Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, February 15, 2023

AI Summary. Core goods inflation, excluding food and energy, surged and then fell below the Federal Reserve's 2% target, while services inflation has continued to rise. Goods inflation proved transitory, but services inflation is now the persistent component.

John Authers Bloomberg
Date Posted:

.@johnauthers notes that net of food and energy, goods inflation is now under the Fed’s target, but services inflation remains high and disinflation in services has not yet started.

Is services inflation now the persistent driver of price increases?

Core argument: Core goods inflation, excluding food and energy, surged and then plummeted to below the Federal Reserve's 2% target, proving transitory.

Disinflation is well under way for goods, but services inflation is looking obdurate. If we strip out food and energy, goods inflation surged and then plummeted. It’s now below the Fed target of 2%. Services inflation keeps rising. Goods inflation was indeed transitory, but that’s no longer what matters.

Takeaways by Macro Roundup® AI

  1. Core goods inflation, excluding food and energy, surged and then plummeted to below the Federal Reserve's 2% target, proving transitory.
  2. Services inflation keeps rising even as goods disinflation proceeds, leaving services as the obdurate component that now matters for inflation.

AI Summary. Median wage growth, as measured by the Atlanta Federal Reserve's Wage Growth Tracker, has run below the average rate of consumer price inflation. A negative real reading indicates that fewer than 50% of workers in the sample received wage increases that outpaced consumer price inflation.

John Robertson Federal Reserve Bank of Atlanta
Date Posted:

The @AtlantaFed Wage Growth Tracker shows that less than 50% of workers in the sample saw real wage growth relative to CPI during most of 2021 and 2022.

Are most workers seeing wage gains that trail inflation?

Core argument: The Wage Growth Tracker in terms of median wage growth ran below the average rate of inflation for most of 2021 and 2022, leaving real median wage growth negative.

The Wage Growth Tracker in terms of median wage growth, has been below the average rate of inflation for most of 2021 and 2022. Prior to that period, the last time the real WGT had been negative was during 2011—a short period when CPI inflation reached 4 percent while the WGT was hovering around 2 percent. The fact that the real WGT is negative tells us that less than 50 percent of the people in the WGT sample had real wage increases, relative to the CPI.

Takeaways by Macro Roundup® AI

  1. The Wage Growth Tracker in terms of median wage growth ran below the average rate of inflation for most of 2021 and 2022, leaving real median wage growth negative.
  2. A negative real Wage Growth Tracker indicates that fewer than 50 percent of people in the sample saw wage increases exceeding CPI inflation.
  3. Before 2021 and 2022, the last negative reading for the real Wage Growth Tracker came in 2011, a short period when CPI inflation reached 4 percent while the tracker hovered around 2 percent.

AI Summary. The current account surpluses of major OPEC+ members likely peaked, with terms of trade swinging back against energy exporters as net commodity importers see their external positions improving. The outlook depends on oil prices holding near $80/bbl, Chinese demand, advanced-economy growth, and OPEC+ production decisions.

Alex Etra Money: Inside and Out
Date Posted:

.@EtraAlex reports that the OPEC+ current account surpluses likely peaked in Q3 of 2022.

Have oil exporters' current account surpluses peaked?

Core argument: The current account surpluses of major OPEC+ members likely peaked in Q3/Q4, with the outlook heavily dependent on oil prices holding around $80/bbl.

We think the current account surpluses of other major OPEC+ members likely peaked in Q3/Q4 as well. Obviously, the outlook is heavily dependent on oil prices remaining in their current range around $80/bbl. For now, however, the terms of trade have swung back against energy exporters. The chart below, which is based on Exante Data’s Trade Balance Nowcast shows the projected changed in countries’ annualized current account balance based on current commodity prices. For the first time in 18 months, it is net commodity importers that are seeing their external positions improving. Whether this remains the case will depend on the extent of the recovery in Chinese demand following reopening, recession (or lack thereof) in major advanced economies, and of course the production decisions of OPEC+.

Takeaways by Macro Roundup® AI

  1. The current account surpluses of major OPEC+ members likely peaked in Q3/Q4, with the outlook heavily dependent on oil prices holding around $80/bbl.
  2. For the first time in 18 months, net commodity importers are seeing their external positions improve, according to Exante Data's Trade Balance Nowcast of projected changes in annualized current account balances at current commodity prices.
  3. Whether the swing in terms of trade against energy exporters persists depends on the recovery in Chinese demand after reopening, recession or its absence in major advanced economies, and OPEC+ production decisions.

