Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a 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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, April 4, 2023

AI Summary. Data on over 760,000 US inventors show they are increasingly concentrated in large incumbent firms and less likely to work for young firms or become entrepreneurs; inventors hired by incumbents rather than young firms see earnings rise 12.6% while innovative output falls 6–11% over four years.

Ufuk Akcigit and Nathan Goldschlag National Bureau of Economic Research
Date Posted:

.@ngoldschlag @ufukakcigit find that inventors are increasingly concentrated in large incumbent firms, and that incumbents often catch and kill young inventors.  An inventor hired by an incumbent firm sees their earnings increase and productivity decrease.

Does inventor concentration in large incumbent firms reduce innovative output?

Core argument: Inventors hired by incumbents rather than young firms see earnings rise 12.6% while their innovative output falls 6–11% over four years, based on employment-history data covering more than 760,000 US inventors.

Our paper uses novel data on the employment history of over 760 thousand inventors, to investigate the model’s predictions. We show empirically that (i) inventors are increasingly concentrated in large incumbents, less likely to work for young firms, and less likely to become entrepreneurs, (ii) when an inventor is hired by an incumbent, compared to a young firm, their earnings increases by 12.6 percent and their innovative output declines by 6 to 11 percent over four years. Our analysis has documented that inventor reallocation toward large incumbents, at least the way it happened in recent decades, might be lowering the growth capacity of the country.

Takeaways by Macro Roundup® AI

  1. Inventors hired by incumbents rather than young firms see earnings rise 12.6% while their innovative output falls 6–11% over four years, based on employment-history data covering more than 760,000 US inventors.
  2. US inventors are increasingly concentrated in large incumbent firms and less likely to work for young firms or to become entrepreneurs.
  3. The authors argue that inventor reallocation toward large incumbents, at least as it occurred in recent decades, might be lowering the country's growth capacity.

AI Summary. Blackstone clients requested $4.5bn in withdrawals from its non-traded real estate income trust in a single month, while the firm pitched investors on opportunities arising from US economic turbulence. Blackstone argued that pullbacks in regional bank lending would constrain new construction, limiting supply and pushing rents higher at its properties.

Antoine Gara and Mark Vandevelde Financial Times
Date Posted:

Requested redemptions on Blackstone Real Estate Income Trust ($70 billion in assets) were up 15% in March to $4.5 billion. Blackstone paid out only $666 million in redemptions; it was the fifth straight month that they had limited redemptions.

Requested redemptions on Blackstone Real Estate Income Trust ($70 billion in assets) were up 15% in March to $4.5 billion. ...

Are investors withdrawing from a real estate fund despite bullish supply arguments?

Core argument: Blackstone clients requested $4.5bn of withdrawals from the Breit real estate fund in March, even as the firm's executives promoted real estate investment opportunities they said would arise from US economic turbulence.

Blackstone clients asked to pull $4.5bn from a closely followed real estate fund in March, even as the company’s executives were promoting investment opportunities in the sector that they said would arise from US economic turbulence. At the Spring Place private members club in Manhattan, Blackstone said the unfolding financial crisis could bolster Breit’s earnings because it would constrain bank financing for new real estate construction, crimping supply and providing upward pressure on rents at its properties, according to four people who attended. Blackstone executives told the group that a big crop of new apartments coming into the market will only crimp profits for a short time. Regional banks, the major financier of US apartments, will cut back on new lending commitments as they feel pressure from deposit outflows and rising interest rates, Blackstone predicted.

Takeaways by Macro Roundup® AI

  1. Blackstone clients requested $4.5bn of withdrawals from the Breit real estate fund in March, even as the firm's executives promoted real estate investment opportunities they said would arise from US economic turbulence.
  2. Blackstone told investors at Manhattan's Spring Place private members club that the unfolding financial crisis could bolster Breit's earnings by constraining bank financing for new construction, crimping supply and pushing up rents at its properties, according to four attendees.
  3. Blackstone predicted that regional banks, the major financier of US apartments, will cut back new lending commitments under pressure from deposit outflows and rising interest rates, and said a large crop of new apartments will crimp profits only briefly.

AI Summary. Economic decoupling makes global supply chains less elastic, less efficient, and more costly, reducing their ability to offset inflationary pressures and leaving central banks to contain price growth by suppressing demand. The combination of elevated interest rates and heavy sovereign debt compounds fiscal pressures, while a fragmented economy with barriers to technology diffusion is unlikely to reverse weak productivity growth.

