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
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, December 14, 2022

AI Summary. Inflation has continued to moderate even though interest rates, while rising, remain below the current inflation rate. Conventional "adaptive expectations" models hold that inflation spirals away unless the Federal Reserve raises rates above inflation, while "rational expectations" models hold that inflation is stable and eventually subsides on its own absent fiscal stimulus.

John Cochrane The Grumpy Economist
Date Posted:

.@JohnHCochrane argues that the current trajectory of inflation is coming in on the “rational expectations” side, inflation is stable. He also notes that 1975 might be good precedent – inflation did fade – but took off again with new shocks.

Can inflation moderate without interest rates rising above inflation?

Core argument: November CPI shows inflation continuing to moderate even though interest rates, while rising, remain below the current rate of inflation.

The November CPI is in, and inflation continues to moderate despite interest rates that, while rising, are still below current inflation. In the conventional "adaptive expectations" view, inflation is unstable unless the Fed moves interest rates quickly, and inflation will spiral away unless interest rates rise above the current rate of inflation. In the more radical "rational expectations" view, inflation is stable and will eventually go away on its own even if the Fed does nothing. (So long as fiscal policy doesn't add fuel to the fire. Also, it allows for more dynamics; inflation can go up before coming back, and the long run can take a long time.)

Takeaways by Macro Roundup® AI

  1. November CPI shows inflation continuing to moderate even though interest rates, while rising, remain below the current rate of inflation.
  2. Under the conventional adaptive-expectations view, inflation is unstable and will spiral away unless the Fed raises interest rates quickly above the current rate of inflation.
  3. Under the rational-expectations view, inflation is stable and eventually subsides on its own even if the Fed does nothing, provided fiscal policy adds no fuel, with inflation possibly rising before falling over a long horizon.

AI Summary. U.S. consumer price inflation is running around 4-5% on a near-term basis, both overall and excluding food, energy, shelter, and used vehicles — slower than in the first half of 2022 but faster than before the pandemic. Prices for services other than energy and shelter are still rising relatively quickly.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein argues that this week’s CPI release is consistent with inflation holding steady at 4-5% a year. “The basic problem is that the prices of services other than energy and shelter are still rising relatively quickly.”

Is inflation slowing but still running above pre-pandemic rates?

Core argument: U.S. prices are rising around 4–5% in the near term on both total CPI and a measure excluding food, energy, shelter, and used vehicles, substantially slower than in the first half of 2022 but faster than pre-pandemic rates.

Total CPI inflation does not look that different from CPI inflation, excluding food, energy, shelter (which weirdly includes hotels and dorms in addition to housing), and used vehicles. In both cases, the near-term picture is that prices are rising around 4-5%, which is substantially slower than in the first half of 2022 but still faster than before the pandemic. The basic problem is that the prices of services other than energy and shelter are still rising relatively quickly.

Takeaways by Macro Roundup® AI

  1. U.S. prices are rising around 4–5% in the near term on both total CPI and a measure excluding food, energy, shelter, and used vehicles, substantially slower than in the first half of 2022 but faster than pre-pandemic rates.
  2. Prices of services other than energy and shelter are still rising relatively quickly, the basic problem behind continued U.S. inflation.
  3. Total CPI inflation looks little different from CPI inflation excluding food, energy, shelter, and used vehicles, with the shelter category covering hotels and dormitories in addition to housing.

AI Summary. Widespread labor shortages coexist with falling after-inflation wages, suggesting employers are unwilling to agree to higher pay. If a labor shortage does not raise real wages, a permanently higher inflation target may also fail to, leaving lower real wages and a risk that workers disengage or exit the labor force.

Tyler Cowen Bloomberg
Date Posted:

Citing the fall in labor force participation and anecdotes of “quiet quitting,” @tylercowen worries that letting inflation run at higher rates and driving down real wages will shrink the labor force and decrease productivity. @bloomberg

Citing the fall in labor force participation and anecdotes of “quiet quitting,” @tylercowen worries that letting...

Does higher inflation risk lowering real wages rather than raising them?

Core argument: A widespread labor shortage, evidenced by "Help Wanted" signs, coexists with falling after-inflation wages, a combination economists cannot fully explain.