AI Summary. The average weighted average cost of capital for Russell 3000 companies, a proxy for the U.S. equity market, was 7.9% from 1985 to 2022, with an estimate of 8.8% at the end of 2022. Corporate finance executives rely on the capital asset pricing model, while quantitative investors use multifactor models.

Michael Mauboussin and Dan Callahan Morgan Stanley
Date Posted:
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.@mjmauboussin notes the mean weighted average cost of capital for companies in the Russell 3000 at the end of 2022 was 8.8%, up from the 1985-2022 average of 7.9%.

What is the cost of capital for U.S. public companies?

Core argument: The average weighted average cost of capital for Russell 3000 companies, a proxy for the U.S. equity market, was 7.9 percent from 1985 to 2022, with the estimate at the end of 2022 at 8.8 percent.

The average weighted average cost of capital for companies in the Russell 3000, a good proxy for the overall U.S. equity market, from 1985 to 2022 was 7.9 percent, and the estimate at the end of 2022 was 8.8 percent. Financial executives rely heavily on the capital asset pricing model (CAPM) but the investment community, led by quantitative funds, uses six factors widely. These include beta (stocks of companies with high betas earn higher returns than those with low betas), size (stocks of companies with small capitalizations generate higher returns than stocks of companies with large capitalizations), value (stocks with low multiples outperform those with high multiples), momentum (stocks that have done well continue to do well in the short term), quality (companies of high quality provide higher returns than companies of low quality),  and asset growth (companies with low asset growth outperform those with high asset growth). Fama and French now recommend a five-factor model that includes all of the factors above except for momentum.

Takeaways by Macro Roundup® AI

  1. The average weighted average cost of capital for Russell 3000 companies, a proxy for the U.S. equity market, was 7.9 percent from 1985 to 2022, with the estimate at the end of 2022 at 8.8 percent.
  2. Financial executives rely heavily on the capital asset pricing model, while the investment community, led by quantitative funds, widely uses six factors: beta, size, value, momentum, quality, and asset growth.
  3. Fama and French recommend a five-factor model that includes beta, size, value, quality, and asset growth but excludes momentum.

AI Summary. The authors estimate that ambitious U.S. plans to cut transportation and electricity emissions would require more inputs to produce the same outputs, generating recurring costs of up to $483bn per year. They forecast real GDP and consumption would be 2–3% lower in the long run if the policies are implemented as stated.

Timothy Fitzgerald and Casey Mulligan National Bureau of Economic Research
Date Posted:
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.@caseybmulligan estimates that decarbonization in the US will result in recurring costs of up to $483Bper year, including $186B for auto fuel efficiency standards, and will lower real GDP by between 2-3% by 2035.

How much would ambitious emissions-cutting plans reduce long-run GDP?

Core argument: The authors estimate that ambitious U.S. plans to cut transportation and electricity emissions would require more inputs to produce the same outputs, generating recurring costs of up to $483 billion per year.

Advocates in several countries have promoted a “green recovery” from the pandemic, with an emphasis on measures to address climate objectives. We evaluate proposals for the United States and find that as stated, ambitious plans to further cut emissions from transportation and electricity will require more inputs to produce the same outputs, resulting in recurring costs of up to $483 billion per year. We forecast that real GDP and consumption will be 2-3 percent less in the long run if policies are implemented as stated, underscoring the opportunity costs of achieving green objectives when resources might be more efficiently deployed. We quantify the opportunity costs of four climate policies that are likely the most impactful among Biden’s proposals. The first would reduce fossil fuel consumption by light- and medium-duty vehicles by raising average fuel economy regulations, in an effort to erode the reliance of the transportation sector on petroleum and avoid associated emissions. The second would increase the share of electricity generation from renewable sources, displacing fossil generation in an effort to reduce emissions. The third would require additional renewable electricity generation to help satisfy the electrification of transport. A fourth, holding companies financially liable for historically emitted carbon and other pollutants, may help finance subsidies for renewables, but would impose additional opportunity costs, such as the impact of the implied higher uncertainty regarding future after-tax profits.

Takeaways by Macro Roundup® AI

  1. The authors estimate that ambitious U.S. plans to cut transportation and electricity emissions would require more inputs to produce the same outputs, generating recurring costs of up to $483 billion per year.
  2. The authors forecast that U.S. real GDP and consumption would be 2–3 percent lower in the long run if the evaluated green recovery policies are implemented as stated.
  3. The four policies assessed are higher average fuel economy standards for light- and medium-duty vehicles, a larger renewable share of electricity generation, added renewable generation to serve electrified transport, and financial liability for historically emitted carbon and other pollutants.

Thursday, February 16, 2023

AI Summary. The Congressional Budget Office projects the federal deficit rising to 6.9% of GDP in 2033, well above the 3.6% average of the past 50 years, with net interest costs a major contributor. Federal debt held by the public is projected to climb from 98% of GDP to 118% by 2033 and 195% by 2053.

CBO Staff Congressional Budget Office
Date Posted:
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The @USCBO now projects the 2023 deficit to be $1.4T (vs $1T in the 2022 forecast) and revises the ten-year deficit projection (2023-2032) to $18.8T, $3.1T higher than was projected in 2022.

How high are federal deficits and debt projected to rise?

Core argument: CBO projects the federal deficit at 5.3% of GDP in 2023 and 6.9% in 2033, significantly larger than the 3.6% of GDP that deficits have averaged over the past 50 years.

In CBO’s projections, the deficit amounts to 5.3% of gross domestic product (GDP) in 2023.  Deficits fluctuate over the next four years, averaging 5.8% of GDP. Starting in 2028, they grow steadily; the projected shortfall in 2033 is 6.9% of GDP—significantly larger than the 3.6% of GDP that deficits have averaged over the past 50 years. In CBO’s projections, net interest outlays increase by 1.2% of GDP from 2023 to 2033 and are a major contributor to the growth of total deficits. Primary deficits (that is, revenues minus noninterest outlays) increase by 0.4% of GDP over that period. Federal debt held by the public is projected to rise from 98% of GDP in 2023 to 118% in 2033.  Over that period, the growth of interest costs and mandatory spending outpaces the growth of revenues and the economy, driving up debt. Those factors persist beyond 2033, pushing federal debt higher still, to 195% of GDP in 2053.

Takeaways by Macro Roundup® AI

  1. CBO projects the federal deficit at 5.3% of GDP in 2023 and 6.9% in 2033, significantly larger than the 3.6% of GDP that deficits have averaged over the past 50 years.
  2. Net interest outlays increase by 1.2% of GDP from 2023 to 2033 in CBO's projections, a major contributor to deficit growth, while primary deficits rise by 0.4% of GDP.
  3. CBO projects federal debt held by the public will climb from 98% of GDP in 2023 to 118% in 2033 and 195% in 2053, as growth in interest costs and mandatory spending outpaces revenues and the economy.

AI Summary. Rising US income inequality is argued to be a main driver of the surge in US debt, because the rich save a larger share of their income, pushing up savings without a matching rise in investment. Unless offset by higher investment or smaller trade deficits, these savings must be balanced by household borrowing or larger fiscal deficits.

Michael Pettis @michaelxpettis
Date Posted:

.@michaelxpettis argues that “rising income inequality pushes up the savings of the rich, and if this cannot be matched with higher investment or a lower trade deficit, it must be matched with either higher unemployment or higher debt.”

.@michaelxpettis argues that “rising income inequality pushes up the savings of the rich, and if this cannot be matched with...

Does rising income inequality drive the surge in US debt?

Core argument: Pettis argues that one of the main drivers of the surge in US debt over the past four decades is the economic impact of rising US income inequality, which made rising debt a nearly automatic consequence.

While there are many reasons for the surge in US debt over the past four decades, one of the main reasons has to do with the economic impact of the rise in US income inequality during this period. Rising debt was the nearly automatic consequence of rising income inequality. Because the rich save a larger share of their income, rising income inequality tends to force up ex-ante savings. But this increase in the savings of the rich must be balanced. Today what mainly drives investment are increases in expected demand, and rising income inequality normally reduces expected demand by reducing the share of income that goes to consumption (all income is either consumed or saved). If the higher savings of the rich cannot be balanced by higher investment or lower trade deficits, they must be balanced by lower savings elsewhere in the economy. Policymakers don't want to see higher unemployment, so either the Fed will respond by encouraging a surge in household borrowing, or Washington will respond by increasing the fiscal deficit.

Takeaways by Macro Roundup® AI

  1. Pettis argues that one of the main drivers of the surge in US debt over the past four decades is the economic impact of rising US income inequality, which made rising debt a nearly automatic consequence.
  2. Because the rich save a larger share of their income, Pettis argues rising income inequality forces up ex-ante savings while reducing the expected demand that mainly drives investment, by shrinking the share of income going to consumption.
  3. Pettis argues that if higher savings of the rich are not balanced by higher investment or lower trade deficits, savings must fall elsewhere, with the Fed encouraging household borrowing or Washington increasing the fiscal deficit to avoid higher unemployment.

AI Summary. Bank reserves held at the Federal Reserve are about $1.2tn (30%) below their pandemic-era peak of roughly $4.3tn, which the author attributes to U.S. banks declining to raise deposit rates. As savers shift cash to higher-yielding money funds, banks have lost almost $400bn in deposits and replaced them with about $400bn of borrowings.

Matt Klein The Overshoot
Date Posted:

The quantity of reserves held by banks on deposit at the Fed is 30% lower than the pandemic era peak of ~$4.3T as savers move money out of banks in favor of higher yielding assets. @M_C_Klein

Are bank reserves shrinking because banks refuse to raise deposit rates?

Core argument: Bank reserves held on deposit at the Fed have fallen about $1.2 trillion, or 30%, from their pandemic-era peak of roughly $4.3 trillion reached at the end of 2021.

The end of 2021 was also when the quantity of reserves held by banks on deposit at the Fed began to shrink from the pandemic-era peak of ~$4.3 trillion. As of this writing, reserves are about $1.2 trillion (30%) lower now than then.  The underlying explanation for all this seems to be that U.S.-based banks are refusing to raise the rates they offer on deposits. As savers move cash from zero-yielding deposits to higher-yielding money funds, banks have to sell assets (mainly reserves, apparently) and/or find alternative sources of financing to replace the lost deposits. Since the start of 2022, U.S. commercial banks have lost almost $400 billion in deposits and replaced them with about $400 billion of “borrowings”.

Takeaways by Macro Roundup® AI

  1. Bank reserves held on deposit at the Fed have fallen about $1.2 trillion, or 30%, from their pandemic-era peak of roughly $4.3 trillion reached at the end of 2021.
  2. U.S. commercial banks have lost almost $400 billion in deposits since the start of 2022 and replaced them with about $400 billion of borrowings.
  3. The apparent explanation is that U.S.-based banks are refusing to raise deposit rates, prompting savers to move cash from zero-yielding deposits into higher-yielding money funds and leaving banks to sell assets, mainly reserves, or find alternative financing.

AI Summary. Household debt balances rose $394bn in a quarter, the largest nominal quarterly increase in 20 years, and 18.3m borrowers were behind on a credit card, up from 15.8m in 2019. With unemployment near a 50-year low, the evidence suggests higher prices and interest rates are driving delinquencies.

Andrew Haughwout, Donghoon Lee, et al Federal Reserve Bank of New York
Date Posted:

Researchers at @NewYorkFed report that delinquencies rates for credit card borrowers under age 50 are now above the pre-pandemic level, and they suggest that this may be driven by higher prices and higher interest rates.

Are higher prices and interest rates, not unemployment, driving rising delinquencies?

Core argument: Total debt balances rose $394 billion in the fourth quarter of 2022, the largest nominal quarterly increase in twenty years, with borrower-level delinquency rates approaching or surpassing pre-COVID norms.

Total debt balances grew by $394 billion in the fourth quarter of 2022, the largest nominal quarterly increase in twenty years. As borrower-level delinquency rates approach or surpass pre-COVID norms, many look to the historical culprit: the labor market. However, employment and income gaps are not likely triggers for this recent trend. The Bureau of Labor Statistics reported that there were just under 6 million unemployed in the fourth quarter of 2022, roughly unchanged from the previous quarter and near a fifty-year low (even as the population and labor force have grown). Meanwhile, there were 18.3 million borrowers behind on a credit card at the end of 2022 compared to 15.8 million at the end of 2019. Instead, the evidence suggests that higher prices and higher interest rates are the more likely culprits driving delinquencies. While person-level delinquencies are high, we do not anticipate widespread stress for lender portfolios as balance weighted delinquencies remain at or below pre-pandemic levels. But, on a person-level, this financial distress is real, and the delinquent marks will impact their access to credit for years to come.

Takeaways by Macro Roundup® AI

  1. Total debt balances rose $394 billion in the fourth quarter of 2022, the largest nominal quarterly increase in twenty years, with borrower-level delinquency rates approaching or surpassing pre-COVID norms.
  2. Some 18.3 million borrowers were behind on a credit card at the end of 2022, up from 15.8 million at the end of 2019, while the Bureau of Labor Statistics counted just under 6 million unemployed in the fourth quarter, near a fifty-year low.
  3. The evidence suggests higher prices and higher interest rates, rather than employment or income gaps, are driving delinquencies, and widespread stress for lender portfolios is not anticipated because balance-weighted delinquencies remain at or below pre-pandemic levels.

AI Summary. U.S. crude oil exports reached a record 5.1m barrels a day, roughly 10x the level before legislation opened the door to such shipments. Industry figures describe West Texas Intermediate crude as the most important marginal pricing barrel globally, turning a domestically focused market into an international one.

David Uberti Wall Street Journal
Date Posted:

As American crude exports hit new records West Texas Intermediate “has become the most important marginal pricing barrel on the globe,” said Peter Keavey, CME Group’s global head of energy. @WSJecon

Are record U.S. crude exports making American oil the global price setter?

Core argument: U.S. crude exports hit a record 5.1 million barrels a day in the week ended Oct. 21, according to the Energy Information Administration, roughly a 10-fold increase since President Barack Obama signed a bill opening the door to such shipments.

Crude exports hit a record of 5.1 million barrels a day the week that ended Oct. 21, according to the U.S. Energy Information Administration, a roughly 10-fold increase since President Barack Obama signed a bill opening the door to such shipments. West Texas Intermediate crude, or WTI, “has become the most important marginal pricing barrel on the globe,” said Peter Keavey, CME Group’s global head of energy and environmental products. “We have gone from a very domestically focused market into an international powerhouse,” he added.

Takeaways by Macro Roundup® AI

  1. U.S. crude exports hit a record 5.1 million barrels a day in the week ended Oct. 21, according to the Energy Information Administration, roughly a 10-fold increase since President Barack Obama signed a bill opening the door to such shipments.
  2. West Texas Intermediate crude "has become the most important marginal pricing barrel on the globe," said Peter Keavey, CME Group's global head of energy and environmental products.
  3. Peter Keavey said the U.S. oil market has gone from a very domestically focused market into an international powerhouse.

AI Summary. Saudi Aramco generated $181bn in operating cash flow over 12 months, exceeding the combined total of Exxon Mobil, Shell and Chevron in the same period. Despite publicly forecasting strong oil demand, Aramco's investment restraint suggests caution, since aggressive spending risks flooding a market gradually shifting away from petroleum and depressing prices.

David Fickling Bloomberg
Date Posted:

.@davidfickling notes that Saudi Aramco drilling activity is 30% below pre-Covid levels and argues that the company’s reduced capex spend is consistent with an internal forecast of declining global oil consumption by 2030. @bloomberg

Does the world's largest oil producer's spending contradict its demand forecasts?

Core argument: Saudi Aramco generated $181 billion of operating cashflow in the 12 months through September, exceeding the combined total posted by Exxon Mobil, Shell and Chevron over the same period.

Saudi Aramco's operating cashflows in the 12 months through September came to $181 billion — more than was posted in the same period by Exxon Mobil, Shell and Chevron put together. Saudi Aramco could never do anything but paint a bright future for oil consumption — but its revealed preference is more cautious. If it invests too aggressively now, it risks flooding a market that is gradually turning its back on petroleum, driving down prices and the kingdom’s own oil revenues. Its warning that oil supply will fall to about 80 million daily barrels in 2030 without more capex is pretty much in line with the levels of demand that BP expects at that point, in a world which manages to keep global warming well below 2 degrees Celsius.

Takeaways by Macro Roundup® AI

  1. Saudi Aramco generated $181 billion of operating cashflow in the 12 months through September, exceeding the combined total posted by Exxon Mobil, Shell and Chevron over the same period.
  2. Aramco's warning that oil supply will fall to about 80 million barrels a day in 2030 without more capex is roughly in line with the demand BP expects then in a world holding global warming well below 2 degrees Celsius.
  3. Investing too aggressively risks flooding a market gradually turning away from petroleum, driving down prices and Saudi Arabia's oil revenues, and Aramco's revealed preference is more cautious than its public rhetoric.

AI Summary. The Pentagon is reviewing its weapons stockpiles and may need to raise military spending after the high consumption rates of conventional munitions seen in the war in Ukraine. The return of large-scale conventional ground warfare in Europe is prompting US planners to reconsider assumptions that shifted capabilities toward counter-terrorism and irregular combat.

Felicia Schwartz Financial Times
Date Posted:

In an interview with the @ft, General Mark Milley noted one lesson from the Russo-Ukranian War is a “very high consumption rates of conventional munitions,” which may require increased spending to augment munitions stocks.

In an interview with the @ft, General Mark Milley noted one lesson from the Russo-Ukranian War is a “very high consumption...

Is large-scale ground warfare forcing the US to rebuild munitions stockpiles?

Core argument: The Pentagon is reviewing its weapons stockpiles and may need to raise military spending after the high consumption rates of conventional munitions seen in the war in Ukraine, according to General Mark Milley.

The Pentagon is reviewing its weapons stockpiles and may need to boost military spending after seeing how quickly ammunition has been used during the war in Ukraine. General Mark Milley said the return of 20th-century ground warfare tactics in Europe was forcing US planners to reconsider assumptions made in recent decades that had led military strategists to retool capabilities for counter-terrorism and irregular combat. “One of the lessons of this war is the very high consumption rates of conventional munitions, and we are re-examining our own stockages and our own plans to make sure that we got it right. We’re trying to do the analysis so that we can then estimate what we think the true requirement would be. And then we have to put that in the budget. Ammunition is very expensive.”

Takeaways by Macro Roundup® AI

  1. The Pentagon is reviewing its weapons stockpiles and may need to raise military spending after the high consumption rates of conventional munitions seen in the war in Ukraine, according to General Mark Milley.
  2. General Mark Milley said the return of 20th-century ground warfare tactics in Europe is forcing US planners to reconsider assumptions that led strategists to retool capabilities for counter-terrorism and irregular combat.
  3. General Mark Milley said the Pentagon is analyzing what the true munitions requirement would be so it can be put in the budget, noting that ammunition is very expensive.

AI Summary. Large language models are useful research tools for ideation, writing, background research, data analysis, coding, and mathematical derivations, and the author argues they will make economic researchers significantly more productive while risking leaving behind those who do not adopt them. The author expects human researchers to shift toward posing questions, choosing directions, selecting useful output, editing, and giving feedback.

Anton Korinek National Bureau of Economic Research
Date Posted:

.@akorinek reports on how large language models (LLMs) such as ChatGPT could increase productivity in economics research by focusing human effort on posing questions and providing feedback and editing of drafts from LLMs.

.@akorinek reports on how large language models (LLMs) such as ChatGPT could increase productivity in economics research by...

Will language models make economic researchers significantly more productive?

Core argument: Cognitive automation via large language models will make economic researchers significantly more productive in the short term, across tasks from ideation, writing and background research to data analysis, coding, and mathematical derivations.

LLMs have become useful research tools for tasks ranging from ideation, writing and background research to data analysis, coding, and mathematical derivations. In the short term, cognitive automation via LLMs will allow researchers to become significantly more productive. I expect that a growing number of researchers will incorporate LLMs into their workflow. This could help to increase the overall speed of progress in economics, although it risks leaving behind those who do not take advantage of LLMs. In the medium term, I anticipate that LLM-based assistants and tutors will become increasingly useful for generating the content that makes up research papers. Human researchers will focus on their comparative advantage by posing the questions, suggesting directions for obtaining answers, discriminating which parts of the produced content are useful, editing, and providing feedback, akin to an advisor.

Takeaways by Macro Roundup® AI

  1. Cognitive automation via large language models will make economic researchers significantly more productive in the short term, across tasks from ideation, writing and background research to data analysis, coding, and mathematical derivations.
  2. Growing adoption of large language models in research workflows could increase the overall speed of progress in economics, while risking leaving behind researchers who do not take advantage of them.
  3. In the medium term, LLM-based assistants and tutors will generate much of the content making up research papers, while human researchers pose the questions, suggest directions, judge which output is useful, edit, and give feedback.