Michael Spence Project Syndicate
Date Posted:

Michael Spence argues that the Sino-American decoupling “are as far-reaching as they are severe.” He argues that such decoupling will likely lead to higher inflation, which might compound fiscal pressure in the west.

Michael Spence argues that the Sino-American decoupling “are as far-reaching as they are severe.” He argues that such...

Does economic decoupling raise inflation pressures and weaken productivity growth?

Core argument: As global supply chains become less elastic, less efficient, and more costly, their ability to offset inflationary pressures will decline, leaving central banks to manage price growth alone by suppressing excess demand, the author argues.

Make no mistake: the economic consequences of this lurch toward confrontation are as far-reaching as they are severe. As global supply chains become less elastic, less efficient, and more costly, their ability to counteract inflationary pressures will decline. Central banks will thus be left to manage price growth alone, by suppressing excess demand. The combination of higher interest rates and heavy sovereign-debt burdens will compound fiscal pressures. Though lower inflation could ease those pressures, interest rates are likely to remain elevated for a while, especially if suboptimal global economic trends and secular forces like population aging cause supply-side conditions to deteriorate. Nor is the downward trend in productivity growth – which has become particularly pronounced in the last decade – likely to be reversed in a fragmented global economy with barriers to technology development and diffusion.

Takeaways by Macro Roundup® AI

  1. As global supply chains become less elastic, less efficient, and more costly, their ability to offset inflationary pressures will decline, leaving central banks to manage price growth alone by suppressing excess demand, the author argues.
  2. The author contends that higher interest rates combined with heavy sovereign-debt burdens will compound fiscal pressures, with rates likely to remain elevated if supply-side conditions deteriorate from suboptimal global economic trends and population aging.
  3. The downward trend in productivity growth, particularly pronounced over the last decade, is unlikely to reverse in a fragmented global economy with barriers to technology development and diffusion, according to the author.

AI Summary. China has 76 port terminals able to handle large ships carrying more than 14,000 20ft containers, while south and south-east Asian countries have 31 between them, according to research group Drewry. This shortage of deep-water capacity elsewhere in Asia could make it harder for Western businesses to shift trade away from China.

Oliver Telling, Martin Stabe, Chan Ho-him and Andrew Edgecliffe-Johnson Financial Times
Date Posted:

Research group Drewry notes that China has 76 port terminals able to accommodate the large ships that make up 2/3 of the shipping capacity btw Europe and Asia.  South and south-east Asian countries have only 31 such port terminals.

Does limited deep-water port capacity in Asia hinder shifting trade from China?

Core argument: China has 76 port terminals able to handle ships carrying more than 14,000 20ft containers, compared with just 31 across south and south-east Asian countries combined, according to research group Drewry.

Ports in the rest of Asia will need significant investment to match the capacity of Chinese harbours, according to analysis that shows how western businesses could struggle to loosen ties with the world’s largest exporter. More than 80 per cent of goods are transported by ship, according to the UN. But data from research group Drewry shows that other Asian manufacturing hubs have a dearth of harbours able to accommodate the largest ships that have become essential for transporting goods from east to west. While China has 76 port terminals able to support large ships carrying more than 14,000 20ft containers, south and south-east Asian countries have just 31 between them. Large vessels make up about two-thirds of the shipping capacity for services between east Asia and Europe, according to data provider MDS Transmodal.

Takeaways by Macro Roundup® AI

  1. China has 76 port terminals able to handle ships carrying more than 14,000 20ft containers, compared with just 31 across south and south-east Asian countries combined, according to research group Drewry.
  2. Large vessels account for about two-thirds of shipping capacity on east Asia–Europe services, according to MDS Transmodal, and other Asian manufacturing hubs lack harbours able to accommodate them.
  3. More than 80 per cent of goods are transported by ship, according to the UN, and analysis indicates western businesses could struggle to loosen ties with China without significant port investment elsewhere in Asia.

AI Summary. Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.

Steven Bogden Wall Street Journal
Date Posted:

Btw 1985-2021 the capital intensity of the American economy was relatively flat as a rise in intangible investment was offset by a decline in tangible investment. @stevebogden makes the case that this dynamic is about to end.

Btw 1985-2021 the capital intensity of the American economy was relatively flat as a rise in intangible investment was...

Will demand for tangible capital investment rise after decades of decline?

Core argument: U.S. tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private GDP between 1985 and 2021, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%.

