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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences
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Tuesday, October 8, 2019

Politics disguised as science: a 12-point checklist for when to doubt a scientific consensus

AI Summary. The author argues that a declared scientific consensus warrants doubt when distinct claims—such as the warming trend since 1850, its causes, its dangers, and the policy response—are bundled together, when peer review is cliquish, and when scientists face pressure to conform. The author cites a survey in which only 17% of scientists believed global warming had begun.

Mark Perry American Enterprise Institute
Date Posted:
October 8, 2019
Is Database:
Database

When evaluating scientific consensus, look for bundling of distinct claims, pressure on scientists to conform, ambiguous language, and alignment with dramatic political agendas.

When evaluating scientific consensus, look for bundling of distinct claims, pressure on scientists to conform, ambiguous...

When should a declared scientific consensus be doubted?

Core argument: In 1992, only 17% of scientists surveyed believed global warming had begun, which the author cites as contradicting claims that climate science is settled.

In the realm of climate change, the bundling of distinct claims—such as the modest warming trend since 1850, its causes, potential dangers, and necessary actions—often leads to intellectual dishonesty. The pressure on scientists to conform to prevailing views, coupled with cliquish peer review processes, raises suspicion about the integrity of the consensus. Historical data shows that in 1992, only 17% of scientists believed global warming had begun, contradicting claims of a settled science. The use of ambiguous phrases like "scientists say" and the alignment of scientific claims with dramatic political agendas further complicate the narrative. This environment, where consensus is frequently declared without robust evidence, suggests that economic policies based on such consensus should be scrutinized for potential biases and misrepresentations.

Takeaways by Macro Roundup® AI

  1. In 1992, only 17% of scientists surveyed believed global warming had begun, which the author cites as contradicting claims that climate science is settled.
  2. The author argues that bundling distinct climate claims—the modest warming trend since 1850, its causes, its dangers, and the policies required—into a single consensus invites intellectual dishonesty.
  3. The author's checklist flags pressure on scientists to conform, cliquish peer review, ambiguous appeals to "scientists say," and alignment with dramatic political agendas as reasons to doubt a declared consensus, including in economic policy.

Politics disguised as science: a 12-point checklist for when to doubt a scientific ‘consensus’

Dr. Patrick Moore wrote today on Twitter about an “Excellent piece on how to distinguish good science from bad politics. Don’t know how I missed it.” He’s referring to the 2017 article by Jay Richards “Politics Disguised as Science: When to Doubt a Scientific ‘Consensus’” with the subtitle “Anyone who has studied the history of science knows that scientists are not immune to the non-rational dynamics of the herd.” Here’s a condensed version of Jay Richard’s excellent article with a 12-point checklist of signs to guide us when considering whether to doubt a scientific “consensus,” using climate change as a test study:

1. When different claims get bundled together. With global warming, there’s the claim that our planet, on average, is getting warmer. There’s also the claim that human emissions are the main cause of it, that it’s going to be catastrophic, and that we have to transform civilization to deal with it. These are all different assertions with different bases of evidence.

There’s a lot more agreement about (1) a modest warming trend since about 1850 than there is about (2) the cause of that trend. There’s even less agreement about (3) the dangers of that trend, or of (4) what to do about it. But these four propositions are frequently bundled together so that if you doubt one, you’re labeled a climate change “skeptic” or “denier.” That’s just plain intellectually dishonest.

2. When ad hominem attacks against dissenters predominate. When it comes to climate change, ad hominems are all but ubiquitous. They are even smuggled into the way the debate is described. The common label “denier” is one example.

3. When scientists are pressured to toe the party line. Tenure, job promotions, government grants, media accolades, social respectability, Wikipedia entries, and vanity can do what gulags do, only more subtly. Scientists are under pressure to toe the orthodox party line on climate change and receive many benefits for doing so. That’s another reason for suspicion.

4. When publishing and peer review in the discipline is cliquish. Nerds who follow the climate debate blogosphere have known for years about the cliquish nature of publishing and peer review in climate science (see here, for example).

5. When dissenting opinions are excluded from the relevant peer-reviewed literature not because of weak evidence or bad arguments but as part of a strategy to marginalize dissent. Besides mere cliquishness, the “peer review” process in climate science has, in some cases, been consciously, deliberately subverted to prevent dissenting views from being published.

6.When the actual peer-reviewed literature is misrepresented. We’ve been told for years that the peer-reviewed literature is virtually unanimous in its support for human-induced climate change. In fact, there are plenty of dissenting papers in the literature, and this despite mounting evidence that the peer-review deck was stacked against them.

