Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…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


Wednesday, September 16, 2020

AI Summary. Surveys of wealthy Americans report that 77% grew up in poor or middle-class households, and a separate study found 82% of wealth was self-made rather than inherited.

Kirsten Fleming New York Post
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@KirstenFleming US Trust study: 77% of wealthy respondents said they grew up poor or middle class, Fidelity study: 86% of wealth is self-made.

Is most wealth in America self-made rather than inherited?

Core argument: A US Trust study found 77% of wealthy individuals report growing up in poor or middle-class households.

Recent studies highlight the self-made nature of wealth among the affluent, with 77% of wealthy individuals reporting they grew up in poor or middle-class households, according to a US Trust study. This underscores a significant shift in wealth creation dynamics, as evidenced by a 2019 Fidelity study indicating that 82% of wealth is self-made. These findings suggest that economic mobility remains robust, with a majority of today's wealthy individuals having ascended from modest beginnings. This trend has implications for economic policy and wealth distribution, as it challenges traditional narratives about inherited wealth and emphasizes the role of entrepreneurship and innovation in wealth accumulation. The data also reflect broader macroeconomic trends where individual effort and opportunity play crucial roles in shaping financial success, potentially influencing future policy decisions aimed at fostering economic equality and opportunity.

Takeaways by Macro Roundup® AI

  1. A US Trust study found 77% of wealthy individuals report growing up in poor or middle-class households.
  2. A 2019 Fidelity study found 82% of wealth among the affluent is self-made rather than inherited.

Links to sources showing wealthier individuals earn their money “…. Risher, who grew up in a middle-class household while her husband was raised by a single mother who struggled financially. She said newly rich individuals like herself are relatively common, citing a US Trust study in which 77% of wealthy respondents said they grew up poor*and also a 2017 Fidelity study that found 86% of wealth is self-made**….”

Kirsten Fleming, "I’m a millionaire and it’s really hard being rich,"New York Post, September 14, 2020, https://nypost.com/2020/09/14/why-one-very-rich-woman-says-we-need-to-talk-about-money/

**That Fidelity Number is correct for 2017, in the most recent 2019 version (attached) 82% of wealthwas reported being self made (the 2017 report is no longer on their website)

*Note according to the U.S. Trust survey (attached) that “77% of wealthty respondents said they grew up poor” is a misquote of the survey thatfound 19% of respondents grew up poor, and 58% grew up middle class, for 77% grew up middle or lower class. In later versions of the report they apparently didn’t ask the same question so I stuck with 2016 version .

AI Summary. A U.S. Trust survey found that 77% of Americans with more than $3m in investable assets grew up in middle-class or poor households, including 20% who grew up poor, while 45% of millennial respondents came from wealthy families. Some 80% described their parents as firm disciplinarians who encouraged personal interests.

Bank Of America U.S. Trust Bank Of America Private Wealth Management
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77% of wealthy Americans grew up middle class or poor, highlighting significant upward mobility. 20% grew up poor, while 45% of millennials came from wealthy families, indicating a generational shift in wealth origins.

Do most wealthy Americans come from middle-class or poor households?

Core argument: The 2016 U.S. Trust survey found 77% of Americans with more than $3m in investable assets grew up in middle class or poor households, and 20% of them grew up poor.

The 2016 U.S. Trust survey reveals that 77% of wealthy Americans, defined as those with >$3m in investable assets, grew up in middle class or poor households, highlighting significant upward mobility. Interestingly, 20% of these individuals grew up poor, underscoring the potential for economic advancement despite initial financial constraints. In contrast, 45% of millennial respondents came from wealthy families, indicating a generational shift in wealth origins. The survey also notes that many wealthy individuals were raised in strict yet supportive households, with 80% describing their parents as firm disciplinarians who encouraged personal interests. Key values emphasized in these families included academics (79%), financial discipline (68%), and work participation (63%), suggesting that these factors may contribute to financial success.