The U.S. economy is about to become more capital-intensive. Demand for intangible investment will continue to grow to meet the needs of a tech-driven economy. Artificial intelligence will likely enable much cheaper software to diffuse faster throughout the economy. But for the first time in decades, demand for investment in tangible capital will have to rise to meet emerging economic challenges. From 1985 to 2021, tangible investment—including property, factories and equipment—decreased from 12.5% to 8.5% of private gross domestic product. That decrease was more than compensated for by growth in intangible investment—including intellectual property, software and process knowledge—which rose from about 11.5% to 16.75% to meet the demands of an increasingly digital economy. Overall, the rate of total private capital investment from 1985 to 2021 grew only 1%.

Takeaways by Macro Roundup® AI

  1. U.S. tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private GDP between 1985 and 2021, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%.
  2. The rate of total private capital investment in the U.S. grew only 1% from 1985 to 2021, as gains in intangible investment more than compensated for the decline in tangible investment.
  3. The U.S. economy is poised to become more capital-intensive, with demand for tangible investment rising for the first time in decades and artificial intelligence likely enabling much cheaper software to diffuse faster through the economy.

Related Articles:

  • The Transition to a Higher Cost of Capital — Bond yields near 4.5% sit below the 5.5% short-term interest rate, leaving little risk premium, and those yields have been enough to draw buyers back toward normal bond holdings. The author argues yields still need to rise to a sustainable cost of capital given structurally higher fiscal and inflationary spending.
  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • Global Economies, Converging on Equilibrium, Confront a Geopolitical Regime Shift — Global economies are converging on a reasonable equilibrium, with developed-world central banks gradually cutting rates toward what they view as neutral, China prioritizing domestic demand after a deflationary stretch, and artificial intelligence showing potential to enhance productivity. Markets are discounting that stability, with US equity indexes pricing an even more exceptional decade than the last.

AI Summary. A higher ratio of people aged 59 and over to children under 15 is strongly negatively correlated with GDP growth, as are higher median age and a larger share over 59. In China's northeastern provinces, where fertility fell a decade before the rest of the country, growth has stalled.

Yi Fuxian Project Syndicate
Date Posted:

.@fuxianyi argues that evidence from demographically older provinces northeastern China (where the economy is the same size as in 2012) foreshadows the future impact of demographic change on southern and western China.

Does an aging population correlate with slower economic growth?

Core argument: The aging index — people aged 59 and over per 100 people younger than 15 — correlates strongly negatively with GDP growth, as do higher median age and a higher share of people over 59, while a higher share of children aged 14 and under correlates positively.

While population aging may not directly cause economic recession, a higher aging index – the number of people aged 59 and over per 100 individuals younger than 15 – has a strong negative correlation with GDP growth, as does a higher median age and proportion of people over 59. A higher proportion of children aged 14 and under correlates positively with GDP growth. These dynamics are already apparent across Chinese regions. With relatively younger populations, southern and western China are still growing. But in the Heilongjiang, Liaoning, and Jilin provinces of northeastern China – where fertility rates fell a decade ahead of the rest of the country – the economic engine has stalled. Though China’s government claims that northeastern China’s economy grew by 5% annually in 2013-19 and by 3% annually in 2020-22, the fourth national economic census showed that the region’s GDP in 2019 was the same size as in 2012.

Takeaways by Macro Roundup® AI

  1. The aging index — people aged 59 and over per 100 people younger than 15 — correlates strongly negatively with GDP growth, as do higher median age and a higher share of people over 59, while a higher share of children aged 14 and under correlates positively.
  2. Northeastern China's Heilongjiang, Liaoning, and Jilin provinces, where fertility rates fell a decade ahead of the rest of the country, have stalled economically, while relatively younger southern and western China continues to grow.
  3. China's government reports northeastern GDP growth of 5% annually in 2013-19 and 3% annually in 2020-22, but the fourth national economic census showed the region's 2019 GDP was the same size as in 2012.

Wednesday, April 5, 2023

AI Summary. One estimate finds expanding imports hurt about 312,000 US workers a year on average between 2001 and 2015, under 2% of all spells of involuntary unemployment in those years. The author argues the appropriate response is fully funded labor adjustment programs rather than protection that would introduce rigidities and reduce competitiveness.

Alan Wolff, Robert Lawrence and Gary Clyde Peterson Institute for International Economics
Date Posted:

Alan Wolff, Robert Lawrence and Gary Clyde @PIIE make the case that job losses from trade should be offset by transfer payments. “The best answer is almost never long-term protection,” they conclude.

Alan Wolff, Robert Lawrence and Gary Clyde @PIIE make the case that job losses from trade should be offset by transfer...

Are labor adjustment programs a better response to import competition than protection?

Core argument: One estimate finds expanding imports hurt about 312,000 US workers a year on average between 2001 and 2015, a period covering the "China shock," though that represents under 2 percent of all spells of involuntary unemployment in those years.

