Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 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
  • “…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 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 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

Macro Roundup


Monday, November 25, 2019

AI Summary. About 9m U.S. owner-occupied homes are expected to come onto the market over a decade as baby boomers die, up from 7m in the prior decade, with roughly 21m homes — a quarter of the for-sale stock — vacated by seniors over two decades. These are concentrated in retirement states and declining Rust Belt areas.

Laura Kusisto Wall Street Journal
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Btw 2017 & 2027, 9m owner-occupied homes in the US are expected to enter the market as baby boomers pass away, a 2mm increase from the previous decade @LauraKusisto @WSJ.

How many homes will aging baby boomers release onto the market?

Core argument: Roughly 9m U.S. owner-occupied homes are expected to hit the market between 2017 and 2027 as baby boomers pass away, up from 7m in the prior decade.

Between 2017 and 2027, approximately 9m owner-occupied homes in the U.S. are expected to enter the market as baby boomers pass away, marking an increase from 7m in the previous decade. By 2037, seniors will vacate about 21m homes, equating to one-quarter of the U.S. for-sale housing stock. This figure is more than double the number of new properties built during the last housing bubble. These homes will predominantly be located in retirement hubs like Arizona and Florida or in Rust Belt areas experiencing population decline. In contrast, a smaller influx of new housing is anticipated in high-cost coastal areas such as New York and San Francisco, where younger demographics are increasingly concentrated. This generational housing shift poses significant implications for the real estate market, potentially affecting housing supply dynamics and regional economic patterns.

Takeaways by Macro Roundup® AI

  1. Roughly 9m U.S. owner-occupied homes are expected to hit the market between 2017 and 2027 as baby boomers pass away, up from 7m in the prior decade.
  2. By 2037, seniors are projected to vacate about 21m homes, equal to one-quarter of the U.S. for-sale housing stock and more than double the number of new properties built during the last housing bubble.
  3. The vacated homes are expected to be concentrated in retirement hubs such as Arizona and Florida and in Rust Belt areas losing population, with a smaller influx in high-cost coastal markets like New York and San Francisco.

makes your point about generational housing mismatch

"...One in eight owner-occupied homes in the U.S., or roughly nine million residences, are set to hit the market from 2017 through 2027 as the baby boomers start to die in larger numbers, according to an analysis by Issi Romem conducted while he was a senior director of housing and urban economics at Zillow. That is up from roughly 7 million homes in the prior decade. By 2037, one quarter of the U.S. for-sale housing stock, or roughly 21 million homes will be vacated by seniors. That is more than twice the number of new properties built during a 10-year period that spanned the last housing bubble. Most of these homes will be concentrated in traditional retirement communities in Arizona and Florida, according to Zillow, or parts of the Rust Belt that have been losing population for decades. A more modest infusion of new housing is expected in pricey coastal neighborhoods of New York or San Francisco where younger Americans are still flocking in large numbers..."

Laura Kusisto, "OK Boomer, Who’s Going to Buy Your 21 Million Homes?,"Wall Street Journal, November 23, 2019, https://www.wsj.com/articles/ok-boomer-whos-going-to-buy-your-21-million-homes-11574485201mod=searchresults&page=1&pos=10

AI Summary. The labor force participation rate for American men fell from 86% in 1950 to 69% in 2020. Proposed remedies include expanding vocational training and apprenticeships to close skills gaps in sectors such as manufacturing and construction, reforming social safety nets to incentivize work, and adjusting tax policy to favor low-income workers.

Oren Cass Wall Street Journal
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American men’s labor force participation rate has declined from 86% in 1950 to 69% in 2020. Targeted policies can enhance skill development & align education with market demands, boosting GDP & reducing welfare dependency.

Can training, safety net, and tax reforms raise male labor force participation?

Core argument: The labor force participation rate for American men fell from 86% in 1950 to 69% in 2020, which the author frames as a significant economic challenge.

The labor force participation (LFP) rate for American men has declined from 86% in 1950 to 69% in 2020, highlighting a significant economic challenge. Addressing this requires targeted policies that enhance skill development and align education with market demands. Increasing investment in vocational training and apprenticeships could bridge the skills gap, making men more employable in sectors like manufacturing and construction. Additionally, reforming social safety nets to incentivize work and adjusting tax policies to favor low-income workers can stimulate job growth. By focusing on these areas, the economy can better utilize the potential of American men, boosting GDP and reducing dependency on welfare programs.

Takeaways by Macro Roundup® AI

  1. The labor force participation rate for American men fell from 86% in 1950 to 69% in 2020, which the author frames as a significant economic challenge.
  2. The author argues that greater investment in vocational training and apprenticeships could bridge the skills gap and make men more employable in sectors such as manufacturing and construction.
  3. Reforming social safety nets to incentivize work and adjusting tax policies to favor low-income workers would, in the author's view, stimulate job growth, boost GDP, and reduce dependency on welfare programs.