Takeaways by Macro Roundup® AI

  1. The 2016 U.S. Trust survey found 77% of Americans with more than $3m in investable assets grew up in middle class or poor households, and 20% of them grew up poor.
  2. Among millennial respondents to the 2016 U.S. Trust survey, 45% came from wealthy families, in contrast to the broader wealthy population's middle class and poor origins.
  3. In the 2016 U.S. Trust survey, 80% of wealthy respondents described their parents as firm disciplinarians who encouraged personal interests, and their families emphasized academics (79%), financial discipline (68%), and work participation (63%).

U.S Trust runs an annual survey of individuals with >$3mm of investable assets (N=684) of their respondents 77% grew up middle class or less, interesting of their millennials respondents 45% grew up wealthy these numbers are from the 2016 version of the report that was cited in NYPost“…Overall, today’s wealthy Americans come primarily from middle class backgrounds, although one in five grew up poor. However, Millennials contrast sharply with this profile, as nearly half (45%) come from wealthy families,offering this generation an accelerated start to wealth….”

Bank Of American, “2016 U.S. Trust Insights On Wealth And Worth,” U.S. Trust Bank Of America Private Wealth Management, 2016, http://doingmorethatmatters.com/wp-content/uploads/2016/09/US_Trust-Wealth-and-Worth-Study-2016.pdf

Characteristics of the households the wealthy grew up in, “…Many of the wealthy grew up in strict but supportive households. Eight in ten describe their parents as firm disciplinarians who also encouraged individual interests and talents. Nearly two-thirds say their parents were tolerant of their mistakes and failures. The three most important values stressed in these families were academics (79%),financial discipline (68%) and work participation (63%)….”

Some factoids from the report (# are from 2016)“..There are 2,023,518 households in the U.S. with $3 million or more, including 987,930 households with $3 million to $5 million, 716,611 households with $5 million to $10 million, and 318,978 households with more than $10 million in assets…”

AI Summary. A survey of 2,026 investors, including 1,102 with over $1m in investable assets excluding employer retirement plans and real estate, found that 82% of millionaires' wealth was self-earned or self-increased, while 18% was inherited or increased by others.

Fidelity Staff Fidelity Investments
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According to @Fidelity, 82% of millionaires’ wealth is self-earned or increased, while only 18% is inherited or increased by others.

Is most millionaire wealth self-earned rather than inherited?

Core argument: The 11th Millionaire Outlook Study finds 82% of millionaires' wealth is self-earned or self-increased, while 18% is inherited or increased by others.

The 11th Millionaire Outlook Study reveals that 82% of millionaires' wealth is self-earned or increased, while only 18% is inherited or increased by others. This data, collected from a survey of 2,026 investors including 1,102 millionaires, highlights the significant role of personal financial acumen and investment strategies in wealth accumulation. Participants had over $1m in investable assets, excluding employer-sponsored retirement plans and real estate. The study underscores the importance of self-driven financial growth, as the majority of millionaires have built their wealth independently, reflecting broader economic trends where individual entrepreneurship and investment decisions are pivotal. This insight is crucial for economists and policymakers focusing on wealth distribution and economic mobility.

Takeaways by Macro Roundup® AI

  1. The 11th Millionaire Outlook Study finds 82% of millionaires' wealth is self-earned or self-increased, while 18% is inherited or increased by others.
  2. The 11th Millionaire Outlook Study surveyed 2,026 investors, including 1,102 millionaires, with investable assets over $1m excluding employer-sponsored retirement plans and real estate.
  3. The 11th Millionaire Outlook Study points to personal financial acumen and investment strategies as significant in wealth accumulation, with relevance for wealth distribution and economic mobility.

Fidelity’s Millionaire Outlook Study, the 2017 version cited in NY Post review had 88% of individuals saying their wealth was self made,in 2019 it was 82%.I’ve attached the current version here.

