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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, April 19, 2023

AI Summary. Expected US inflation of about 2.1%, measured by the Federal Reserve Bank of Cleveland, sits nearly in line with the 2% target, with an estimated inflation risk premium of 0.5 percentage points consistent with historic levels. Two arguments suggest this is too optimistic: less elastic supply of key inputs, and weaker public concern about inflation.

Martin Wolf Financial Times
Date Posted:

.@martinwolf_ predicts that inflation will decline to 2-3% with an equilibrium real rate of interest of 0-2%; this implies short rates between 2-5% and long rates between 3-6%.

Are market expectations of a return to 2% inflation too optimistic?

Core argument: US expected inflation stands at 2.1 per cent according to the Federal Reserve Bank of Cleveland, almost exactly in line with the target, which the author reads as confidence that the target will be delivered.

We are, in my view, more likely than not to return to inflation at around 2 per cent a year, or perhaps just a little bit higher. This is also what markets expect: according to the Federal Reserve Bank of Cleveland, US expected inflation is 2.1 per cent, almost exactly in line with the target. This shows confidence that the target will be delivered. The inflation risk premium is also estimated at 0.5 percentage points, which is in line with historic valuations. There are two (overlapping) arguments why this might prove too optimistic. One is that supply conditions have become more inflationary. De-globalisation and other shocks have permanently lowered the elasticity of supply of key inputs. That will raise the costs of keeping inflation down. The other is that the political economy of curbing inflation has worsened. Thus, the public cares less about inflation now, partly because it has no memory of a long period of high inflation.

Takeaways by Macro Roundup® AI

  1. US expected inflation stands at 2.1 per cent according to the Federal Reserve Bank of Cleveland, almost exactly in line with the target, which the author reads as confidence that the target will be delivered.
  2. The inflation risk premium is estimated at 0.5 percentage points, in line with historic valuations, alongside the author's view that a return to inflation of around 2 per cent a year, or a little higher, is more likely than not.
  3. Two overlapping arguments against that optimism are that de-globalisation and other shocks have permanently lowered the elasticity of supply of key inputs, raising the cost of keeping inflation down, and that the public now cares less about inflation.

AI Summary. Corporate profits as a share of total economic output vary around a stable mean in US national accounts data, consistent with competition pushing profits toward equilibrium relative to output. Talk of margins being too high or low only makes sense if profits revert to a mean, and no comparable economic account exists for profits as a share of sales.

Robert Armstrong Financial Times
Date Posted:

.@rbrtrmstrng examines Andrew Smithers’ view that profits are reverting to long-term means. This analysis projects that profit margins for all companies are likely to fall from 26.1% in 2022 to 22.0%.

Do corporate profits revert to a stable share of economic output?

Core argument: Andrew Smithers argues that claims about corporate profit margins being too high or too low only make sense if profit levels revert to a stable mean, which US national accounts data suggest holds for profits as a share of total economic output.

Andrew Smithers makes the simple point that it only makes sense to talk about corporate profit margins being too high or too low if profit levels revert to a stable mean. And interpreted in one straightforward way, they do. This is corporate profits as a proportion of total economic output. It makes sense, broadly, that competition would force profit into a stable equilibrium relative to output, and data from the US national accounts does seem to suggest that this ratio varies around a stable mean. There is not (as far as I know of) a good economic account of why profit as a percentage of sales — the more usual sense of “margins” — should revert to a stable mean.

Takeaways by Macro Roundup® AI

  1. Andrew Smithers argues that claims about corporate profit margins being too high or too low only make sense if profit levels revert to a stable mean, which US national accounts data suggest holds for profits as a share of total economic output.
  2. Competition would broadly force corporate profit into a stable equilibrium relative to output, and US national accounts data appear to show that ratio varying around a stable mean.
  3. No good economic account explains why profit as a percentage of sales, the more usual sense of "margins," should revert to a stable mean.

AI Summary. A report from the non-profit Society of Family Planning estimates there were 31,180 fewer abortions than prior rates would suggest over a six-month period, a 6% decline, even as abortions administered by virtual clinics rose. Abortions fell 63% across the 22 states that enacted new restrictions and rose 12% in more permissive states.

