Edward Conard

Top Ten New York Times Bestselling Author

  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…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
  • “…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
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, June 14, 2023

AI Summary. A substantial rise in U.S. investment would likely require greater output from existing labor and capital plus higher imports, since there is little appetite to cut current consumption and little scope to export less. Foreign producers stand to benefit even where investment subsidies carry local-content restrictions.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein argues that investment catalyzed by the CHIPS Act and Inflation Reduction Act will spill over globally, which will boost “global manufacturing demand, ease the supply constraints of the past few years, and support the green transition.”

Would a U.S. investment boom benefit foreign producers?

Core argument: Good investments should raise the capital stock and eventually make it easier to increase both investment and consumption, but that process takes time, leaving a mismatch between America's needs and its productive capabilities in the interim.

There is no appetite in the U.S. for boosting investment at the expense of current consumption by redirecting spending, workers, and capital. Nor is there much scope for American producers to export even less than they already do. This means that any realistic scenario in which U.S. investment rises substantially would mostly involve some combination of higher production out of existing labor and capital as well as higher levels of imports. In theory, good investments should boost the capital stock and eventually make it easier to further increase both investment and consumption, but that process takes time. Until then, there will be a mismatch between America’s needs and its productive capabilities that can only be bridged by drawing upon foreign production. Foreigners stand to benefit from this even if some of the specific subsidies encouraging U.S. investment have local-content restrictions.

Takeaways by Macro Roundup® AI

  1. Good investments should raise the capital stock and eventually make it easier to increase both investment and consumption, but that process takes time, leaving a mismatch between America's needs and its productive capabilities in the interim.
  2. Foreigners stand to benefit from a U.S. investment boom because the gap between American needs and domestic capacity can only be bridged by drawing on foreign production, even where subsidies carry local-content restrictions.
  3. Any realistic scenario of substantially higher U.S. investment would mostly involve higher production from existing labor and capital together with higher imports, given no U.S. appetite for cutting current consumption and little scope for exporting less.

AI Summary. U.S. industrial policies promoting semiconductors, renewable energy, and electric vehicles have catalysed an investment surge concentrated in the South, with S&P Global Market Intelligence calculating that about two-thirds of planned electric-vehicle jobs will be located there. More than 80% of announced electric-vehicle investment has gone to Republican-controlled districts.

Economist Staff The Economist
Date Posted:

S&P Global Markets Intelligence calculates 2/3 of planned EV jobs will be located in the American South, but @TheEconomist argues that the impact on Southern politics may be minimal.

Is the South capturing most new industrial policy investment?

Core argument: More than 80% of electric-vehicle investment announced in the 300 days after the Inflation Reduction Act's passage went to Republican-controlled districts, according to a database of EV investment announcements.

The industrial policies crafted by Mr. Biden’s administration—notably, incentives and rules to boost the production of semiconductors, renewable energy and electric-vehicles — have catalysed a surge in investment, much of it in the South. S&P Global Market Intelligence calculates that about two-thirds of planned EV jobs will reside there. Might the South’s manufacturing boom have political consequences? The investment surge resulting in part from Mr. Biden’s policies so far looks like the opposite of pork-barrel politics: most of the money has gone to places that do not favour him. According to a database of EV investments announced in the 300 days since the passage of the Inflation Reduction Act more than 80% has gone to Republican-controlled districts. As factories become more automated and less labour-intensive, their political weight may well diminish. Robots do not vote.

Takeaways by Macro Roundup® AI

  1. More than 80% of electric-vehicle investment announced in the 300 days after the Inflation Reduction Act's passage went to Republican-controlled districts, according to a database of EV investment announcements.
  2. S&P Global Market Intelligence calculates that about two-thirds of planned electric-vehicle jobs will be located in the South, where much of the investment catalysed by the Biden administration's semiconductor, renewable-energy and EV policies has landed.
  3. As factories become more automated and less labour-intensive, their political weight may diminish, since robots do not vote.

AI Summary. A list of standout US metropolitan growth areas spans Sun Belt boomtowns such as Austin and Nashville, Midwestern cities including Cincinnati and Columbus, and Philadelphia, but no Florida metros. All but Phoenix and Philadelphia sit in Republican-voting states, while all but Huntsville and Oklahoma City have Democratic or nonpartisan mayors.