The participants have >$1mm in investable assets outside of employer sponsored retirement plans and real estate:“…The 2019 Fidelity Millionaire Outlook Study was conducted during the period August 6 through August 26, 2019. It surveyed a total of 2,026 investors, including 1,102 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding retirement assets and primary residence), age, and income levels. Millionaires are defined as investors with over $1 million in investable assets outside employer-sponsored retirement plans and real estate.Millionaires-of-Tomorrow are defined as investors with $50,000 to $999,999 in investable assets outside employer-sponsored retirement plans or real estate. They include both Mass Affluent and Emerging Affluent Investors. Mass Affluent investors are aged 21-54 with Investable Assets of $250K to less than $1M OR aged 55+ with Investable Assets of $500K to less than $1M. Emerging Affluent investors are aged 21-49 with Investable Assets of $50K to less than $250K and household income of $100K or more…”

Fidelity, “11thMillionaire Outlook Study,” Fidelity Investments, December 2019, https://clearingcustody.fidelity.com/app/literature/item/9897298.html

AI Summary. The Federal Reserve's balance sheet has expanded by $1.6tn while banks' excess reserves have turned downward, breaking the pattern of the Great Financial Crisis when both rose together. The author argues this widening gap, which has historically tracked inflation, points to rising inflation that could reach 2% core personal consumption inflation.

Benjamin Della Rocca Council on Foreign Relations
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The Fed’s balance sheet expansion by $1.6tn has diverged from historical patterns, with banks’ excess reserves turning sharply downward since June. This decoupling suggests a potential rise in inflation, reaching 2% Core PCE by Feb 2021.

Does a growing gap between Fed assets and reserves signal inflation?

Core argument: The Fed's balance sheet has expanded by $1.6tn while banks' excess reserves have turned sharply downward since June, diverging from the Great Financial Crisis pattern in which both rose in tandem.

Despite the Fed's balance sheet expansion by $1.6tn, banks' excess reserves have turned sharply downward since June, diverging from the historical pattern observed during the Great Financial Crisis when both rose in tandem. This decoupling suggests a potential rise in inflation, as the gap between the Fed's balance sheet and bank reserves, which has historically tracked inflation, reaches new highs. If the current trend persists, inflation could increase at a similar pace to the post-crisis era, potentially reaching 2% Core PCE [Personal Consumption Expenditures] by February 2021. This shift indicates that the Fed's quantitative easing (QE) may now contribute to upward inflationary pressures, contrasting with past outcomes where inflation remained flat despite balance sheet growth.

Takeaways by Macro Roundup® AI

  1. The Fed's balance sheet has expanded by $1.6tn while banks' excess reserves have turned sharply downward since June, diverging from the Great Financial Crisis pattern in which both rose in tandem.
  2. The gap between the Fed's balance sheet and bank reserves, which has historically tracked inflation, has reached new highs, which the author reads as pointing to a rise in inflation.
  3. Should the current trend persist, inflation could rise at a pace similar to the post-crisis era, reaching 2% Core PCE by February 2021, with quantitative easing contributing upward pressure rather than leaving inflation flat.

Interesting forecast by Ben Steil drawing a comparison btw the Fed’s balance sheet and banks excess reserves during financial crisis and today. “…Stockpile is exactly what the banks did during the so-called Great Financial Crisis, from 2009 to 2015. As the left-hand figure above shows, banks’ excess reserves rose in close tandem with the Fed’s balance sheet during these years. In consequence, inflation, despite fears that it would run wild, stayed flat. The left-hand figure also shows the same pattern emerging in March of this year, when the Fed restarted QE. The Fed’s balance sheet rose by $1.6 trillion, while bank excess reserves rose by $1.7 trillion….”

Benn Steil and Benjamin Della Rocca, "Why the Fed Bond Binge Will Boost Inflation," Council On Foreign Relations, September 16, 2020, https://www.cfr.org/blog/why-fed-bond-binge-will-boost-inflation-1

He suggests the decoupling of the two suggests core PCE could hit 2% early next year, “…More recent data, however, show a big change. Since June, as QE continued to balloon the Fed’s balance sheet, bank excess reserves have turned sharply downward. In consequence, as the right-hand figure shows, the gap between the Fed’s balance sheet and bank excess reserves, which had closely tracked inflation throughout the post-crisis era, has hit new highs. If this trend persists, inflation should head upward in tandem. When, then, can we expect inflation to hit the Fed’s Holy Grail of 2 percent? Well, we know that when our balance-sheet-to-reserves gap measure began rising in 2010 it took eight months for inflation to rise one percentage point from the time it subsequently bottomed out. If inflation should rebound at the same pace now, we are looking at 2 percent Core PCE inflation, the Fed’s preferred measure, in February 2021….”