Economist Staff The Economist
Date Posted:

.@TheEconomist reports on a new study that quantified the impact of Dobbs. Between July and Dec 2022 there were 31,180 fewer abortions relative to pre-Dobbs, a national decline of 6% but there are major variations between states.

How much have state abortion restrictions reduced total abortions nationwide?

Core argument: The Society of Family Planning counted 31,180 fewer abortions from July to December 2022 than pre-Dobbs rates would suggest, a decline of 6%, despite a rise in abortions administered by virtual clinics prescribing drugs like mifepristone.

A report released this month by the Society of Family Planning (SFP), a non-profit, quantifies the effect of the Dobbs ruling. From July to December 2022 there were 31,180 fewer abortions than pre-Dobbs rates would suggest, a decline of 6%. That is despite a rise in abortions administered by virtual clinics, which prescribe abortifacient drugs like mifepristone. The overall decline understates the effect Dobbs has had in much of the country. Across the 22 states where new restrictions took effect following the ruling, the number of abortions fell by 67,040 (63%). Even in states with tight pre-Dobbs restrictions, the decision’s impact has been vast. After Texas implemented a law in 2021 that banned abortions once a fetal heartbeat could be detected, its abortion rate fell from 5,400 per month to 2,200. In April 2022 SFP recorded 2,700 abortions in the state. But between July and December 2022 it has logged fewer than 100. Abortion has also all but disappeared in seven other states, including four in the South.  In states with more permissive rules, in contrast, abortions rose by 35,860 (12%). This suggests that slightly more than half of women who would have had abortions in restrictive states before Dobbs travelled elsewhere to obtain them. The remaining 31,180 either carried their pregnancies to term, or obtained abortions by methods that do not appear in SFP’s data.

Takeaways by Macro Roundup® AI

  1. The Society of Family Planning counted 31,180 fewer abortions from July to December 2022 than pre-Dobbs rates would suggest, a decline of 6%, despite a rise in abortions administered by virtual clinics prescribing drugs like mifepristone.
  2. Across the 22 states where new restrictions took effect after Dobbs, abortions fell by 67,040 (63%), while states with more permissive rules recorded an increase of 35,860 (12%).
  3. Texas's abortion rate fell from 5,400 per month to 2,200 after its 2021 fetal-heartbeat law, and the Society of Family Planning logged fewer than 100 abortions there between July and December 2022.

AI Summary. A shortage of rocket motors is constraining U.S. missile production at makers including Lockheed Martin and Raytheon, with Northrop Grumman brought in to supplement former sole supplier Aerojet Rocketdyne. The Pentagon's acquisition chief says rebuilding and expanding munitions stocks for a potential conflict with China over Taiwan would take five or six years.

Doug Cameron Wall Street Journal
Date Posted:

Unfilled orders for defense capital goods are approaching $200B, as American arms makers are taking longer than expected to expand production of arms and munitions. @WSJ

Is a rocket motor shortage limiting U.S. missile production?

Core argument: Pentagon acquisition chief Bill LaPlante said rebuilding and expanding U.S. munitions stocks to prepare for any potential conflict with China over Taiwan would be a five- or six-year effort.

Big U.S. arms makers are taking longer than expected to boost production despite billions of dollars in support from the Pentagon. Defense-company executives said rocket motors continue to be a problem for missile makers including Lockheed Martin and Raytheon Technologies Corp. Northrop Grumman Corp. has now been hired to produce more rocket motors and supplement one-time sole supplier Aerojet Rocketdyne Holdings Inc. Pentagon acquisition chief Bill LaPlante said last month it would be a five- or six-year effort to rebuild and expand munitions stocks to prepare for any potential conflict with China over Taiwan.

Takeaways by Macro Roundup® AI

  1. Pentagon acquisition chief Bill LaPlante said rebuilding and expanding U.S. munitions stocks to prepare for any potential conflict with China over Taiwan would be a five- or six-year effort.
  2. Defense-company executives said rocket motors remain a problem for missile makers including Lockheed Martin and Raytheon Technologies, with large U.S. arms makers taking longer than expected to raise production despite billions of dollars in Pentagon support.
  3. Northrop Grumman has been hired to produce more rocket motors, supplementing Aerojet Rocketdyne, previously the sole supplier.

Thursday, April 20, 2023

AI Summary. SpaceX's Starship, a nearly 400-foot rocket described as the most powerful ever launched, exploded after reaching an altitude of nearly 40km on its first launch, setting back the company's effort to build a spacecraft capable of flying to Mars.

Richard Waters Financial Times
Date Posted:

SpaceX’s Starship rocket, the most powerful ever launched, managed to take off but failed to reach orbit during its first test launch. @FT

SpaceX’s Starship rocket, the most powerful ever launched, managed to take off but failed to reach orbit during its first...

Does a failed first launch set back plans for Mars spacecraft?

Core argument: SpaceX's Starship, a nearly 400-foot-tall rocket described as the most powerful ever launched, reached an altitude of nearly 40km on its first flight before tumbling back toward Earth and exploding.

SpaceX’s giant Starship rocket exploded after its first launch on Thursday in a setback for Elon Musk’s company and its effort to build a spacecraft capable of flying to Mars. The nearly 400-foot-tall rocket, the most powerful ever launched, left its base along the Gulf coast in south Texas at about 8.30am local time. It rose on a ball of flame from its 33 Raptor engines and reached an altitude of nearly 40km before tumbling back towards Earth and exploding.  “It was partial success, it was not a large setback,” said Laura Forczyk, a former Nasa official and now a space consultant at Astralytical. “The most important part was that it launched—that is quite the accomplishment for a new rocket, particularly one as complex as Starship.”

Takeaways by Macro Roundup® AI

  1. SpaceX's Starship, a nearly 400-foot-tall rocket described as the most powerful ever launched, reached an altitude of nearly 40km on its first flight before tumbling back toward Earth and exploding.
  2. The Starship explosion is a setback for SpaceX's effort to build a spacecraft capable of flying to Mars, following a launch on 33 Raptor engines from its Gulf coast base in south Texas at about 8.30am local time.
  3. Laura Forczyk, a former NASA official and space consultant at Astralytical, called the flight a partial success rather than a large setback, saying the launch itself was the most important part for a rocket as complex as Starship.

AI Summary. The Congressional Budget Office estimates that Alabama's work requirement for cash welfare raises the employment rate of participating families by about 12 percentage points over the first year, lifting average income through higher earnings and tax credits. The requirement also cuts cash assistance, mainly by removing nonworking families, and increases how often families have neither earnings nor cash assistance.

Justin Falk Congressional Budget Office
Date Posted:

A new @USCBO analysis finds that in Alabama an expansion of the TANF work requirement increased the employment rate by ~ 12pp within a year of families entering the program.

Do welfare work requirements raise employment and income of participating families?

Core argument: CBO's Justin Falk estimates that Alabama's Temporary Assistance for Needy Families work requirement raises the employment rate by about 12 percentage points over the first year after families enter the program, elevating average income through higher earnings and tax credits.

CBO‘s Justin Falk finds that Alabama’s work requirement increases the employment rate by about 12 percentage points over the first year after families enter the program, which elevates average income by boosting earnings and tax credits. But the requirement reduces the amount of cash assistance families receive, primarily by removing nonworking families from the program. On net, my analysis suggests that average income increases, but so does the frequency with which families have neither earnings nor cash assistance. Those results are inferred from families whose youngest child is between 6 months and 11 months old, although I find suggestive evidence that the results generalize to families with older children.

Takeaways by Macro Roundup® AI

  1. CBO's Justin Falk estimates that Alabama's Temporary Assistance for Needy Families work requirement raises the employment rate by about 12 percentage points over the first year after families enter the program, elevating average income through higher earnings and tax credits.
  2. Falk finds that the work requirement reduces the cash assistance families receive, primarily by removing nonworking families from the program, so average income rises while the frequency of families with neither earnings nor cash assistance also increases.
  3. Falk infers the results from families whose youngest child is between 6 and 11 months old, with suggestive evidence that the findings generalize to families with older children.

AI Summary. The ratio of US household liabilities to net wealth has fallen 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s. A rise in unemployment would slow consumer spending, but households' starting position is strong.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal reports the American household balance sheets are strong; the ratio of liabilities to net worth is down 50% from the crisis.

Are US household balance sheets strong by historical standards?

Core argument: The ratio of US household liabilities to net wealth has declined 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s.

US households are in excellent shape, the ratio of liabilities to net wealth has declined 50% since the 2008 financial crisis, and household leverage is currently at levels last seen in the early 1980s, see chart below. If the unemployment rate rises, consumer spending will slow down, but the starting point for US households is very strong.

Takeaways by Macro Roundup® AI

  1. The ratio of US household liabilities to net wealth has declined 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s.
  2. US household balance sheets are in excellent shape, providing a very strong starting point for consumers.
  3. A rise in the unemployment rate would slow consumer spending, though US households would enter that slowdown from a strong starting point.

AI Summary. US Census data show the millennial homeownership rate reached 51.5%, though by age 30 only 42% of millennials owned homes compared with 48% of Generation X and more than half of baby boomers. Ownership is concentrated in more affordable cities, with 63% of millennials in Grand Rapids, Michigan owning homes versus 27% in Los Angeles.

Alice Kantor Bloomberg
Date Posted:

Over half of millennials, 51.5%, now own homes. According to a survey from Apartment List, 25% of millennials plan to remain a renter, up from 14% three years earlier.

Are millennials reaching homeownership at lower rates than earlier generations?

Core argument: The millennial homeownership rate reached 51.5% in 2022, according to US Census data, though by age 30 only 42% of millennials owned homes versus 48% of Gen X and more than half of baby boomers.

The millennial homeownership rate hit 51.5% in 2022, US Census data show. It’s been a slog to get there for the generation that came of age during the financial crisis — by age 30, 42% of millennials owned their homes compared to 48% of Gen X and more than half of baby boomers. Those who’ve managed to buy a home are mostly in more affordable cities, with 63% of millennials in Grand Rapids, Michigan, owning homes, compared to just 27% in Los Angeles. Nearly one in four millennials plans to rent forever, up from one in seven just three years earlier, according to a survey from real estate site Apartment List.

Takeaways by Macro Roundup® AI

  1. The millennial homeownership rate reached 51.5% in 2022, according to US Census data, though by age 30 only 42% of millennials owned homes versus 48% of Gen X and more than half of baby boomers.
  2. Millennial homeowners are mostly in more affordable cities, with 63% of millennials in Grand Rapids, Michigan owning homes compared with 27% in Los Angeles.
  3. Nearly one in four millennials plans to rent forever, up from one in seven three years earlier, according to a survey from the real estate site Apartment List.

AI Summary. Presidential voting in rural and urban areas was roughly similar through the 1970s and 1980s, but the rural-urban divide has widened in every region since, growing 27 points in the South and 20 points in the Midwest between 1976 and 2020. Urban areas captured 97% of all employment growth between 2001 and 2016.

Trevor Brown, Suzanne Mettler and Samantha Puzzi The Forum
Date Posted:

Nationwide, the difference between Republican vote share in rural vs urban areas increased to 21 percentage points in 2020, up from 10 pp in 2000 and 2pp in 1996. @SuzanneMettler1

How wide has the rural-urban political divide grown since the 1970s?

Core argument: The rural-urban divide in U.S. presidential voting widened most in the South, by 27 points between 1976 and 2020, alongside 20 points in the Midwest, 18 points in the West, and seven points in the Northeast.

Throughout the mid-twentieth century and as recently as the 1970s and 1980s, presidential candidates received fairly equivalent support from rural and urban dwellers, nationwide. Since the 1990s, however, the rural-urban political cleavage has grown steadily as shown in Figure 1. Although the rural-urban political divide in presidential voting has increased the most in the South, by 27 points between 1976 and 2020, it has widened in all regions over the same period, by seven points in the Northeast, 18 points in the West, and a striking 20 points in the Midwest.  Urban areas captured a full 97% of all employment growth between 2001 and 2016.  As the economic conditions in rural and urban areas diverged, the rural-urban political divide emerged.

Takeaways by Macro Roundup® AI

  1. The rural-urban divide in U.S. presidential voting widened most in the South, by 27 points between 1976 and 2020, alongside 20 points in the Midwest, 18 points in the West, and seven points in the Northeast.
  2. Urban areas captured 97% of all U.S. employment growth between 2001 and 2016, and the rural-urban political divide emerged as economic conditions in the two areas diverged.
  3. Presidential candidates drew roughly equivalent support from rural and urban voters nationwide through the mid-twentieth century and into the 1970s and 1980s, with the cleavage growing steadily since the 1990s.