There is a widespread labor shortage, as evidenced by the “Help Wanted” signs everywhere, yet there are also falling after-inflation wages. We economists cannot fully explain these circumstances. But they may suggest that employers simply are not willing to agree to higher wages, perhaps due to business uncertainty. And if a labor shortage won’t push them to increase real wages, perhaps a higher rate of inflation won’t either. In short, one of the main effects of a permanently higher inflation target may be lower real wages. A lot of workers may not be too happy with their situation. There remains a risk that these workers, in lieu of bargaining for higher wages, will quit the labor force entirely, or perhaps just further disengage from their jobs.

Takeaways by Macro Roundup® AI

  1. A widespread labor shortage, evidenced by "Help Wanted" signs, coexists with falling after-inflation wages, a combination economists cannot fully explain.
  2. Employers may simply be unwilling to agree to higher wages, perhaps due to business uncertainty, suggesting that if a labor shortage does not raise real wages, higher inflation may not either.
  3. A permanently higher inflation target may produce lower real wages, with the risk that workers, rather than bargaining for raises, quit the labor force entirely or further disengage from their jobs.

AI Summary. Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

Scott Winship American Enterprise Institute
Date Posted:

.@swinshi argues that the changes in family formation have not been driven by changes in men’s relative earnings, as the percent of all men aged 25-29 earning at least the post-tax comp of the 25th percentile of young married fathers falls only from 63% in 1979 to 58% in 2021.

Have young men's earnings become less adequate for supporting a family?

Core argument: Using 1979 rather than 1969 as the reference point, marriageability among single men falls only from 63% to 58% by 2019, rather than from 72% to 57% as measured from 1969.

I use, as a marriageability threshold, the 25th percentile of pretax earnings among married fathers aged 25–29 who were sole breadwinners. The other choice involves what year to use as a reference point for “the past.” [The available data] is poorly suited for [estimating the tax burdens of young male sole breadwinners] before 1979. For that reason, I use 1979 as my reference point. Rather than [the share of single men earning pretax incomes less than the 25th percentile of married men] falling from 72% to 57%  from 1969 to 2019, marriageability [only] falls … from 63% to 58% [from 1979 to 2019].

Takeaways by Macro Roundup® AI

  1. Using 1979 rather than 1969 as the reference point, marriageability among single men falls only from 63% to 58% by 2019, rather than from 72% to 57% as measured from 1969.
  2. The marriageability threshold is the 25th percentile of pretax earnings among married fathers aged 25–29 who were sole breadwinners.
  3. Available data are poorly suited to estimating the tax burdens of young male sole breadwinners before 1979, the stated reason for using 1979 as the reference point for "the past.".

AI Summary. The U.S. government allocated $36bn to the Central States Pension Fund, one of the country's largest multi-employer plans, aiding 350,000 union workers and retirees who otherwise faced benefit cuts estimated at 60%.

Akayla Gardner, Jenny Leonard, and Nancy Cook Bloomberg
Date Posted:

The White House announced a $36B bailout for the Central States Pension Fund, which will avoid benefit cuts for 40,000 workers and retirees in Michigan, 40,000 in Ohio and 22,000 in Wisconsin. Biden won WI by a 20,682 margin. @bloomberg

The White House announced a $36B bailout for the Central States Pension Fund, which will avoid benefit cuts for 40,000...

Should taxpayers fund a $36 billion bailout of union pension plans?

Core argument: President Joe Biden announced a $36 billion bailout for the Central States Pension Fund, one of the nation's biggest multi-employer plans, which he said would help 350,000 union workers and retirees who faced estimated benefit cuts of 60% over the next few years.

President Joe Biden announced a $36 billion bailout for the Central States Pension Fund, one of the nation’s biggest multi-employer plans, touting the help for union workers and retirees as he looks to mend ties with organized labor after a contentious rail deal. Biden said the aid would help 350,000 union workers and retirees, who would have faced benefit cuts estimated at 60% over the next few years. The Central States bailout would help 40,000 workers and retirees in Michigan, 40,000 in Ohio and 22,000 in Wisconsin.

Takeaways by Macro Roundup® AI

  1. President Joe Biden announced a $36 billion bailout for the Central States Pension Fund, one of the nation's biggest multi-employer plans, which he said would help 350,000 union workers and retirees who faced estimated benefit cuts of 60% over the next few years.
  2. The Central States bailout would help 40,000 workers and retirees in Michigan, 40,000 in Ohio and 22,000 in Wisconsin.
  3. Biden touted the pension aid for union workers and retirees as he looks to mend ties with organized labor after a contentious rail deal.