Thursday, September 17, 2020

AI Summary. A review of nearly 7,000 empirical economics studies found that in half of the research areas 90% of studies were underpowered, meaning sample sizes were too small to confirm effects, and 80% of the remaining studies exaggerated their results. A replication attempt of 18 economics experiments failed for seven.

Economist Staff The Economist
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A review of nearly 7,000 empirical economics studies found 90% of studies in half of research areas were underpowered, with 80% of remaining studies exaggerating results.

Are many empirical microeconomics findings underpowered, exaggerated, and hard to replicate?

Core argument: A review of nearly 7,000 empirical economics studies found that in half of the research areas, 90% of studies were underpowered, with sample sizes too small to confirm the effects they reported.

A review of nearly 7,000 empirical economics studies revealed that in half of the research areas, 90% of studies were underpowered, indicating insufficient sample sizes to confirm effects. Among studies that avoided this issue, 80% exaggerated their results. Additionally, a replication attempt of 18 economics experiments published in Science failed for seven, highlighting the fragility of findings in microeconomics. These findings suggest that many conclusions drawn from microeconomic research may be unreliable, posing challenges for policymakers and economists who rely on robust data to inform decisions. The prevalence of underpowered studies and exaggerated results underscores the need for more rigorous methodologies and larger sample sizes to ensure the validity and reliability of economic research.

Takeaways by Macro Roundup® AI

  1. A review of nearly 7,000 empirical economics studies found that in half of the research areas, 90% of studies were underpowered, with sample sizes too small to confirm the effects they reported.
  2. Among the studies that were adequately powered, 80% exaggerated their results.
  3. A replication attempt of 18 economics experiments published in Science failed for seven of them.

“…A recent examination in the Economic Journal, of almost 7,000 empirical economics studies, found that in half of the areas of research, nearly 90% of those studies were underpowered, ie, that they used samples too small to judge whether a particular effect was really there. Of the studies that avoided this pitfall, 80% were found to have exaggerated the reported results. Another study, published in Science, which attempted to replicate 18 economics experiments, failed for seven of them….”

Economist Staff, "Many results in microeconomics are shaky,"The Economist, April 26, 2018, https://www.economist.com/finance-and-economics/2018/04/26/many-results-in-microeconomics-are-shaky

AI Summary. Analyses of economics research estimate that up to 20% of studies are fudged, find nearly 90% of empirical studies underpowered with exaggerated results in 80% of cases, and report that attempts to replicate 18 experiments failed for seven. The authors argue publication incentives inflate the apparent significance of findings.

Mark Perry American Enterprise Institute
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A 12-point checklist for when to doubt a scientific consensus: recent analyses reveal significant issues in the reliability of economic studies, with up to 20% fudged.

How reliable are published economics studies?

Core argument: A meta-study found nearly 90% of empirical economics studies were underpowered, with exaggerated results in 80% of cases, and estimates suggest up to 20% of economic studies are fudged.

Recent analyses reveal significant issues in the reliability of economic studies, with estimates suggesting that up to 20% of these studies are fudged. A meta-study found that nearly 90% of empirical economics studies were underpowered, leading to exaggerated results in 80% of cases. Furthermore, attempts to replicate 18 economics experiments failed for seven, highlighting a replication crisis. The distribution of test statistics in prestigious journals shows a two-humped camel shape, indicating misallocation and potential inflation bias. This pattern suggests that academic economists may respond to publication incentives, skewing the perceived significance of their findings. Such findings underscore the need for skepticism towards scientific consensus, especially when results align too neatly with societal biases or newsworthiness.