According to one estimate, between 2001 and 2015—a period that covers the “China shock”—expanding imports hurt about 312,000 workers a year on average. This number is large. It calls for a meaningful response, even if it represents under 2 percent of the total number of periods of involuntary unemployment experienced by workers during those years. Almost 6 million manufacturing jobs were lost in the United States between 2000 and 2010. This loss was overwhelmingly caused by two recessions as well as relatively faster productivity growth, but trade did play a role.  The correct policy answer to job losses resulting from trade is having in place adjustment programs that are equal to the task of meeting dislocations. Two great strengths of the US economy are its flexible prices and flexible labor market. It would be a mistake to introduce rigidities through excessive protection that would make US industries less competitive when what is needed are more effective, fully funded, labor programs.

Takeaways by Macro Roundup® AI

  1. One estimate finds expanding imports hurt about 312,000 US workers a year on average between 2001 and 2015, a period covering the "China shock," though that represents under 2 percent of all spells of involuntary unemployment in those years.
  2. Almost 6 million US manufacturing jobs were lost between 2000 and 2010, a loss overwhelmingly caused by two recessions and relatively faster productivity growth, with trade also playing a role.
  3. The correct policy answer to trade-related job losses is fully funded, effective labor and adjustment programs equal to the dislocations, rather than excessive protection that would introduce rigidities and make US industries less competitive.

AI Summary. A screen of more than 1,000 global large-cap companies shows net profit margins returning to their long-run average of 13.5%, after being suppressed earlier and inflated during the later stages of the pandemic. On a company-by-company view, 52% still earn above their 10-year average margin, by an average of 2.15 percentage points.

Bryce Elder FT Alphaville
Date Posted:

Globally, large cap profit net profit margins are returning to their long run average of 13.5%. However, 52% of the firms are still earning above their 10-year mean margin with an average excess return of 2.15%. @FTAlphaville

Have corporate profit margins returned to their long-run average?

Core argument: A screen of more than 1,000 global large-caps shows net margins returning to a long-run average of 13.5 per cent, after being suppressed during 2017 and inflated through the late-stage pandemic.

Here’s a very simple screen of margins across more than 1,000 global large-caps. We’ve taken the quick and dirty approach and used only reported net profit, where the previous periods are the year-ago figure rather than annualised. Anyone contesting the value of this methodology is invited to share their own. The screen shows net margins recently returning to a long-run average of 13.5 per cent, having been suppressed during the 2017 tech nonsense then inflated through the late-stage pandemic. But on a granular view it also shows 52 per cent of global companies are still earning above their 10-year average margin, with the average excess of 2.15 percentage points.

Takeaways by Macro Roundup® AI

  1. A screen of more than 1,000 global large-caps shows net margins returning to a long-run average of 13.5 per cent, after being suppressed during 2017 and inflated through the late-stage pandemic.
  2. On a granular view, 52 per cent of the global companies screened still earn above their 10-year average net margin, with an average excess of 2.15 percentage points.
  3. The margin screen uses only reported net profit, with previous periods taken as the year-ago figure rather than annualised, an approach its authors call quick and dirty.

AI Summary. Apple is shifting some production out of China—iPhones and accessories to India, AirPods and Mac assembly to Vietnam, some Mac output to Malaysia, and simpler products to Ireland—while planning to retain extensive Chinese operations. Its leadership is concerned that moving too much capacity too quickly could prompt Chinese retaliation or nationalist consumer backlash.

Mark Gurman Bloomberg
Date Posted:

Apple’s decoupling strategy is increasingly focused on India. Apple plans to shift 25% of iPhone production to India by 2025.

Why are tech manufacturers shifting production out of China slowly?

Core argument: Apple is diversifying manufacturing to India for iPhones and accessories, Vietnam for AirPods and Mac assembly, Malaysia for some Mac production, and Ireland, where suppliers build the relatively easy-to-produce iMacs, for a range of simpler products.

The company is moving carefully. Apple’s leadership is concerned that China might retaliate if it moves too much capacity to other countries, or transitions too rapidly. Customers in China could turn against US-designed products amid heightened nationalism.  Apple’s efforts center on India as a location for production of iPhones and accessories, Vietnam for AirPods and Mac assembly, Malaysia for some Mac production, and Ireland—where suppliers currently build the relatively easy-to-produce iMacs—for a range of simpler products. Managers in Apple’s operations department have instructed employees to focus on sourcing additional components and locating production lines outside China for more new products coming in 2024, though the company also plans to retain extensive operations in the country.