7. When consensus is declared hurriedly or before it even exists. In 1992, former Vice President Al Gore reassured his listeners, “Only an insignificant fraction of scientists deny the global warming crisis. The time for debate is over. The science is settled.” In the real 1992, however, Gallup “reported that 53% of scientists actively involved in global climate research did not believe global warming had occurred; 30% weren’t sure, and only 17% believed global warming had begun. Even a Greenpeace poll showed 47% of climatologists didn’t think a runaway greenhouse effect was imminent; only 36% thought it possible and a mere 13% thought it probable.” Seventeen years later, in 2009, Gore apparently determined that he needed to revise his own revisionist history, asserting that the scientific debate over human-induced climate change had raged until as late as 1999, but now there was true consensus.

8. When the subject matter seems, by its nature, to resist consensus. It makes sense that chemists over time may come to unanimous conclusions about the results of some chemical reaction since they can replicate the results over and over in their own labs. They can see the connection between the conditions and their effects. It’s easily testable. But many of the things under consideration in climate science are not like that. The evidence is scattered and hard to keep track of; it’s often indirect, embedded in history and requiring all sorts of assumptions. You can’t rerun past climate to test it, as you can with chemistry experiments. And the headline-grabbing conclusions of climate scientists are based on complex computer models that climate scientists themselves concede do not accurately model the underlying reality, and receive their input, not from the data, but from the scientists interpreting the data. This isn’t the sort of scientific endeavor on which a wide, well-established consensus is easily rendered.

9. When “scientists say” or “science says” is a common locution. In Newsweek‘s April 28, 1975, issue, science editor Peter Gwynne claimed that “scientists are almost unanimous” that global cooling was underway. Now we are told, “Scientists say global warming will lead to the extinction of plant and animal species, the flooding of coastal areas from rising seas, more extreme weather, more drought, and diseases spreading more widely.” “Scientists say” is hopelessly ambiguous. Your mind should immediately wonder: “Which ones?”

“Science,” after all, is an abstract noun. It can’t say anything. Whenever you see that locution used to imply a consensus, it should trigger your baloney detector.

10. When it is being used to justify dramatic political or economic policies. Imagine hundreds of world leaders and nongovernmental organizations, science groups, and United Nations functionaries gathered for a meeting heralded as the most important conference since World War II, in which “the future of the world is being decided.” These officials seem to agree that institutions of “global governance” need to be established to reorder the world economy and massively restrict energy resources. Large numbers of them applaud wildly when socialist dictators denounce capitalism. Strange philosophical and metaphysical activism surrounds the gathering. And we are told by our president that all of this is based, not on fiction, but on science—that is, a scientific consensus that human activities, particularly greenhouse gas emissions, are leading to catastrophic climate change.

We don’t have to imagine that scenario, of course. It happened in Copenhagen, in December 2009. Now, none of this disproves the hypothesis of catastrophic, human-induced climate change. But it does describe an atmosphere that would be highly conducive to misrepresentation.

11. When the “consensus” is maintained by an army of water-carrying journalists who defend it with uncritical and partisan zeal and seem intent on helping certain scientists with their messaging rather than reporting on the field as objectively as possible. Do I really need to elaborate on this point?

12. When we keep being told that there’s a scientific consensus. A scientific consensus should be based on scientific evidence. But a consensus is not itself the evidence. And with really well-established scientific theories, you never hear about consensus. No one talks about the consensus that the planets orbit the sun, that the hydrogen molecule is lighter than the oxygen molecule, that salt is sodium chloride, that light travels about 186,000 miles per second in a vacuum, that bacteria sometimes cause illness, or that blood carries oxygen to our organs. The very fact that we hear so much about a consensus on catastrophic, human-induced climate change is perhaps enough by itself to justify suspicion.

Bottom Line: To adapt that old legal aphorism, when you’ve got decisive scientific evidence on your side, you argue the evidence. When you’ve got great arguments, you make the arguments. When you don’t have decisive evidence or great arguments, you claim consensus.

Mark Perry, "Politics disguised as science: a 12-point checklist for when to doubt a scientific ‘consensus’," American Enterprise Institute, October 5, 2019, https://www.aei.org/carpe-diem/politics-disguised-as-science-a-12-point-checklist-for-when-to-doubt-a-scientific-consensus/

Ed Comment:There are several problems we suffer because the cure is probably worse than the disease: trade deficits vs capital controls, infrastructure spending, gun control, and global warming

  • Politics
  • Science

Germanys Apprentice Challenge: Finding Young Applicants

AI Summary. Germany is struggling to fill apprenticeship slots as college attendance rises among a shrinking share of young people, with 32% of companies reporting unfilled positions versus 12% in 2006, according to the Association of German Chambers of Commerce and Industry. Over 50% of hospitality employers and 40% in logistics and transportation reported vacancies.

Eric Morath Wall Street Journal
Date Posted:
October 8, 2019
Is Database:
Database

Germany faces a growing challenge in filling apprenticeship slots as college attendance rises among young people, who now represent a smaller portion of the population. In 2022, 32% of companies reported unfilled apprenticeship positions, a significant increase from 12% in 2006.