Takeaways by Macro Roundup® AI

  1. A meta-study found nearly 90% of empirical economics studies were underpowered, with exaggerated results in 80% of cases, and estimates suggest up to 20% of economic studies are fudged.
  2. Attempts to replicate 18 economics experiments failed for seven.
  3. The distribution of test statistics in prestigious economics journals forms a two-humped camel shape, indicating misallocation and potential inflation bias, suggesting academic economists may respond to publication incentives.

Three highly relevant blog posts in full with the associated database entries attached. Following the three blog posts I’ve included database entries that might be useful. Note 2/3 blog post are on fraudulent economic studies where most of the database entries are with issues in other fields.

Steve

  1. Edward Conard, “New Study Estimates Upwards Of 20% Of Economic Studies Are Fudged,” EdwardConard.com, February 2, 2016, https://www.staging4.edwardconard.com/2016/02/02/new-study-estimates-upwards-of-20-of-economic-studies-are-fudged/

Ed this blogpost contains one database entry (attached)

Economist Staff, "Are results in top journals to be trusted?"The Economist, January 21, 2016. Available at:http://www.economist.com/blogs/freeexchange/2016/01/fudging-hell
NEW STUDY ESTIMATES UPWARDS OF 20% OF ECONOMIC STUDIES ARE FUDGED

  1. Edward Conard, “Two More Studies Find Shocking Inability To Replicate Economic Research,” EdwardConard.com April 30, 2018, https://www.staging4.edwardconard.com/2018/04/30/two-more-studies-find-shocking-inability-to-replicate-economic-research/

Tells for Politics Disguised As Science (Mark Perry) 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/

"True Number Of Next Day Deaths Fell Outside The IHME Prediction Intervals As Much As 70% Of The Time In Comparison To The Expected Value of 5% (University of Sydney) Roman Marchant, Noelle Samia, Ori Rosen, Martin Tanner, and Sally Cripps, "Learning as We Go - An Examination of the Statistical Accuracy of COVID19 Daily Death Count Predictions," ARC Centre for Data Analytics for Resources and Environments, University of Sydney, University of Texas, Northwestern University, April 24, 2020, https://www.sydney.edu.au/content/dam/corporate/documents/centre-for-translational-data-sience/marchant-et-al---2020---learning-as-we-go.pdf

Physicist Quote On The Politicization Of Science (Lawrence Krauss) Lawrence Krauss, "The Ideological Corruption of Science,"Wall Street Journal, July 12, 2020, https://www.wsj.com/articles/the-ideological-corruption-of-science-11594572501

Ioannidis Scientific Studies Are Often Infected By Biases (WSJ) Allysia Finley, "The Bearer of Good Coronavirus News,"Wall Street Journal, April 24, 2020, https://www.wsj.com/articles/the-bearer-of-good-coronavirus-news-11587746176

Likelihood of Null Effects of Large NHLBI Clinical Trials Has Increased Over Time (PLOS ONE) Robert Kaplan and Veronica Irvin, "Likelihood of Null Effects of Large NHLBI Clinical Trials Has Increased over Time," PLOS One, August 5, 2015, https://journals.plos.org/plosone/article

In 30 Years Before 2000 57% Of Trials Showed "Significant Benefit" After Changes In Transparency Only 8% Did (NYT) Aaron Carroll, Congratulations on the Promotion. But Did Science Get a Demotion?"New York Times, December 31, 2018, https://www.nytimes.com/2018/12/31/upshot/congratulations-on-the-promotion-but-did-science-get-a-demotion.html

Only 39% Of Psychology Paper's Published In 2015 Were Replicable (The Economist) Economist Staff, "Let's just try that again,"The Economist, February 6, 2016. Available at:http://www.economist.com/node/21690020/print