Jean-Baptiste Say lives on!“... “...A larger pool of skilled, if less for­mally ed­u­cated, work­ers would make busi­nesses that em­ploy such work­ers rel­a­tively more at­trac­tive to build.......”Oren Cass, "How to Get American Men Working Again,"Wall Street Journal, November 22, 2019, https://www.wsj.com/articles/how-to-get-american-men-working-again-11574436197

AI Summary. The share of prime-age men employed has recovered faster in the current business cycle than after the recessions of the 1990s and mid-2000s, though its decline during the Great Recession was the steepest in over half a century. Prime-age male employment has historically been nearly 3x as sensitive to the business cycle as women's.

Ernie Tedeschi @ernietedeschi
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Prime-age male employment recovery pace is firmer than in the 1990s and mid-2000s, despite the extraordinary decline during the Great Recession. Historically, changes in prime-age male employment have been almost 3x as sensitive to the business cycle compared to women.

Has prime-age male employment recovered faster than in past cycles?

Core argument: Changes in prime-age male employment have historically been almost three times as sensitive to the business cycle as changes in prime-age female employment.

The recovery pace of prime-age male employment in the current business cycle is notably firmer than in the 1990s and mid-2000s, despite the extraordinary decline during the Great Recession, which was the fastest in over half a century. Historically, changes in prime-age male employment have been almost 3x as sensitive to the business cycle compared to women, highlighting the importance of full employment commitments. This cyclical sensitivity partly explains the observed employment dynamics, underscoring the need for robust economic policies to stabilize male employment rates during downturns and enhance recovery phases.

Takeaways by Macro Roundup® AI

  1. Changes in prime-age male employment have historically been almost three times as sensitive to the business cycle as changes in prime-age female employment.
  2. Prime-age male employment is recovering at a firmer pace in the current business cycle than in the 1990s and mid-2000s recoveries, despite the Great Recession's decline being the fastest in over half a century.
  3. The cyclical sensitivity of prime-age male employment partly explains these employment dynamics and, per the summary's argument, strengthens the case for full employment commitments.

Two charts of note from Ernie (note I pinged him to ask but don't think this is his demographically adjusted series)"...In thinking about prime-age male employment, I'm struck by the fact that the pace of recovery in this business cycle isn't any slower than past ones. In fact, it's actually been firmer than the 1990s and mid-2000s. What was extraordinary was the *downside*. When prime-age male employment was falling during the Great Recession, it was falling faster than it had over the last half-century (though the mid-70s decline was close). One thing that might explain the weakness of male employment relative to women is if male employment were historically more cyclically-sensitive, and if past commitments to full employment were weaker than today. A cursory analysis of the data is consistent with the former.In words: since 1949, changes in prime-age male employment have been almost 3x as sensitive to the business cycle as they have for women.This explains far from all the dynamics we've seen since then, for either men or women, but it does highlight why full employment is important...."

Employment to Population Ratio Prime Age Men Recoveries and Decline: Extended Excerpt Image 1


Employment to Population Ratio Prime Age Men Recoveries and Decline: Extended Excerpt Image 2


Ernie Tedeschi, "Employment to Population Ratio Prime Age Men Recoveries and Decline," @ernietedeschi, November 25, 2019, https://twitter.com/ernietedeschi/status/1199013481120440321

Tuesday, November 26, 2019

AI Summary. Revised estimates find that double counting in official data on U.S. multinationals' foreign affiliate income — particularly equity income from indirectly owned affiliates — inflates measures of profit shifting to tax havens. Adjusting for this, the authors estimate U.S. corporate tax revenue lost to profit shifting at 4% ($10bn) to 13% ($32bn), about one-third of prior estimates.

Jennifer Blouin Social Science Research Network
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Revised estimates suggest the U.S. Treasury loses only one-third of previously estimated revenue to BEPS due to double counting in accounting practices.

Does double counting in official data overstate profit shifting to tax havens?

Core argument: Revised estimates put the U.S. corporate tax base lost to base erosion and profit shifting in 2012 at 4% ($10bn) to 13% ($32bn), roughly one-third of previously estimated revenue losses.

Revised estimates suggest that the U.S. Treasury loses only one-third of the previously estimated revenue to base erosion and profit shifting (BEPS) due to double counting in accounting practices. The misinterpretation of the Bureau of Economic Analysis (BEA) data, particularly the treatment of equity income from indirectly-owned foreign affiliates, has led to inflated figures. In 2016, equity income accounted for 67% of aggregate foreign affiliate income for U.S. multinational enterprises (MNEs), indicating profits are reported in multiple jurisdictions. Adjusting for this, the U.S. corporate tax base lost to BEPS in 2012 is estimated between 4% ($10bn) and 13% ($32bn), significantly lower than previous estimates. This correction reduces the perceived magnitude of BEPS, challenging influential studies that overstate the issue due to accounting misallocations.

Takeaways by Macro Roundup® AI

  1. Revised estimates put the U.S. corporate tax base lost to base erosion and profit shifting in 2012 at 4% ($10bn) to 13% ($32bn), roughly one-third of previously estimated revenue losses.
  2. Equity income accounted for 67% of aggregate foreign affiliate income for U.S. multinationals in 2016, indicating that the same profits are reported in multiple jurisdictions in Bureau of Economic Analysis data.
  3. Correcting the treatment of equity income from indirectly-owned foreign affiliates in Bureau of Economic Analysis data reduces the measured magnitude of profit shifting and challenges influential studies that overstate it through accounting misallocations.

Boom. new paper undermines Zucman, argues that the current baseline on base erosion and profit shifting is wrong due to double counting. the change in estimates are giant, their revised estimate is that Treasury only loses 1/3 of the current estimates to to BEPS. Not in a position to judge the accounting, but if they are correct, and they make a compelling case, giant.

"...To illustrate the impact of our adjustment to resolve the issues,we offer revised estimates of the U.S. revenue lost to BEPS that are on average only one third of those found in the literature....We explain that the large share of BEA aggregate income reported in tax havens is due to a significant misinterpretation of the BEA’s U.S. international economic accounts data. The confusion stems from the accounting treatment of the activity of U.S. MNEs’ indirectly owned foreign affiliates. For BEA reporting, a foreign affiliate (parent) that owns another foreign affiliate (affiliate) will be required to report the income of the affiliate on its own income statement. This income on the foreign parent’s books is referred to in the BEA data as the equity income from investments. Equity income only arises from foreign affiliates that are indirectly-owned owned by the U.S. parent (i.e., affiliates owned by other foreign affiliates directly held by the U.S. parent). Equity income is neither dividend income nor does it represent an asset (cash or otherwise) flow between a foreign parent affiliate and its affiliate. It is only an accounting construct that is necessary because national statistics require MNEs to report affiliate-level financial information by jurisdiction....For example, in 1990 equity income represented 27% of aggregate foreign affiliate net income but, in 2016, equity income comprises 67 percent of the aggregate foreign affiliate income for U.S. MNEs. This means that in 2016 two-thirds of foreign profits are reported in at least two different countries - once in the country of the parent affiliate and once in the country of the affiliate that generated the profit from its underlying operations....Once we adjust the BEA’s income measures for equity income, we estimate the U.S. corporate tax base lost to BEPS in 2012 of between 4% ($10 billion) and 13% ($32 billion). Similarly, Zucman (2015, p. 105-106) fails to adjust for equity income in his analysis of the 2013 BEA data leading to his conclusion that 55 percent of foreign affiliate income is earned in tax havens resulting in a revenue loss of $130 billion a year (41.4% of U.S. tax revenue in 2013). Our revised estimate using his methodology is only $80 billion (25.4% of U.S. tax revenue in 2013).....Putting an end to the base erosion and profit shifting (BEPS) activity of multinational enterprises (MNEs) is on the national agenda of nearly every country in the world. While many influential papers suggest that the scope and magnitude of the BEPS problem is quite large, we show that these magnitudes are likely overstated due to the accounting treatment of indirectly-owned foreign affiliates in the BEA’s U.S. international economic accounts data. We explain how this accounting treatment leads to double counting of foreign income and to misallocations to the incorrect jurisdiction. We demonstrate an appropriate correction, and show that the correction significantly reduces the magnitude of the BEPS estimates...."
Jennifer Blouin and Leslie A. Robinson, "Double counting accounting: How much profit of multinational enterprises is really in tax havens?," Social Science Research Network, November 21, 2019, https://papers.ssrn.com/sol3/papers.cfm

AI Summary. The decline in labor force participation among prime-age men is attributed to demographic shifts in workforce composition, school enrollment that has not fallen during recoveries, and a structural rise in men taking on home and family care roles, while disability has not been a lasting factor.

Ernie Tedeschi @ernietedeschi
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Demographic shifts, increased school enrollment, and rising home/family care responsibilities have influenced the decline in prime-age male labor force participation rate since 2000, @ernietedeschi.

Why are fewer prime-age men working than two decades ago?

Core argument: The decline in prime-age male labor force participation since 2000 is attributed to demographic shifts in workforce composition, higher school enrollment, and rising home and family care responsibilities among men.

The decline in prime-age male labor force participation rate (LFPR) since 2000 is influenced by several factors, including demographic shifts, increased school enrollment, and rising home/family care responsibilities. Demographic changes have altered the composition of the workforce, while educational enrollment has not decreased as expected during economic recoveries, affecting both men and women. Additionally, the structural rise in home/family care roles for men over the past 40 years has contributed to this trend. Contrary to previous assumptions, disability has not been a permanent factor, while school non-involvement in the labor force (NILF) has shown a more lasting impact. These elements collectively explain the employment gap among prime-age men compared to two decades ago.

Takeaways by Macro Roundup® AI

  1. The decline in prime-age male labor force participation since 2000 is attributed to demographic shifts in workforce composition, higher school enrollment, and rising home and family care responsibilities among men.
  2. School-related non-involvement in the labor force has had a more lasting effect on prime-age male participation than disability, which the analysis finds has not been a permanent factor, contrary to prior assumptions.
  3. Educational enrollment has not declined as expected during economic recoveries, affecting participation for both men and women, while men's home and family care roles have risen structurally over the past 40 years.

Ernie, ".... Yes. But/and let's also be sober about the drivers of lower prime-age male LFPR that we should be concerned about, and the drivers we shouldn't....don’t think we should dismiss concerns over the fall in the top line rate, but the fact that demography, school, and home/family care are top-tier factors driving the delta since 2000 is worth considering.Now I’m off my PC but home/family has been structurally rising for men for at least 40 years. The cyclical enrollment story makes a lot of sense in theory but we haven’t seen that margin decline in the recovery for either men or women....5 years ago I would have predicted that school NILF was a long lagged cyclical factor and disability was a permanent one. I would have been wrong: in fact it’s been the reverse..."

Why are prime-age men less likely to be employed vs. 2000: Extended Excerpt Image 1


Ernie Tedeschi, "Why are prime-age men less likely to be employed vs. 2000," @ernietedeschi, November 26, 2019, https://twitter.com/ernietedeschi/status/1199355009605001216

AI Summary. A critique argues that giving government a larger role in allocating capital risks substituting political agendas for private ownership interests and inviting collusion rather than the voluntary cooperation of markets. It contends that attempting to engineer economic outcomes through regulation and the tax code will not resolve deeper cultural problems.

William McGurn Wall Street Journal
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William McGurn critiques Rubio’s advocacy for increased state involvement in capital allocation, arguing it could undermine market cooperation & lead to collusion.

Does giving government a larger role in allocating capital undermine markets?

Core argument: William McGurn argues that Marco Rubio's call for greater state involvement in capital allocation risks undermining the market's natural cooperation and producing collusion.

William McGurn critiques Marco Rubio's advocacy for increased state involvement in capital allocation, arguing that such a shift could undermine the market's natural cooperation and lead to collusion. McGurn suggests that allowing politicians to decide where capital is invested risks prioritizing government agendas over private ownership interests, requiring a level of faith in government intervention that exceeds historical norms. He emphasizes that the current system, where workers freely choose their labor markets, fosters genuine cooperation. McGurn warns that engineering economic outcomes through regulation and tax codes may not address deeper cultural issues, highlighting a lack of modesty in assuming government can effectively redesign capitalism. This critique underscores concerns about the potential inefficiencies and unintended consequences of expanding state roles in economic decision-making.

Takeaways by Macro Roundup® AI

  1. William McGurn argues that Marco Rubio's call for greater state involvement in capital allocation risks undermining the market's natural cooperation and producing collusion.
  2. McGurn contends that letting politicians decide where capital is invested risks prioritizing government agendas over private ownership interests, requiring faith in government intervention beyond historical norms.
  3. McGurn warns that engineering economic outcomes through regulation and the tax code may not address deeper cultural problems, and faults the lack of modesty in assuming government can redesign capitalism.

McGurn’s offers’ a moral and practical defense of the current system

"....outlines of a post-Trump form of Republican populism. But there are serious objections that can’t be answered merely by dismissing critics as soulless libertarians....The solution, he says, is an economy where politicians such as himself make more of the decisions about where capital gets invested...some of us believe that cooperation is what you get in a market where workers are free to decide to whom they’ll sell their labor—and to whom they won’t.....Experience, moreover, also tells us that when competition is tethered the result isn’t cooperation. It’s collusion.....who are the real materialists, if the answer to a cultural meltdown isn’t to address the human soul but to say, “Don’t worry, we can engineer it all through regulation and the tax code”?...This kind of thing speaks to the larger objection: a want of modesty....So when Mr. Rubio and his allies complain that the high priests of capitalism dismiss his ideas out of hand, it isn’t because they believe him stupid... it’s because they believe that trusting Washington to give us a new and improved capitalism by repurposing private companies to serve the priorities of the government rather than those of their owners requires a faith far greater than any ever demanded by the Lord...."

William McGurn, "Making Capitalism Great Again?,"Wall Street Journal, November 25, 2019, https://www.wsj.com/articles/making-capitalism-great-again-11574726835