AI Summary. Markets have shifted from the low-return environment of 2009–21 to a full-return environment in which credit instruments can offer solid returns, reducing investors' need to rely as heavily on riskier assets to hit return targets. High-yield bonds that yielded 4–5% now yield roughly 8%.

Howard Marks Oaktree Capital
Date Posted:

Howard Marks notes the S&P 500 delivered a 10.3% compound return from August 1982 through the start of 2022. Marks suspects that the 2000 basis point decrease in interest rates over the past forty years is the primary driver of this performance.

Howard Marks notes the S&P 500 delivered a 10.3% compound return from August 1982 through the start of 2022. Marks...

Do higher credit yields reduce investors' need for riskier assets?

Core argument: High-yield bonds yield roughly 8%, up from 4–5% a year earlier, when many issues came to market with yields in the 3s and at least one carried a 2-handle.

We've gone from the low-return world of 2009-21 to a full-return world, and it may become more so in the near term.  Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets. Here's one example: In the low-return world of just one year ago, high-yield bonds offered yields of 4-5%. A lot of issuances was at yields in the 3s, and at least one new bond came to the market with a "handle" of 2. Today these securities yield roughly 8%.

Takeaways by Macro Roundup® AI

  1. High-yield bonds yield roughly 8%, up from 4–5% a year earlier, when many issues came to market with yields in the 3s and at least one carried a 2-handle.
  2. The shift from the low-return world of 2009–21 to a full-return world means investors can potentially achieve solid returns from credit instruments rather than relying as heavily on riskier investments to hit overall return targets.

AI Summary. A US fusion experiment produced about 3.15 megajoules of energy from 2.05 megajoules delivered by its lasers, achieving energy gain long seen as a key step toward commercial fusion power. That comparison excludes the 330 megajoules of electricity drawn to power each shot, and scientists estimate commercial fusion requires reactions yielding 30x to 100x the energy put in.

Tom Wilson Financial Times
Date Posted:

The fusion reaction achieved at Lawrence Livermore energy gain of 150% was greater than initially reported by the @FT, though they note that 330 MJ of electrical energy was used to produce 3.15 MJ of fusion energy.

The fusion reaction achieved at Lawrence Livermore energy gain of 150% was greater than initially reported by the @FT,...

Does achieving fusion energy gain mean commercial fusion power is ready?

Core argument: The US fusion reaction produced about 3.15 megajoules of energy versus the 2.05 megajoules delivered by the lasers, roughly 150% of the laser energy input, an energy gain long seen as a crucial step toward commercial fusion power stations.

The reaction produced about 3.15 megajoules of energy, which was about 150 percent of the 2.05MJ of energy in the lasers. Does this mean they have cracked fusion power? No. Achieving energy gain has been seen for decades as a crucial step in proving that commercial fusion power stations are possible. However, there are still several hurdles to overcome. First, energy gain in this context only compares the energy out to the energy in the lasers, not to the total amount of energy pulled off the grid to power the system. In fact, each shot requires 330MJ of electrical energy, delivered in a 400-microsecond burst. Scientists estimate that commercial fusion will require fusion reactions that generate between 30 and 100 times the energy going in.

Takeaways by Macro Roundup® AI

  1. The US fusion reaction produced about 3.15 megajoules of energy versus the 2.05 megajoules delivered by the lasers, roughly 150% of the laser energy input, an energy gain long seen as a crucial step toward commercial fusion power stations.
  2. Each shot requires 330 megajoules of electrical energy delivered in a 400-microsecond burst, and the reported energy gain compares output only with laser energy, not with the total energy drawn from the grid.
  3. Scientists estimate commercial fusion will require reactions generating between 30 and 100 times the energy going in.

AI Summary. Researchers in China report producing hydrogen directly from seawater without first desalinating or purifying it, using a waterproof, breathable membrane that admits only pure water vapor into the electrolyser and draws in replacement vapor as hydrogen is made. A prototype produced over 1mn liters of hydrogen across 133 days with no reported deterioration.

Anjana Ajuja Financial Times
Date Posted:

The @FT reports a claim by Chinese researchers that they have produced hydrogen directly from seawater, without the need to desalinate or purify the seawater first, advancing a long-term goal of hydrogen power.

The @FT reports a claim by Chinese researchers that they have produced hydrogen directly from seawater, without the need to...

Can hydrogen be produced from seawater without desalination first?

Core argument: A prototype seawater electrolyser installed in China's Shenzhen Bay produced more than 1mn liters of hydrogen over 133 days without any reported deterioration, according to results published in Nature.

Researchers in China claim to have produced hydrogen by splitting seawater without the need to desalinate or purify it first.  Heping Xie at Shenzhen University and Zongping Shao at Nanjing Tech kept the electrolyser separate from the seawater with a waterproof, breathable membrane. A bit like a sieve, the membrane keeps anything other than pure water vapor from entering the electrolyser. As the water vapor is drawn in and converted to hydrogen, more is pulled in from the seawater to take its place. It is, they reported recently in the journal Nature, a self-sustaining system. The scientists installed a prototype in China’s Shenzhen Bay and produced more than 1mn liters of hydrogen over 133 days without any reported deterioration.

Takeaways by Macro Roundup® AI

  1. A prototype seawater electrolyser installed in China's Shenzhen Bay produced more than 1mn liters of hydrogen over 133 days without any reported deterioration, according to results published in Nature.
  2. Heping Xie of Shenzhen University and Zongping Shao of Nanjing Tech separated the electrolyser from seawater with a waterproof, breathable membrane that admits only pure water vapor, which they say allows hydrogen production without desalination or purification.
  3. The researchers report that as water vapor is drawn through the membrane and converted to hydrogen, more vapor is pulled in from the seawater to replace it, which they describe as a self-sustaining system.

Thursday, December 15, 2022

AI Summary. Median household market income — labor, business, capital, and retirement income — grew 26% after inflation from 1990 to 2019, in line with roughly one-third growth in inflation-adjusted average wages for nonsupervisory workers. The Congressional Budget Office finds median household income rose 55% after taxes and transfers, and 74% for the bottom 20% of households.

Michael Strain Project Syndicate
Date Posted:
Is Database:
Database

Citing CBO data, @MichaelRStrain finds that market income for the median household grew by 26% from 1990 through 2019 after adjusting for inflation. Including transfer payments and federal taxes, real median household income grew 55%. @AEIecon

Citing CBO data, @MichaelRStrain finds that market income for the median household grew by 26% from 1990 through 2019 after...

Has median household income actually stagnated over recent decades?

Core argument: Median household market income — labor, business, capital, and retirement income from past services — grew 26% after inflation from 1990 to 2019, in line with wage growth rather than stagnating.

Median household income from market activities – labor, business, and capital income, as well as retirement income from past services – was not stagnant from 1990 to 2019. Instead, after adjusting for inflation, it grew by 26%. This is in line with wage growth. By my calculations using Bureau of Labor Statistics (BLS) data, inflation-adjusted average wages for nonsupervisory workers grew by around one-third over this period. After factoring in social insurance benefits (from Social Security and unemployment insurance, for example), government safety-net benefits (such as food stamps), and federal taxes, the CBO finds that median household income increased by 55% from 1990 to 2019, which is significantly faster than wage growth and certainly not stagnate. The bottom 20% of households enjoyed even greater gains, with market income growth of 51% and after-tax-and-transfer income growth of 74%.

Takeaways by Macro Roundup® AI

  1. Median household market income — labor, business, capital, and retirement income from past services — grew 26% after inflation from 1990 to 2019, in line with wage growth rather than stagnating.
  2. The CBO finds median household income rose 55% from 1990 to 2019 after counting social insurance benefits, government safety-net benefits, and federal taxes, significantly faster than wage growth.
  3. The bottom 20% of households saw market income grow 51% and after-tax-and-transfer income grow 74% from 1990 to 2019.

AI Summary. Nominal growth is slowing while inflation-adjusted growth is rising as the economy normalizes from pandemic disruptions, so workers' fortunes are improving even with a softer labor market. Healing supply chains, easing labor needs, and lower prices boosting inflation-adjusted wages can be described as productivity growth.

Conor Sen Bloomberg
Date Posted:

Investor @conorsen argues that worker’s prospects will improve dramatically going forward as earnings growth will be coupled with lower gas prices, easing rents, falling car prices, and fully stocked shelves. @bloomberg

Investor @conorsen argues that worker’s prospects will improve dramatically going forward as earnings growth will be coupled...

Are workers better off even as the labor market softens?

Core argument: Nominal growth is slowing while inflation-adjusted growth rises as the US economy returns to normal from pandemic disruptions, leaving worker fortunes brighter even as the labor market softens.

While nominal levels of growth might be slowing, inflation-adjusted growth is rising as the economy slowly gets back to normal from the many disruptions that wreaked havoc during the pandemic. So even though the labor market is softer, worker fortunes are looking brighter. We normally think about real economic growth as a function of employment growth and productivity growth. What we’re now experiencing — supply chains healing, companies’ labor needs easing, and workers reaping the benefits of lower prices with a boost to their inflation-adjusted wages — could be called productivity growth.

Takeaways by Macro Roundup® AI

  1. Nominal growth is slowing while inflation-adjusted growth rises as the US economy returns to normal from pandemic disruptions, leaving worker fortunes brighter even as the labor market softens.
  2. Healing supply chains, easing corporate labor needs, and lower prices boosting inflation-adjusted wages amount to what could be called productivity growth, according to the author.
  3. Real economic growth is normally understood as a function of employment growth and productivity growth.

AI Summary. The US Commerce Department added 36 Chinese companies to its "entity list" trade blacklist, requiring American firms to obtain hard-to-get licenses to export critical technologies to them. The move extends US efforts to slow China's development of advanced chips and military technologies such as hypersonic weapons.

Demetri Sevastopulo, Kathrin Hille and Qianer Liu Financial Times
Date Posted:

The United States added 36 Chinese firms to a trade blacklist as it expands export controls targeted at slowing Chinese development of advanced chips and technologies for military uses such as hypersonic weapons. @FT

The United States added 36 Chinese firms to a trade blacklist as it expands export controls targeted at slowing Chinese...

Is the US expanding export restrictions on Chinese technology companies?

Core argument: The US Commerce Department added 36 Chinese companies to its "entity list," escalating efforts to slow China's development of advanced chips and technologies for military uses such as hypersonic weapons.

The US has placed three dozen Chinese companies on a trade blacklist, in another escalation of its effort to slow China’s development of advanced chips and technologies for military uses such as hypersonic weapons. The commerce department put 36 Chinese groups on the “entity list”, a move that means American companies will require extremely hard-to-obtain licenses to export critical technologies to those customers in China.

Takeaways by Macro Roundup® AI

  1. The US Commerce Department added 36 Chinese companies to its "entity list," escalating efforts to slow China's development of advanced chips and technologies for military uses such as hypersonic weapons.
  2. Placement on the entity list requires American companies to obtain extremely hard-to-obtain licenses before exporting critical technologies to the 36 blacklisted Chinese customers.

AI Summary. Pew Research Center survey analysis finds that 41% of U.S. adults experienced high levels of psychological distress at least once during the coronavirus pandemic, including 58% of those ages 18 to 29.

Giancarlo Pasquini and Scott Keeter Pew Research Center
Date Posted:

Young Americans are experiencing high levels of psychological distress relative to other adults; 58% of 18 to 29 year old’s reported being distressed in surveys conducted between March 2020 and September 2022, relative to 41% of the 50 to 64 cohort. @pewresearch

How widespread was psychological distress among Americans during the pandemic?

Core argument: About 41% of U.S. adults experienced high levels of psychological distress at least once since the early stages of the coronavirus outbreak, according to a Pew Research Center analysis tracking survey responses from the same Americans over time.

About four-in-ten U.S. adults (41%) have experienced high levels of psychological distress at least once since the early stages of the coronavirus outbreak, according to a new Pew Research Center analysis that examines survey responses from the same Americans over time. Experiences of high psychological distress are especially widespread among young adults. A 58% majority of those ages 18 to 29 have experienced high levels of psychological distress at least once across four Center surveys conducted between March 2020 and September 2022.

Takeaways by Macro Roundup® AI

  1. About 41% of U.S. adults experienced high levels of psychological distress at least once since the early stages of the coronavirus outbreak, according to a Pew Research Center analysis tracking survey responses from the same Americans over time.
  2. Among U.S. adults ages 18 to 29, 58% experienced high levels of psychological distress at least once across four Pew Research Center surveys conducted between March 2020 and September 2022.