“Consider the new results from the Social Sciences Replication Project, in which 24 researchers attempted to replicate social-science studies published between 2010 and 2015 in Nature and Science—the world’s top two scientific journals. … As it turned out, that finding was entirely predictable. While the SSRP team was doing their experimental re-runs, they also ran a ‘prediction market.’ … Overall, the traders thought that studies in the market would replicate 63 percent of the time—a figure that was uncannily close to the actual 62-percent success rate. … The traders’ instincts were also unfailingly sound when it came to individual studies. … The 62-percent success rate…is…galling…since the project specifically looked at the two most prestigious journals in the world. …several of the studies that didn’t replicate have another quality in common: newsworthiness. They reported cute, attention-grabbing, whoa-if-true results that conform to the biases of at least some parts of society. … ‘I did a sniff test of whether the results actually make sense,’ says Paul Smeets from Maastricht University. ‘Some results look quite spectacular but also seem a bit too good to be true, which usually that means they are.’… these journals ‘are not especially good at picking out really robust findings or excellent research practices. And the prediction market adds to my frustration because it shows that there are clues to the strength of the evidence in the papers themselves.’ … If prediction-market participants could collectively identify reliable results, why couldn’t…the journal editors who decided to publish them? ‘Maybe they’re not looking at the right things,’ says Vazire. ‘They probably put too-little weight on markers of replicability, and too much on irrelevant factors…’”

  1. The following database entries didn’t make it onto the blog, suspect there first three would be the most interesting to you

A recent study shows a prediction market is a better predictor of scientific reproducibility than the editors of the journals Nature and Science (who have only a 62% chance of accurately identifying reproducibility). Telltale signs of irreproducibility include newsworthy results.


STUDY SHOWS PREDICTION MARKET BETTER PREDICTOR OF SCIENTIFIC REPRODUCIBILITY THAN EDITORS OF NATURE AND SCIENCE

Ed Yong, "Online Bettors Can Sniff Out Weak Psychology Studies,"The Atlantic, August 27, 2018, https://www.theatlantic.com/science/archive/2018/08/scientists-can-collectively-sense-which-psychology-studies-are-weak/568630/

Ed this blogpost links to one database entry (attached)

I havepreviously reportedon this widespread problem in economics and other hard and soft sciences.

A recent examination in theEconomic Journal, of almost 7,000 empirical economics studies, found that in half of the areas of research, nearly 90% of those studies were underpowered, i.e., that they used samples too small to judge whether a particular effect was really there. Of the studies that avoided this pitfall, 80% were found to have exaggerated the reported results. Anotherstudy, published inScience, which attempted to replicate 18 economics experiments, failed for seven of them.

The Economist reports on two more studies that find a shocking inability to replicate economic research:


TWO MORE STUDIES FIND SHOCKING INABILITY TO REPLICATE ECONOMIC RESEARCH

  1. Edward Conard, “Study Shows Prediction Market Better Predictor Of Scientific Reproducibility Than Editors Of Nature And Science,” EdwardConard.com, August 28, 2018, https://www.staging4.edwardconard.com/2018/08/28/study-shows-prediction-market-better-predictor-of-scientific-reproducibility-than-editors-of-nature-and-science/

Economist Staff, "Many results in microeconomics are shaky,"The Economist, April 26, 2018, https://www.economist.com/finance-and-economics/2018/04/26/many-results-in-microeconomics-are-shaky

Ed this blogpost contained one database entry (attached) and links to the previous blogpost.

The researchers conclude, “Our analysis suggests that the pattern of this misallocation is consistent with what we dubbed an inflation bias: researchers might be tempted to inflate the value of those almost-rejected tests by choosing a slightly more ‘significant’ specification. … Among the tests that are marginally significant, 10% to 20% are misreported. These figures are likely to be lower bounds of the true misallocation as we use conservative collecting and estimating processes.”