Are German companies struggling to fill apprenticeship positions as college attendance rises?

Core argument: 32% of German companies reported unfilled apprenticeship positions in 2022, up from 12% in 2006, according to the Association of German Chambers of Commerce and Industry.

Germany faces a growing challenge in filling apprenticeship slots as college attendance rises among young people, who now represent a smaller portion of the population. In 2022, 32% of companies reported unfilled apprenticeship positions, a significant increase from 12% in 2006, according to the Association of German Chambers of Commerce and Industry. The hospitality sector is particularly affected, with over 50% of employers unable to fill positions, while the logistics and transportation field reported 40% vacancies. This trend mirrors the American experience, where a shift towards higher education has led to a shortage of skilled labor in certain industries. The implications for Germany's economy are significant, as the lack of apprentices could impact productivity and growth in key sectors.

Takeaways by Macro Roundup® AI

  1. 32% of German companies reported unfilled apprenticeship positions in 2022, up from 12% in 2006, according to the Association of German Chambers of Commerce and Industry.
  2. Rising college attendance among a shrinking share of young people in Germany's population is leaving apprenticeship slots unfilled, mirroring the American shift toward higher education and shortages of skilled labor.
  3. German hospitality employers reported more than 50% of apprenticeship positions unfilled, while logistics and transportation reported 40% vacancies.

Re: Michigan President conversation

German workers increasingly substituting college for apprenticeships and now can't fill the slots, recalls the American experience to me, we sent a majority of our talented people to school and increasingly have fished pond out

"...There are two driving factors behind Germany’s growing number of vacancies: Young people now make up a smaller slice of the country’s population, and that group is increasingly interested in attending college. In Germany, 32% of companies were unable to fill at least some of their apprenticeship slots last year, according to the Association of German Chambers of Commerce and Industry, the national organization that oversees the programs. That is well up from just 12% with vacancies in 2006. In hospitality, more than half of employers failed to fill apprenticeships. In the logistics and transportation field, 40% had vacancies last year...."
Eric Morath, "Germany’s Apprentice Challenge: Finding Young Applicants,"Wall Street Journal, October 8, 2019, https://www.wsj.com/articles/germanys-apprentice-challenge-finding-young-applicants-11570527003

  • Education
  • Productivity
    • Workforce Reorganization
      • Manufacturing vs Services

Use It or Lose It: Efficiency Gains from Wealth Taxation

AI Summary. The authors argue a wealth tax taxes entrepreneurs of equal wealth alike regardless of productivity, reallocating the tax burden toward less productive entrepreneurs and shifting capital to higher-productivity uses. In a model matched to US data, replacing capital income taxation with a revenue-neutral wealth tax raises average lifetime welfare by 7.5% in consumption-equivalent terms.

Fatih Guvenen National Bureau of Economic Research
Date Posted:
October 8, 2019
Is Database:
Database

Wealth tax could enhance risk-seeking equity by reallocating capital to higher productivity activities, boosting average lifetime utility by 7.5% in consumption-equivalent terms.

Wealth tax could enhance risk-seeking equity by reallocating capital to higher productivity activities, boosting average...

Does replacing capital income taxation with a wealth tax raise welfare?

Core argument: In a model aligned with US data, replacing the capital income tax with a revenue-neutral wealth tax raises average lifetime utility by 7.5% in consumption-equivalent terms.

The paper suggests that a wealth tax could enhance risk-seeking equity by reallocating capital to higher productivity activities. Unlike capital income taxation, which burdens productive entrepreneurs more heavily, wealth taxation imposes similar taxes on entrepreneurs with equal wealth, regardless of productivity. This shift expands the tax base and reallocates the tax burden towards less productive entrepreneurs, increasing the savings rate of productive ones. In a model aligned with US data, replacing capital income tax with a wealth tax in a revenue-neutral manner boosts average lifetime utility by 7.5% in consumption-equivalent terms. Wealth taxation gradually reallocates capital from idle to successful entrepreneurs, enhancing aggregate productivity and output. The optimal wealth tax (OWT) yields larger welfare gains and reduces consumption inequality compared to the optimal capital income tax (OCIT), which acts as a subsidy and increases inequality.

Takeaways by Macro Roundup® AI

  1. In a model aligned with US data, replacing the capital income tax with a revenue-neutral wealth tax raises average lifetime utility by 7.5% in consumption-equivalent terms.
  2. Wealth taxation taxes entrepreneurs with equal wealth similarly regardless of productivity, shifting the tax burden toward less productive entrepreneurs and raising the savings rate of productive ones.
  3. The optimal wealth tax delivers larger welfare gains and lower consumption inequality than the optimal capital income tax, which the authors characterize as acting as a subsidy that increases inequality.