Justin Fox Bloomberg
Date Posted:

.@foxjust highlights 15 cities that have 5-year job growth at a much faster pace than the rest of their states. He notes that, other than Phoenix and Philadelphia, all are in states that voted GOP in 2020 but all but two have Democratic mayors.

What do the fastest-growing US metro areas have in common?

Core argument: All but two of the standout metro areas — Phoenix and Philadelphia — are in states that voted Republican in the 2020 presidential election, while all but Huntsville and Oklahoma City have Democratic or Democratic-sounding nonpartisan mayors in their largest cities.

This list has a little of everything. It includes Indianapolis, of course, along with perennial powerhouses Dallas-Fort Worth and Phoenix, boomtowns Austin and Nashville and much-discussed up-and-comers Boise, Fayetteville-Springdale-Rogers, Oklahoma City and Raleigh. But there are also some under-the-radar growth stories (Charleston, Huntsville) moderate Midwestern successes (Cincinnati, Columbus, Des Moines) and one true surprise: Philadelphia? Really?! There is not, however, a single city from Florida. What unites the standouts? All but two, Phoenix and Philadelphia, are in states that voted Republican in the 2020 presidential election, while in all but two, Huntsville and Oklahoma City, the mayors of the largest cities are either Democrats or nonpartisan officials who sound a lot like Democrats.

Takeaways by Macro Roundup® AI

  1. All but two of the standout metro areas — Phoenix and Philadelphia — are in states that voted Republican in the 2020 presidential election, while all but Huntsville and Oklahoma City have Democratic or Democratic-sounding nonpartisan mayors in their largest cities.
  2. The list of standout metro areas spans Indianapolis, powerhouses Dallas-Fort Worth and Phoenix, boomtowns Austin and Nashville, up-and-comers Boise, Fayetteville-Springdale-Rogers, Oklahoma City and Raleigh, and Midwestern successes Cincinnati, Columbus and Des Moines.
  3. No Florida city appears on the list of standout metro areas, which includes under-the-radar growth stories Charleston and Huntsville along with the surprise of Philadelphia.

AI Summary. Larger investments in artificial intelligence are associated with workforce upskilling at firms, with rising shares of workers holding bachelor's, master's, and doctoral degrees and a falling share without college education. The authors estimate a one-standard-deviation increase in a firm's share of AI workers corresponds to a 7.2% decline in the share of non-college workers.

Tania Babina, Anastassia Fedyk, Alex He and James Hodson National Bureau of Economic Research
Date Posted:
Is Database:
Database

Between 2010 and 2018 firms that invested in AI shifted employment towards more junior employees with high educational attainment and technical expertise. @TaniaBabina @AnastassiaFedyk @AlexXiHe

Does AI investment shift firms toward more educated workers?

Core argument: A one-standard-deviation increase in a firm's share of AI workers is associated with a 7.2% decline in the share of workers without college education, alongside rising shares of degree-holding workers.

In terms of labor composition, we observe a general upskilling trend associated with larger AI investments. Firms that invest more in AI tend to increase their shares of workers with bachelors, masters, and doctoral degrees (correspondingly decreasing the share of workers without college education). For example, a one-standard-deviation increase in the firm’s share of AI workers translates into a 3.7% increase in the share of workers whose maximal educational attainment is an associates or bachelors degree, a 2.9% increase in the share of workers whose maximal educational attainment is a masters degree, and a 0.6% increase in doctoral degrees. These increases in educated workers correspond to a 7.2% decline in the share of workers without college education.

Takeaways by Macro Roundup® AI

  1. A one-standard-deviation increase in a firm's share of AI workers is associated with a 7.2% decline in the share of workers without college education, alongside rising shares of degree-holding workers.
  2. A one-standard-deviation increase in a firm's AI worker share corresponds to a 3.7% rise in the share of workers with an associate's or bachelor's degree, 2.9% for master's degrees, and 0.6% for doctorates.
  3. Firms making larger AI investments show a general upskilling trend in labor composition, tending to increase their shares of workers with bachelor's, master's, and doctoral degrees.

AI Summary. Analysts estimate that automating individual work activities could add 0.2%–3.3% a year to global productivity growth depending on adoption speed, with generative AI contributing 0.1–0.6 percentage points of that. Realizing the gain requires workers displaced by the technology to move into activities at least as productive as their current ones.

Michael Chui, Eric Hazan, et al. McKinsey & Company
Date Posted:

.@McKinsey forecasts that generative AI could accelerate US productivity growth to 3.6% CAGR between 2022-2040.

How much could generative AI add to global productivity growth?

Core argument: Automation of individual work activities could add 0.2 to 3.3 percent to annual global productivity growth from 2023 to 2040, depending on the rate of automation adoption, according to McKinsey's estimates.

The deployment of generative AI and other technologies could help accelerate productivity growth, partially compensating for declining employment growth and enabling overall economic growth. Based on our estimates, the automation of individual work activities enabled by these technologies could provide the global economy with an annual productivity boost of 0.2 to 3.3 percent from 2023 to 2040 depending on the rate of automation adoption—with generative AI contributing to 0.1 to 0.6 percentage points of that growth— but only if individuals affected by the technology were to shift to other work activities that at least match their 2022 productivity levels. In some cases, workers will stay in the same occupations, but their mix of activities will shift; in others, workers will need to shift occupations.

Takeaways by Macro Roundup® AI

  1. Automation of individual work activities could add 0.2 to 3.3 percent to annual global productivity growth from 2023 to 2040, depending on the rate of automation adoption, according to McKinsey's estimates.
  2. Generative AI could contribute 0.1 to 0.6 percentage points of that estimated annual productivity growth.
  3. The estimated productivity gains depend on individuals affected by these technologies shifting to other work activities that at least match their 2022 productivity levels, with some workers changing their mix of activities and others changing occupations.

AI Summary. IBM researchers report that a 127-qubit quantum processor simulated the magnetic behavior of 127 atom-scale bar magnets, a problem too complex for an exact answer on the largest supercomputers. Because quantum noise made each sub-millisecond calculation unreliable, the computation was repeated 600,000 times to converge on an answer.

Kenneth Chang New York Times
Date Posted:

IBM researchers have used a quantum processor and a process of error elimination to make a major step forward in quantum computing. The work may help in accelerating drug discovery and modeling fusion reactions. @NYT

IBM researchers have used a quantum processor and a process of error elimination to make a major step forward in quantum...

Can quantum computers solve problems beyond the reach of supercomputers?

Core argument: IBM researchers used a 127-qubit quantum processor to simulate 127 atom-scale bar magnets in a magnetic field under the Ising model, a problem too complex for a precise answer on the largest, fastest supercomputers.

The IBM researchers used a quantum processor with 127 qubits to simulate the behavior of 127 atom-scale bar magnets — tiny enough to be governed by the spooky rules of quantum mechanics — in a magnetic field. That is a simple system known as the Ising model, which is often used to study magnetism. This problem is too complex for a precise answer to be calculated even on the largest, fastest supercomputers. On the quantum computer, the calculation took less than a thousandth of a second to complete. Each quantum calculation was unreliable — fluctuations of quantum noise inevitably intrude and induce errors — but each calculation was quick, so it could be performed repeatedly. Altogether, the computer performed the calculation 600,000 times, converging on an answer for the overall magnetization produced by the 127 bar magnets.

Takeaways by Macro Roundup® AI

  1. IBM researchers used a 127-qubit quantum processor to simulate 127 atom-scale bar magnets in a magnetic field under the Ising model, a problem too complex for a precise answer on the largest, fastest supercomputers.
  2. Each quantum calculation on IBM's processor took less than a thousandth of a second, and the computer repeated it 600,000 times to converge on an answer for the overall magnetization of the 127 bar magnets.
  3. Individual calculations on IBM's quantum processor were unreliable because fluctuations of quantum noise inevitably intrude and induce errors, but each was quick enough to be performed repeatedly.

Thursday, June 15, 2023

AI Summary. The authors estimate that $1 spent auditing US taxpayers above the 90th income percentile yields more than $12 in revenue, versus $5 for audits of below-median-income taxpayers. Audits of high earners cost more but raise enough additional revenue to offset those costs, and deterrence effects on future revenue are relatively consistent across the income distribution.

William Boning, Nathaniel Hendren, Ben Sprung-Keyser and Ellen Stuart Harvard University
Date Posted:

New research from @nhendren82 @bsprungkeyser finds that $1 spent auditing taxpayers above the 90% income thresholds yields $12 in revenue, including a “deterrence effect” which produces “at least three times more revenue than the initial audit.”

How does the return on tax audits vary by income?

Core argument: The authors estimate that $1 spent auditing US taxpayers above the 90th income percentile yields more than $12 in revenue, compared with $5 for audits of below-median income taxpayers.

An additional $1 spent auditing taxpayers above the 90th income percentile yields more than $12 in revenue, while audits of below-median income taxpayers yield $5. We begin by estimating the average initial return to all audits of US taxpayers filing in 2010-2014. On average, $1 in audit spending initially raises $2.17 in revenue. Audits of high-income taxpayers are more costly, but the additional revenue raised more than offsets the costs. Audits of the 99-99.9th percentile have a 3.2:1 initial return; audits of the top 0.1% return 6.3:1. Next, we use randomly selected audits to examine the impact of an initial audit on future revenue. This specific deterrence effect produces at least three times more revenue than the initial audit. Deterrence effects are relatively consistent across the income distribution. This results in the 12:1 return above the 90th percentile. 

Takeaways by Macro Roundup® AI

  1. The authors estimate that $1 spent auditing US taxpayers above the 90th income percentile yields more than $12 in revenue, compared with $5 for audits of below-median income taxpayers.
  2. Across all US taxpayers filing in 2010–2014, $1 in audit spending initially raises $2.17 in revenue, with initial returns of 3.2:1 for the 99–99.9th percentiles and 6.3:1 for the top 0.1%.
  3. Using randomly selected audits, the authors estimate that the specific deterrence effect on future revenue is at least three times the revenue from the initial audit and is relatively consistent across the income distribution.

AI Summary. Denmark abolished a centuries-old religious holiday, requiring people to work that day, partly to help pay for extra defence spending, a move 70% of Danes opposed in one poll. The Stockholm International Peace Research Institute calculates global defence spending rose 4% to a record $2.24tn and is set to keep rising even as higher interest rates raise governments' borrowing costs.

John Paul Rathbone Financial Times
Date Posted:

The Danish government scrapped a public holiday to help offset increased defense spending despite 70% of Danes opposing the change.  Globally defense spending rose 4% in 2022. @FT

How do governments pay for rising defense spending?

Core argument: The Stockholm International Peace Research Institute calculates global defence spending rose 4% to a record $2.24tn last year, and it is set to keep rising this year even as higher rates raise governments' borrowing costs.

Next April, for the first time in more than three centuries, Danes will have to work on the holiday of Great Prayer after the government scrapped the religious day off partly to pay for extra defence spending. The decision, approved in March, was deeply unpopular: in one poll, 70 percent of Danes opposed it. The Stockholm International Peace Research Institute calculates that global defence spending rose by 4 percent to reach a record $2.24tn last year. This year, it is set to continue rising, even as higher rates increase governments’ borrowing costs. During the long decades of the cold war, the west financed its defence spending through higher taxation. 

Takeaways by Macro Roundup® AI

  1. The Stockholm International Peace Research Institute calculates global defence spending rose 4% to a record $2.24tn last year, and it is set to keep rising this year even as higher rates raise governments' borrowing costs.
  2. Denmark's government scrapped the religious holiday of Great Prayer, a decision approved in March partly to pay for extra defence spending, requiring Danes to work that day next April for the first time in more than three centuries.
  3. Denmark's decision to abolish the Great Prayer holiday was deeply unpopular, with 70 percent of Danes opposed in one poll, while during the cold war the west financed its defence spending through higher taxation.

AI Summary. Seven of the largest US-listed companies — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta — have gained between 40% and 180%, while the other 493 index members are flat in aggregate. Five of those seven account for nearly a quarter of the index's market value.

Katie Martin and Nicholas Megaw Financial Times
Date Posted:

The S&P 500 performance is the most concentrated it has been since the 1970s with 5 of 7 tech stocks representing almost 25% of the total market capitalization. At $2.9T, Apple is worth more than the UK’s top 100 listed companies combined. @FT

Is the stock market rally driven by just seven companies?

Core argument: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta have gained between 40% and 180% this year, while the index's other 493 companies are in aggregate flat.

Seven of the biggest constituents — Apple, Microsoft, Google owner Alphabet, Amazon, Nvidia, Tesla and Meta — have ripped higher, gaining between 40 percent and 180 percent this year. The remaining 493 companies are, in aggregate, flat. Big tech companies dominate the index to an unprecedented degree. Just five of those seven stocks represent nearly a quarter of the market capitalisation of the entire index. At $2.9tn, Apple alone is worth more than the UK’s top 100 listed companies put together. 