But rather than finding such a logically shaped curve, the study finds, “the distribution of test statistics published in three of the most prestigious economic journals over the period 2005-2011 exhibits a sizable under-representation of marginally insignificant statistics relatively to significant statistics but also to (very) insignificant ones. In a nutshell, once tests are normalized…the distribution has a two-humped camel shape … cannot be explained by selection alone. …10% to 20% percent of tests with are misallocated: there are missing test statistics just the threshold that…can retrieve the”

Politics disguised as science: a 12-point checklist for when to doubt a scientific ‘consensus’: Extended Excerpt Image 1


The study notes, “The two-humped shape is an empirical regularity that can be observed consistently across journals, years and fields. … Similarly, the two-humped camel shape is less visible in articles with theoretical models, articles using data from randomized control trials or laboratory experiments and papers published by tenured and older researchers. More generally, we find a larger residual in cases in which we would expect higher incentives for researchers to respond to selection,” i.e., “…evidence that academic economists respond to publication incentives.”

The selection of studies by academic journals should increase as the statistical significance of the studies’ results increase. This should lead to a logically shaped distribution of studies in journals as a function of their statistical significance.

Anew meta-study(and alsohere) of economic studies goes beyond “survival bias” and estimates upwards of 20% of the results are fudged.

It’s well understood that statistically significant results in scientific studies are not what they appear to be. Statisticians commonly set the bar for statistical significance at 95%—i.e., the probability that results are not random. But if researchers run 100 different experiments, 5 of them will appear to produce statistically significant results for no other reason than chance. When studies that do not achieve significance are pruned away—so called “survival bias,” which occurs in academic journals—it leaves a pool of apparently statistically significant studies where an even larger share of studies is significant for no other reason than chance. Because of this and other biases, reviews of academic and scientific studies (here, here, hereandherefor example) find upwards of 50% of the results cannot be repeated.

AI Summary. Germany's export-led economic model, built on a technological edge and its small and medium-sized manufacturers, is challenged as China moves up the value chain into higher-value production. German leaders warn that China's technological advances could erode Germany's competitive advantage and turn a growth partner into a rival.

Tom Fairless Wall Street Journal
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Germany’s economic model faces significant challenges as China ascends the value chain, threatening Germany’s competitive advantage & global standing, according to @TomFairless @WSJ.

Is China's move up the value chain eroding Germany's competitive advantage?

Core argument: Germany's economic model, built on a technological edge and its Mittelstand of small and medium-sized enterprises, faces challenges as China climbs the value chain and shifts from growth partner to rival.

Germany's economic model, heavily reliant on its technological edge and robust Mittelstand [small and medium-sized enterprises], faces significant challenges as China ascends the value chain. Concerns are mounting among German leaders, such as Norbert Röttgen, who warns that China's rapid technological advancements could erode Germany's competitive advantage. This shift is underscored by Germany's substantial export volume to China, which rivals that of other major economies. As China progresses in achieving technological leadership, Germany risks stagnation, potentially diminishing its role as a key partner in China's growth. The implications are profound for Germany's economic strategy, necessitating urgent innovation and adaptation to maintain its global standing.

Takeaways by Macro Roundup® AI

  1. Germany's economic model, built on a technological edge and its Mittelstand of small and medium-sized enterprises, faces challenges as China climbs the value chain and shifts from growth partner to rival.
  2. Norbert Röttgen warns that China's rapid technological advancement could erode Germany's competitive advantage, a concern mounting among German leaders as China pursues technological leadership.
  3. Germany's export volume to China rivals that of other major economies, and Germany risks stagnation and a diminished role as a partner in China's growth without innovation and adaptation.

Good quote and factoid showing the dangers of the German model. Germany’ leadership worries their Mittelstand under threat from China moving up value chain, “…Norbert Röttgen, a political ally of Chancellor Angela Merkel who chairs Parliament’s foreign affairs committee, said China would only need Germany as long as Germany retained its technological edge. “My fear is that this window is closing, China is progressing in achieving more and more technological leadership, and we are stagnating,” he said….”

Tom Fairless, "China, Once Germany’s Partner in Growth, Turns Into a Rival,"Wall Street Journal, September 17, 2020, https://www.wsj.com/articles/china-once-germanys-partner-in-growth-turns-into-a-rival-11600338663

Also amazing that Germany exports almost as much as we do to China: