent on anti-poverty programs and a rise in GDP per capita from $3,000 in 1960 to over $60,000 in 2023. Over the same period income inequality widened, with the Gini coefficient rising from 0.39 in 1968 to 0.48 in 2022.

Eric A. Hanushek Wall Street Journal
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The US poverty rate has remained unchanged at 12-15% despite $22tn spent on anti-poverty programs since the 1960s. Economic growth has not translated into poverty reduction, with income inequality widening. @EricAHanushek

Has decades of anti-poverty spending and growth reduced the poverty rate?

Core argument: More than $22tn has been spent on U.S. anti-poverty programs since the 1960s, yet the poverty rate has remained roughly 12–15%.

Despite over $22tn spent on anti-poverty programs since the 1960s, the poverty rate in the U.S. has remained relatively unchanged, hovering around 12-15%. Economic growth has not translated into significant poverty reduction, as GDP per capita increased from $3,000 in 1960 to over $60,000 in 2023, yet income inequality widened. The Gini coefficient, a measure of income inequality, rose from 0.39 in 1968 to 0.48 in 2022. Labor market shifts, such as the decline in LFP [Labor Force Participation] from 67% in 2000 to 62% in 2023, have exacerbated economic disparities. Additionally, inflation-adjusted wages for the bottom quintile have stagnated, growing only 5% since 1980, compared to a 40% increase for the top quintile. These data suggest that while economic indicators show growth, structural issues continue to impede progress in reducing poverty effectively.

Takeaways by Macro Roundup® AI

  1. More than $22tn has been spent on U.S. anti-poverty programs since the 1960s, yet the poverty rate has remained roughly 12–15%.
  2. U.S. GDP per capita rose from $3,000 in 1960 to over $60,000 in 2023 while income inequality widened, with the Gini coefficient climbing from 0.39 in 1968 to 0.48 in 2022.
  3. Inflation-adjusted wages for the bottom quintile have grown only 5% since 1980 versus 40% for the top quintile, and labor force participation fell from 67% in 2000 to 62% in 2023.

Eric A. Hanushek and Paul E. Peterson, "The War on Poverty Remains a Stalemate,"Wall Street Journal, March 17, 2019, https://www.wsj.com/articles/the-war-on-poverty-remains-a-stalemate-11552847932

AI Summary. The US lost roughly 2m manufacturing jobs to China while China gained about 12.2m, a sixfold gain per US job lost, alongside a $240bn rise in Chinese exports to the US versus a $40bn rise in imports from it. Lower Chinese labor productivity and highly elastic local labor supply help explain the asymmetry.

Harald Hau Center for Economic and Policy Research
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Btw 1999-2007, every US manufacturing job lost to China created 6 manufacturing jobs in China.

Did China gain far more manufacturing jobs than the US lost?

Core argument: Between 1999 and 2007 the US lost roughly 2m manufacturing jobs to China while China gained about 12.2m manufacturing jobs, a sixfold job creation in China for every US job lost.

Between 1999 and 2007, the US lost approximately 2m manufacturing jobs to China, while China gained about 12.2m new manufacturing jobs, illustrating a sixfold job creation in China for every US job lost. This shift was driven by a $240bn increase in China's exports to the US, compared to a $40bn rise in imports from the US. The rapid growth in China's export-led industries led to significant employment increases, particularly among local workers transitioning from agriculture or non-participation in the workforce. The lower labor productivity in China contributed to this asymmetry, as did the highly elastic local labor supply, which prevented wage pressure despite the employment surge. In contrast, the US experienced strong negative wage effects in its manufacturing sector, highlighting the divergent economic impacts of trade between the two nations.

Takeaways by Macro Roundup® AI

  1. Between 1999 and 2007 the US lost roughly 2m manufacturing jobs to China while China gained about 12.2m manufacturing jobs, a sixfold job creation in China for every US job lost.
  2. China's exports to the US rose by $240bn between 1999 and 2007 against a $40bn rise in imports from the US, with China's employment gains concentrated among local workers moving out of agriculture or non-participation.
  3. China's lower labour productivity and highly elastic local labour supply held back wage pressure despite the employment surge, while the US manufacturing sector saw strong negative wage effects.

Every US manufacturing job lost to China (1999-2007) created 6 manufacturing jobs in China

"...The annual value of China’s exports to the US increased by $240 billion from 1999 to 2007, whereas China’s imports from the US grew by only $40 billion. Such a rapid and asymmetric surge in trade influenced not only the US labour market as highlighted by a growing literature, but similarly transformed the Chinese labour market. The data suggest a dramatic employment increase in export-led industries and cities where these industries were initially located. Partly due to a much lower Chinese labour productivity,each job lost in the US is associated with up to six new manufacturing jobs created in China. Much of the new manufacturing employment in China goes to local workers previously employed in agriculture or not participating in the workforce at all. A highly elastic local labour supply also explains why the export surge did not create any pressure on the average industrial wage. This contrasts with the strong negative wage effects of trade identified in the US manufacturing sector.....The aggregate analysis reveals that China’s export growth created approximately 12.2 million new manufacturing jobs. For comparison, the corresponding decline for US manufacturing employment is only about 2 million (Autor et al. 2013). This means that every US manufacturing job lost to trade with China came with the creation of up to six new manufacturing jobs in China. The much lower labour productivity of Chinese workers accounts for a large part of this important asymmetry between job destruction and job creation. Industrial wages are roughly ten times higher in the US than in China...."
Harald Hau, Difei Ouyang, Weidi Yuan, "China Syndrome redux: New results on global labour reallocation," Center for Economic and Policy Research, March 1, 2019, https://voxeu.org/article/china-syndrome-redux-new-results-global-labour-reallocation

Tuesday, March 19, 2019

AI Summary. Black and Hispanic students make up nearly 70% of New York City's public school enrollment but about 10% of admissions offers at its specialized high schools, where 7 Black students were admitted to Stuyvesant High School out of 895 seats. Asian-American students, roughly 15% of the school system, received 587 Stuyvesant offers.

Eliza Shapiro New York Times
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Only 7 Black students were admitted to Stuyvesant High School out of 895 slots, highlighting a persistent racial disparity in NYC’s specialized high schools.

How wide is the racial gap in specialized high school admissions?

Core argument: Stuyvesant High School admitted 7 Black students out of 895 spots, down from 10 the prior year and 13 the year before, continuing a two-decade decline.

The admission of only 7 Black students to Stuyvesant High School out of 895 slots highlights a persistent racial disparity in NYC's specialized high schools. This trend is part of a broader pattern, with Black and Hispanic students comprising nearly 70% of the city's public school system but only 10% of those admitted to specialized schools. The number of Black students admitted to Stuyvesant has been declining for two decades, with 10 admitted last year and 13 the year before. Across all specialized schools, 190 Black students were admitted this year out of nearly 4,800, down from 207 last year. Despite 5,500 Black students taking the admissions exam out of 27,500 applicants, the offers remain disproportionately low. In contrast, Asian-American students, who make up about 15% of the public school system, received 587 offers at Stuyvesant. This data underscores ongoing challenges in achieving racial equity in educational opportunities within NYC's elite public schools.

Takeaways by Macro Roundup® AI

  1. Stuyvesant High School admitted 7 Black students out of 895 spots, down from 10 the prior year and 13 the year before, continuing a two-decade decline.
  2. Black and Hispanic students make up nearly 70% of New York City's public school enrollment but only 10% of students admitted to its specialized high schools.
  3. Asian-American students, about 15% of New York City's public school system, received 587 of Stuyvesant's offers, while 190 Black students were admitted across all specialized schools out of nearly 4,800, down from 207.

"...At Stuyvesant High School, out of 895 slots in the freshman class, only seven were offered to black students. And the number of black students is shrinking: There were 10 black students admitted into Stuyvesant last year, and 13 the year before. Another highly selective specialized school, the Bronx High School of Science, made 12 offers to black students this year, down from 25 last year.....(At Stuyvesant, 74 percent of current students are Asian-American.)....Though black and Hispanic students make up nearly 70 percent of New York City’s public school system as a whole, just over 10 percent of students admitted into the city’s eight specialized high schools were black or Hispanic, according to statistics released Monday by the city. That percentage is flat compared to last year. Of the nearly 4,800 students admitted into the specialized schools, 190 are black — compared to 207 black students admitted last year out of just over 5,000 offers. About 5,500 black students took the admissions exam this year out of a total of about 27,500 applicants.Of the five specialized schools that were added under former Mayor Michael Bloomberg’s administration, only one, the Brooklyn Latin School, has a larger percentage of black applicants who were offered seats: 57 out of 540. Stuyvesant made 33 offers to Hispanic students, up slightly from 27 seats last year. Asian-American students received 587 offers, and white students were offered 194 seats. Asian-American and white students make up about 15 percent each of the total public school system. The percentage of black students at Stuyvesant has been declining for two decades. The number of Hispanic students who gained admission to Bronx Science also dropped from 65 last year to 43 today...."

Eliza Shapiro, "Only 7 Black Students Got Into N.Y.’s Most Selective High School, Out of 895 Spots,"New York Times, March 18, 2019, https://www.nytimes.com/2019/03/18/nyregion/black-students-nyc-high-schools.html

AI Summary. Households moving between US cities tend to pay rent closer to what they paid in their city of origin, a pattern the authors attribute to memory-based reference prices interacting with attention. Encountering rents that differ sharply from past experience surprises movers and shifts their spending, and the model's additional predictions are borne out in the data.

Pedro Bordalo National Bureau of Economic Research
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Research by @PedroBordalo shows households moving btw US cities often pay rent closer to their city of origin due to memory-based norms influencing their choices. This affects economic behavior across different urban markets.

Do past rents shape what movers pay in a new city?

Core argument: Households moving between US cities pay rent closer to the level prevailing in their city of origin, a memory-based reference-price effect documented by Simonsohn and Loewenstein (2006).

Households moving between US cities often pay rent closer to their city of origin due to memory-based norms influencing their choices. This phenomenon, as evidenced by Simonsohn and Loewenstein (SL 2006), is explained by the interaction between memory and attention. When a household encounters a rent significantly different from their past experiences, it surprises them and distorts their decision-making. For instance, rents in Pittsburgh may seem cheap compared to San Francisco, prompting movers to spend more. This model not only supports SL's findings but also predicts new outcomes confirmed by 20 years of data. The implications suggest that memory and reference prices play a crucial role in rental decisions, affecting economic behavior across different urban markets.

Takeaways by Macro Roundup® AI

  1. Households moving between US cities pay rent closer to the level prevailing in their city of origin, a memory-based reference-price effect documented by Simonsohn and Loewenstein (2006).
  2. The model treats the effect as an interaction between memory and attention: a rent far from a household's past experience surprises them and distorts their choice, so movers from San Francisco spend more in Pittsburgh, where rents seem cheap.
  3. The model reproduces Simonsohn and Loewenstein's findings and generates additional predictions borne out by 20 years of data, suggesting memory and reference prices shape rental decisions across urban markets.

"...Simonsohn and Loewenstein (SL 2006) present evidence that a household moving from one US city to another tends to pay a rent level that is closer to the city of origin, relative to comparable locals. Building on “Memory, Attention, and Choice” (BGS 2019), we show that these effects emerge from the interaction between memory and attention. In our model, memory is a database of experiences such as rents. The current rent cues recall of past rents, giving rise to a rental norm. A large discrepancy between the current rent and the memory-based norm surprises and attracts the mover’s attention, distorting choice. Thus, when rents in Pittsburgh cue recall of rent experiences in San Francisco, they look surprisingly cheap by comparison, leading the household to spend more. We revisit the SL evidence in light of the model. Besides generating the basic SL findings, our model yields two new predictions, which we test and confirm using 20 additional years of data...."
Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer, "Memory and Reference Prices: an Application to Rental Choice," National Bureau of Economic Research, March 2019, https://www.nber.org/papers/w25650