Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, May 3, 2021

AI Summary. Individual income taxes made up 24.2% of state and local tax collections, exceeding general sales taxes at 23.3%, averaging $1,303 per capita. Collections varied widely, from $3,407 in New York and $2,411 in California to $36 in Tennessee and $78 in New Hampshire, which taxed only investment income.

Janelle Cammenga Tax Foundation
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Individual income taxes accounted for 24.2% of state & local tax collections in FY 2018, with $1,303 collected per capita on average. High-income states like New York ($3,407) & California ($2,411) led in per capita collections. @TaxFoundation

How much do state and local income tax collections vary per person?

Core argument: Individual income taxes made up 24.2% of state and local tax collections in FY 2018, surpassing general sales taxes at 23.3%, with an average of $1,303 collected per capita.

In FY 2018, individual income taxes accounted for 24.2% of state and local tax collections, surpassing general sales taxes at 23.3%. On average, $1,303 per capita was collected, with significant variation due to differing rate structures and income distributions. High-income states like New York ($3,407) and California ($2,411) led in per capita collections, while states like Tennessee ($36) and New Hampshire ($78) taxed only investment income. Among states taxing wage income, North Dakota ($485) and New Mexico ($599) had the lowest collections. This data highlights the reliance on income taxes as a revenue source and the impact of state-specific tax policies on revenue generation.

Takeaways by Macro Roundup® AI

  1. Individual income taxes made up 24.2% of state and local tax collections in FY 2018, surpassing general sales taxes at 23.3%, with an average of $1,303 collected per capita.
  2. New York led per capita individual income tax collections at $3,407, followed by California at $2,411, with variation across states reflecting differing rate structures and income distributions.
  3. Tennessee ($36) and New Hampshire ($78) collected the least per capita, taxing only investment income, while North Dakota ($485) and New Mexico ($599) collected the least among states taxing wage income.

Janelle Cammenga, "State and Local Individual Income Tax Collections Per Capita," Tax Foundation, April 28, 2021, https://taxfoundation.org/income-tax-per-capita-2021/

State and Local Individual Income Tax Collections Per Capita

The individual income tax is one of the most significant sources of revenue for state and local governments. In fiscal year 2018, the most recent year for which data are available, individual income taxes generated 24.2 percent of state and local tax collections, just ahead of general sales taxes (23.3 percent).

The following map shows combined state and local individual income tax collections per capita for each state in fiscal year 2018. As of that year, 41 states and the District of Columbia levied broad-based taxes on wage income and investment income, while two states—New Hampshire and Tennessee—taxed investment income but not wage income. Tennessee’s tax on investment income—known as the “Hall tax”—was fully repealed as of January 2021. In all, eight states forgo an individual income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

State and Local Individual Income Tax Collections Per Capita: Extended Excerpt Image 1


On average, state and local governments collected $1,303 per capita in individual income taxes, but collections varied widely from state to state. This was a function of both rate structures and income distributions, with higher-income states generating significantly more revenue per capita whether they had a high graduated rate system, like California, or a modest flat-rate income tax, like Massachusetts.

New York ($3,407), the District of Columbia ($2,946), Connecticut ($2,725), Maryland ($2,470), California ($2,411), and Massachusetts ($2,365) came in with the top collections per capita. Tennessee ($36) and New Hampshire ($78) taxed investment income but not wage income, making them the states with the lowest individual income tax collections per capita. Of the states that tax wage income, the lowest collections per capita in fiscal year 2018 were in North Dakota ($485), New Mexico ($599), Mississippi ($622), Arizona ($635), and Louisiana ($697).

AI Summary. The authors organize inequality-reducing policies into a 3x3 matrix that crosses target income groups — low-income, middle-class, and high-income — with the stage of intervention. It distinguishes "pre-distribution" policies, which address inequality before economic outcomes are determined, from redistribution policies such as progressive taxation and social insurance that adjust outcomes afterward.

Stefanie Stantcheva National Bureau of Economic Research
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A 3×3 matrix organizes policies to reduce inequality, focusing on target income groups & stages of economic intervention, distinguishing btw pre-distribution & redistribution policies.

Can inequality policies be organized by income group and intervention stage?

Core argument: The inequality-reduction framework is organized as a 3×3 matrix combining three target income groups — low-income households, middle classes, and high-income groups — with stages of economic intervention.

The framework for reducing inequality is organized into a 3x3 matrix focusing on two key dimensions: target income groups and stages of economic intervention. Policies are tailored to low-income households, middle classes, or high-income groups, each facing unique economic challenges. The matrix distinguishes between "pre-distribution" and "redistribution" policies. Pre-distribution policies aim to address inequalities before economic outcomes are determined, while redistribution policies, such as progressive taxation and social insurance, adjust inequalities after economic activities like employment and investments have occurred. This structured approach allows for targeted interventions that can effectively address the specific needs of different income groups at various stages of economic development, promoting inclusive prosperity.

Takeaways by Macro Roundup® AI

  1. The inequality-reduction framework is organized as a 3×3 matrix combining three target income groups — low-income households, middle classes, and high-income groups — with stages of economic intervention.
  2. The matrix separates "pre-distribution" policies, which address inequalities before economic outcomes are determined, from "redistribution" policies such as progressive taxation and social insurance that adjust inequalities after employment and investment have occurred.
  3. The framework holds that each income group faces distinct economic challenges, allowing targeted interventions at various stages of economic development to promote inclusive prosperity.

Rodrik/Stantcheva, “…The framework can be summarized by a 3 x 3 matrix, shown in Figure 1. 3 We consider that the discussion of policies can be organized around two questions or dimensions. First, which income group is the target of the policies intended to counter inequality or economic insecurity? Is it mainly the low-income households at the very bottom of the income distribution? Or is it rather the middle classes, who have traditionally had access to good jobs, but are increasingly facing reduced standards of living and growing economic insecurity in many nations? Is it instead the high-income or high wealth households at the very top that keep concentrating more economic power - as well as political power, possibly -- individually and through stocks in large corporations? Policy priorities will naturally differ depending on whether the target is the poor at the bottom, the middle classes, or the top of the income distribution. This dimension of policy is captured by the rows of the matrix in Figure 1. The second question relates to the stage of the economy where the intervention takes place.A useful and increasingly frequently used distinction, based on Hacker (2011), is between “pre-distribution” and “redistribution” policies. In this terminology, “redistribution” policies are ex post policies, that transfer income and wealth once they have been realized (e.g., redistributive transfers, progressive taxation, and social insurance). They reshape inequalities after the economic decisions regarding employment, investments, or innovations have been made. We will use the term postproduction policies instead to denote these policies….”

A Policy Matrix For Inclusive Prosperity: Extended Excerpt Image 1


Dani Rodrik and Stefanie Stantcheva, "A Policy Matrix For Inclusive Prosperity," National Bureau Of Economic Research, April 2021, https://www.nber.org/papers/w28736

Tuesday, May 4, 2021

AI Summary. Government entrepreneurial finance programs worldwide have averaged $156bn in annual budgets, comparable to $153bn in annual venture capital disbursements. Analysis of 755 programs across 66 countries finds no evidence that public funding crowds out venture capital; instead public and private funding are positively correlated, and program launches are associated with increased patent filings.

Jessica Bai National Bureau of Economic Research
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Research by @JessicaBai shows no evidence globally that government entrepreneurial finance crowds out venture capital. In fact, state funding complements VC investment, enhancing innovation without displacing private capital.

Does government startup funding crowd out private venture capital?

Core argument: Government entrepreneurial finance programs averaged $156bn in annual budgets over the past decade, roughly matching the $153bn disbursed by the venture capital industry.

Over the past decade, government entrepreneurial finance programs globally have matched the venture capital (VC) industry in scale, with an average annual budget of $156bn compared to $153bn in VC disbursements. Analysis of 755 programs across 66 countries from 1995 to 2019 shows no evidence of crowding out; instead, state funding complements VC investment. These programs are more frequent in regions with active private venture activity and are particularly effective when targeting early-stage companies. The initiation of government programs correlates with increased patent filings, indicating a beneficial synergy between public and private sectors. The positive correlation between private and public funding is more pronounced when governments are effective, suggesting that public entrepreneurial finance can enhance innovation without displacing private capital.

Takeaways by Macro Roundup® AI

  1. Government entrepreneurial finance programs averaged $156bn in annual budgets over the past decade, roughly matching the $153bn disbursed by the venture capital industry.
  2. Analysis of 755 programs across 66 countries from 1995 to 2019 finds no evidence of crowding out, with state funding instead complementing venture capital investment, and programs proving particularly effective when targeting early-stage companies.
  3. The initiation of government entrepreneurial finance programs correlates with increased patent filings, and the positive correlation between private and public funding is stronger where governments are effective.

New (from Ben's co-author Lerner) finds that globally over the past decade governments have invested ~ as much as the VC industry in startups, nothing earthshattering, few good factoids. Bu they don’t estimates the returns/hit rate for the different forms of financings, “…The aggregate budget of government funding programs is comparable to the global venture capital market. It is also interesting to compare these programs to the global venture capital market. As illustrated in Figure 5, over the last decade, the average cumulative annual budget of such government funding programs around the world was $156 billion. In contrast, global annual disbursements of traditional venture funds around the world were on average $153 billion, as tabulated by CrunchBase’s Global VC Reports..”

Core of paper, they don’t see evidence of crowding out and suggests state funding is complementary VC investment, “…We examined 755 programs in 66 countries active between 1995 and 2019. These programs were more frequent in nations and periods with more private venture activity. The positive correlation between private and public activities was more pronounced when governments were more effective. When we looked at the interactions between government programs and private capital markets, we found that these mechanisms were more frequent when the government programs targeted earlier-stage companies—where information asymmetries were likely greater—and the effectiveness of government was higher. The initiation of these programs was associated with an increase in patent filings from that nation, particularly for programs that focused on early-stage ventures or required matching from the private sector. Together, the results suggested a socially beneficial complementarity between the private and public sectors in this arena. The analysis suggested a wide variety of questions for future research. Foremost among these was the need for better understanding of the mechanisms employed in these programs and their implications. These programs had a wide variety of provisions that lent themselves to theoretical and empirical economic analysis. Examples included the differing sharing rules in the equity programs (e.g., the capping of the return to the public sector, as was the case in the Israeli Yozma initiative and a number of subsequent programs) and the extent that governments attempted to use these programs to achieve multiple goals. For instance, the SBIR program simultaneously attempted to promote technological innovation, to use small businesses to meet Federal R&D needs, and to encourage diversity. In short, despite the proliferation and size of public programs to promote entrepreneurial finance, many questions remain about their design and implementation. It is our hope that this analysis will encourage work on the open questions identified above, as well as related questions….”

Jessica Bai, Shai Bernstein, Abhishek Dev, Josh Lerner, "Public Entrepreneurial Finance around the Globe," National Bureau Of Economic Research, April 2021, https://www.nber.org/papers/w28744

Takeaways, “…we first established several stylized facts about public entrepreneurial finance efforts. We found that government funding programs have become prevalent around the globe. Between 2010 and 2019, national governments’ entrepreneurial finance programs around the world had on average a cumulative annual budget of $156 billion, as opposed to an average of $153 billion of global disbursements of traditional venture funds. These efforts were geographically dispersed, and not just confined to developed countries. Moreover, such government efforts relied on a host of different financial instruments, from grants and equity funding, to credit guarantees, loans, innovation vouchers, and tax credits. Many public funding programs targeted specific industries and company stages. Turning to our main analyses, we found that more private venture activity was associated with subsequent government entrepreneurial finance: the two sources of capital were positively correlated.Using panel data, we saw not just a positive correlation but that public policies followed private capital investments. Moreover, increases in venture capital activity in a given industry country pair were followed by subsequent government funding programs that targeted those industries as well…”

AI Summary. A quasi-experimental study using 30 years of Ohio data estimates that parental incarceration reduces a child's likelihood of being charged, convicted, or incarcerated before age 25 by 6.6, 5.5, and 4.9 percentage points, with effects concentrated among Black children. The authors find sibling incarceration similarly reduces children's criminal activity.

Samuel Norris American Economic Review
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Having a criminal parent jailed reduces children’s likelihood of incarceration by 4.9pp.

Does incarcerating a parent or sibling reduce a child's criminal activity?

Core argument: Using 30 years of Ohio data, quasi-experimental estimates indicate that parental incarceration reduces a child's likelihood of incarceration by 4.9pp, with effects concentrated among black children.

Utilizing 30 years of data from Ohio, this study provides quasi-experimental estimates showing that parental incarceration reduces children's likelihood of incarceration by 4.9pp [percentage points]. It also decreases the likelihood of a child being charged, convicted, or incarcerated before age 25 by 6.6, 5.5, and 4.9pp, respectively. These effects are notably concentrated among black children. The study highlights that sibling incarceration similarly reduces criminal activity, emphasizing the role of peer effects in youth criminal tendencies. Despite the high costs of incarceration, these findings suggest potential economic benefits and underscore the importance of considering family spillovers in sentencing policy. However, the study advocates for exploring alternative interventions to aid children with incarcerated family members, given the costliness of incarceration.

Takeaways by Macro Roundup® AI

  1. Using 30 years of Ohio data, quasi-experimental estimates indicate that parental incarceration reduces a child's likelihood of incarceration by 4.9pp, with effects concentrated among black children.
  2. Parental incarceration lowers the likelihood a child is charged, convicted, or incarcerated before age 25 by 6.6, 5.5, and 4.9pp respectively, according to the Ohio estimates.
  3. Sibling incarceration similarly reduces children's criminal activity, which the study links to peer effects and cites as reason to weigh family spillovers in sentencing policy while exploring alternative interventions, given incarceration's costliness.

This finding is intuitive to me, “…Every year, millions of Americans experience the incarceration of a family member. Using 30 years of administrative data from Ohio and exploiting differing incarceration propensities of randomly assigned judges, this paper provides the first quasi-experimental estimates of the effects of parental and sibling incarceration in the US. Parental incarceration has beneficial effects on some important outcomes for children, reducing their likelihood of incarceration by 4.9 percentage points and improving their adult neighborhood quality….parental incarceration decreases the likelihood that a child is charged with a crime, convicted, or incarcerated before the age of 25 by 6.6, 5.5, and 4.9 percentage points respectively.2,3 These effects are concentrated among black children…While estimates on academic performance and teen parenthood are imprecise, we reject large positive or negative effects. Sibling incarceration leads to similar reductions in criminal activity….”

Back to this paper what they try to do, “….We make three main contributions relative to these papers. First, although we study only one state, we emphasize the policy relevance of the US context: there are currently over 2 million prisoners in the US, making up one- fifth of all prisoners in the world, as opposed to approximately 5,400 in Sweden, 3,700 in Norway, 3,100 in Finland, and 121,000 in Colombia… Second, motivated by the prevalence of sibling incarceration 34% of US inmates have a brother who has been incarcerated, as opposed to 19% with an ever-incarcerated father….we provide some of the first estimates of the spillovers of sibling incarceration. Third, the breadth and depth of our data permit us to investigate differences in effects among different interesting subsamples (e.g. socioeconomic status, racial groups) and provide novel tests of the mechanisms at work…. The net result is that incarceration reduces the total criminal exposure for family members over the following 30 quarters by approximately 0.6 crimes, relative to a sample mean of 3.94.2
Core results, “….Tens of millions of Americans have been incarcerated, and a substantial literature has at tempted to understand both the direct and spillover effects of incarceration. In this paper, we provide the first causal estimates of the effects of parental and sibling incarceration in the United States. In contrast to existing correlational evidence,we find that parental incarceration decreases children’s future criminal involvement and improves child long-term socioeconomic status. There are multiple mechanisms that may mediate this effect, including:(1) lower rates of criminal activity by the defendant and the non-incarcerated parent; (2) among male defendants, a greater dedication to existing family; (3) deterrence; and (4) removal of an unstable influence or shifting the child to a more stable care-giving environment.Even if there are notable anecdotes of when parental incarceration has harmed children, there appear to be other, potentially less salient cases in which the effects are positive. These positive cases counterbalance the negative ones to produce economic benefits. We find that sibling incarceration also results in reductions in criminal activity, consistent with the importance of peer effects in the formation of youth criminal tendencies. The timing of the sibling effects indicates sibling incarceration has a direct, short-term influence on criminality, rather than affecting long-term behavior. The relatively positive family spillovers from incarceration have a number of implications for policy. The costs and benefits from the spillovers of incarceration matter for determining optimal sentencing and incarceration policy… and our findings demonstrate a previously unknown benefit of incarceration. We conduct a partial cost benefit analysis and conclude that while the marginal child benefits from parental incarceration, the high costs of incarceration still outweigh the benefits. More broadly, the positive effects of family incarceration we find highlight the challenging environment faced by children with family members on the margin of incarceration, and demonstrate the scope for policy to affect their long-run economic outcomes. However, given the costliness of incarceration, future work should study other interventions that may aid this population..”
Samuel Norris, Matthew Pecenco, Jeffrey Weaver, “The Effects of Parental and Sibling Incarceration: Evidence from Ohio,”American Economic Review, May 2021, https://www.aeaweb.org/articles

Note this finding mirrors a 2018 study we looked at (attached) that found that in terms of crime there are significant spillover (in terms of propensity to be arrested) effects from older to younger siblings (effect is gendered, impacting males)