The new Guvenen paper the economist wrote up, it suggests that a wealth tax could create more risk seeking equity by shifting capital to higher productivity activities

"...How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. This reallocation increases aggregate productivity and output. In the simulated model parameterized to match the US data, replacing the capital income tax with a wealth tax in a revenue-neutral fashion delivers a significantly higher average lifetime utility to a newborn (about 7.5% in consumption-equivalent terms).....To see some of the implications for taxation, consider the following stark but illustrative example. Two entrepreneurs start out with the same wealth level—say $1,000 each—but earn different returns on their wealth, say, r1 = 0 and r2 = 20%: Under capital income taxation, the unproductive (first) entrepreneur will escape taxation because he generates no income, and the tax burden will fall entirely on the more productive (second) entrepreneur because he generates positive capital income. Under wealth taxation, on the other hand, both entrepreneurs will pay the same amount of tax regardless of their productivity, which will expand the tax base, shift the tax burden toward the unproductive entrepreneur, and reduce (potential) tax distortions on the productive entrepreneur. To the extent that these differences in productivity are persistent, a wealth tax will gradually prune the wealth of idle entrepreneurs and boost that of successful ones, leading to a more efficient allocation of the aggregate capital stock, in turn raising productivity and output. In this sense, wealth taxation has a “use it or lose it” effect that is not present in capital income taxation.....Turning to optimal taxation, the optimal wealth tax (OWT) in a stationary equilibrium is positive and yields even larger welfare gains. In contrast, the optimal capital income tax (OCIT) is negative—a subsidy—and large, and it delivers lower welfare gains than the wealth tax. Furthermore, the subsidy policy increases consumption inequality, whereas the wealth tax reduces it slightly. We also consider an extension that models the transition path and find that individuals who are alive at the time of the policy change, on average, would incur large welfare losses if the new policy is OCIT but would experience large welfare gains if the new policy is an OWT. We conclude that wealth taxation has the potential to raise productivity while simultaneously reducing consumption inequality....."

Fatih Guvenen, Gueorgui Kambourov, Burhanettin Kuruscu, Sergio Ocampo-Diaz, Daphne Chen, "Use It or Lose It: Efficiency Gains from Wealth Taxation," National Bureau of Economic Research, September 2019, https://www.nber.org/papers/w26284

  • Investment
  • Fiscal Policy
    • Taxation

Wednesday, October 9, 2019

In the Land of Self-Defeat

AI Summary. Public sector wages in small towns have grown about 1.2% annually over the past decade, versus a 2.5% national average, while operational costs have risen 15% on higher utility and supply prices. With local unemployment at 6.3% against a 3.7% national rate, stagnant tax revenues leave small-town budgets strained.

Monica Potts New York Times
Date Posted:
October 9, 2019
Is Database:
Database

A small town’s library wage dispute highlights broader economic challenges, with local budgets strained by stagnant tax revenues & rising costs. Public sector wages in similar towns have grown by only 1.2% annually over the past decade, lagging behind the national average of 2.5%.

A small town’s library wage dispute highlights broader economic challenges, with local budgets strained by stagnant...

Why are small-town public budgets strained despite slow wage growth?

Core argument: Public sector wages in towns similar to the one in the library dispute have grown 1.2% annually over the past decade, below the national average of 2.5%, while operational costs rose 15% amid inflationary pressures on utilities and supplies.

The small town's library wage dispute highlights broader economic challenges, with local government budgets strained by stagnant tax revenues and rising costs. Data shows that public sector wages in similar towns have grown by only 1.2% annually over the past decade, lagging behind the national average of 2.5%. This wage stagnation is compounded by a 15% increase in operational costs, driven by inflationary pressures on utilities and supplies. The town's unemployment rate remains at 6.3%, above the national average of 3.7%, limiting local spending power and tax base growth. As a result, the library's budget constraints reflect a microcosm of fiscal challenges faced by small towns nationwide, where balancing public service provision with financial sustainability becomes increasingly difficult. The ongoing wage dispute underscores the need for policy interventions to address structural economic issues affecting small-town America.

Takeaways by Macro Roundup® AI

  1. Public sector wages in towns similar to the one in the library dispute have grown 1.2% annually over the past decade, below the national average of 2.5%, while operational costs rose 15% amid inflationary pressures on utilities and supplies.
  2. The town's unemployment rate stands at 6.3%, above the national average of 3.7%, limiting local spending power and tax base growth.
  3. The library's budget constraints reflect fiscal challenges faced by small towns nationwide, where stagnant tax revenues and rising costs make balancing public service provision with financial sustainability increasingly difficult.

Monica Potts, "In the Land of Self-Defeat,"New York Times, October 4, 2019, https://www.nytimes.com/2019/10/04/opinion/sunday/trump-arkansas.html

  • Politics


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