Takeaways by Macro Roundup® AI

  1. Apple is diversifying manufacturing to India for iPhones and accessories, Vietnam for AirPods and Mac assembly, Malaysia for some Mac production, and Ireland, where suppliers build the relatively easy-to-produce iMacs, for a range of simpler products.
  2. Apple's leadership is concerned that China might retaliate if the company shifts too much capacity abroad or moves too rapidly, and that Chinese customers could turn against US-designed products amid heightened nationalism.
  3. Managers in Apple's operations department have instructed employees to source additional components and locate production lines outside China for more new products coming in 2024, while the company plans to retain extensive operations in China.

AI Summary. New research finds the average US workweek has fallen by more than half an hour over three years, letting some Americans spend more time on leisure and other activities. The authors estimate the reduction amounts to a labor shortfall equivalent to 2.4m employees.

Rich Miller Bloomberg
Date Posted:

Americans are working about 30 minutes less per week relative to before the pandemic. This is equivalent to a loss of 2.4 million employees. @markets

Are Americans working shorter weeks than before the pandemic?

Core argument: The average US workweek has fallen by more than half an hour over the past three years, according to research by former Bureau of Labor Statistics Commissioner Katharine Abraham and Lea Rendell.

The average US workweek has dropped by more than a half hour over the last three years, according to new research by former Bureau of Labor Statistics Commissioner Katharine Abraham and Lea Rendell. That’s enabled some Americans to emulate their European counterparts and spend more time on leisure and other activities. But it’s also meant a shortfall of labor – equivalent to 2.4 million employees, according to the paper.

Takeaways by Macro Roundup® AI

  1. The average US workweek has fallen by more than half an hour over the past three years, according to research by former Bureau of Labor Statistics Commissioner Katharine Abraham and Lea Rendell.
  2. Abraham and Rendell estimate the shorter workweek amounts to a labor shortfall equivalent to 2.4 million employees.
  3. The decline in hours worked has enabled some Americans to emulate their European counterparts by spending more time on leisure and other activities.

AI Summary. An analysis of 68 vertebrate species published in Nature found germline mutation rates varied about 40-fold per generation but roughly 120-fold per year, a wider range than earlier studies suggested. The authors found species with larger effective population sizes had lower mutation rates, evidence for the "drift-barrier hypothesis" that natural selection weakens against mutation in smaller populations.

Yasemin Saplakoglu Quanta Magazine
Date Posted:

.@QuantaMagazine reports on a @Nature study that tracked the tempo of evolution across 68 species and found that the mutation rate per year was higher than expected.

.@QuantaMagazine reports on a @Nature study that tracked the tempo of evolution across 68 species and found that the...

Does population size shape how fast species mutate?

Core argument: Germline mutation rates across 68 vertebrate species varied by about 40-fold per generation but roughly 120-fold per year, a wider range than previous studies had suggested, according to the analysis published in Nature.

A massive analysis of 68 diverse vertebrate species, from lizards and penguins to humans and whales, has made the first large-scale comparison of the rates at which species mutate — a first step toward understanding how quickly they can evolve. The findings, published in the journal Nature, unearthed surprising insights into how the tempo for mutations can change and what sets that pace. The most surprising finding that emerged from the data was the wide range of germline mutation rates. When the researchers measured how often the mutations occurred per generation, the species varied by only about fortyfold. But when they looked at the mutation rates per year rather than per generation, the range increased to about 120-fold, which was larger than previous studies had suggested. The study authors found that the higher the average effective population size for a species, the lower its mutation rate. That provided good evidence for the “drift-barrier hypothesis” devised a little over a decade ago. “Selection is relentlessly trying to reduce the mutation rate because most mutations are deleterious,” Michael Lynch, an evolutionary biologist at Arizona State University explained. But in species with smaller effective population sizes, natural selection gets weaker because genetic drift—the effect of pure chance on the spread of a mutation—gets stronger. That allows the mutation rate to rise.

Takeaways by Macro Roundup® AI

  1. Germline mutation rates across 68 vertebrate species varied by about 40-fold per generation but roughly 120-fold per year, a wider range than previous studies had suggested, according to the analysis published in Nature.
  2. The study authors found that species with larger average effective population sizes had lower mutation rates, which they report as evidence for the drift-barrier hypothesis.
  3. Michael Lynch, an evolutionary biologist at Arizona State University, explains that selection continually pushes mutation rates down because most mutations are deleterious, while in species with smaller effective population sizes stronger genetic drift weakens selection and allows mutation rates to rise.