Takeaways by Macro Roundup® AI

  1. Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta have gained between 40% and 180% this year, while the index's other 493 companies are in aggregate flat.
  2. Five of those seven stocks account for nearly a quarter of the entire index's market capitalisation, with big tech companies dominating the index to an unprecedented degree.
  3. Apple alone, at $2.9tn, is worth more than the UK's top 100 listed companies put together.

AI Summary. West Coast dockworkers and port employers reached a tentative six-year labor agreement after more than a year of contentious negotiations that disrupted trade flows from California to Washington state. The deal covers more than 22,000 dockworkers represented by the International Longshore and Warehouse Union across 29 ports.

Paul Berger Wall Street Journal
Date Posted:

West Coast dockworkers reached a tentative deal with port employers yesterday. Labor activity had disrupted West Coast port operations in recent weeks. @WSJ

West Coast dockworkers reached a tentative deal with port employers yesterday. Labor activity had disrupted West Coast port...

Have West Coast ports and dockworkers reached a labor agreement?

Core argument: The International Longshore and Warehouse Union, representing more than 22,000 dockworkers, and the Pacific Maritime Association, representing employers at 29 ports, reached a tentative six-year contract agreement.

West Coast dockworkers reached a tentative labor deal with port employers Wednesday following more than a year of contentious negotiations that have disrupted trade flows from California to Washington state. The International Longshore and Warehouse Union, which represents more than 22,000 dockworkers, and the Pacific Maritime Association, representing employers at 29 ports, said the agreement would run for six years.

Takeaways by Macro Roundup® AI

  1. The International Longshore and Warehouse Union, representing more than 22,000 dockworkers, and the Pacific Maritime Association, representing employers at 29 ports, reached a tentative six-year contract agreement.
  2. The tentative deal follows more than a year of contentious negotiations that disrupted trade flows at West Coast ports from California to Washington state.

Related Articles:

  • West Coast Dockworkers Making $200K Demand Higher Pay — Full-time registered West Coast longshore workers earned an average of $197,514 excluding benefits, with clerks averaging $220,042 and foremen and walking bosses $306,291, according to the Pacific Maritime Association. The association also paid $100,534 per union registrant in benefits, including full insurance, a 401(k), and a pension capped at $95,460 a year.

AI Summary. India hosts roughly 1,600 global capability centers—offshore offices run by multinational firms—accounting for more than 40% of the world total and generating about $46bn in revenue in the fiscal year ended March, according to the Indian technology industry trade body Nasscom. Analysts attribute India's services exports rising 27% to about $323bn to these centers.

Subhadip Sircar and Ruchi Bhatia Bloomberg
Date Posted:

India has 1,600 global capability centers which provide back office services, 40% of the number globally, helping to drive India’s service exports to $323B in the FY ending in March. @markets

Are offshore corporate offices driving India's services export growth?

Core argument: India hosts roughly 1,600 global capability centers, more than 40% of the worldwide total, according to Nasscom, a trade body for the country's technology industry.

India has roughly 1,600 global capability centers (GCC), more than 40% of the number worldwide, according to Nasscom, a trade body for the country’s technology industry. The offices generated about $46 billion in combined revenue in the fiscal year ended March, more than the output of Nepal. Services exports rose to a record for December, leading economists to speculate why. The trend continued. They climbed to about $323 billion in the fiscal year ended March, up 27% from the year before. Analysts reached the same conclusion: It was the GCCs. 

Takeaways by Macro Roundup® AI

  1. India hosts roughly 1,600 global capability centers, more than 40% of the worldwide total, according to Nasscom, a trade body for the country's technology industry.
  2. India's global capability centers generated about $46 billion in combined revenue in the fiscal year ended March, exceeding the output of Nepal.
  3. India's services exports climbed to about $323 billion in the fiscal year ended March, up 27% from the year before, a rise analysts attribute to the global capability centers.

AI Summary. China's unemployment rate among 16- to 24-year-olds reached a record 20.8%, up from 20.4% the prior month, according to the National Bureau of Statistics. That is 4x the overall surveyed jobless rate of 5.2%.

Bloomberg Staff Bloomberg
Date Posted:

China’s youth unemployment hit a new record in May, rising to 20.8% from 20.4% in April for workers aged 16-24. The overall jobless rate was unchanged at 5.2% @markets

Is China's youth unemployment rate rising to record highs?

Core argument: China's unemployment rate among those aged 16–24 reached a record 20.8% in May, up from 20.4% in April, according to data published by the National Bureau of Statistics.

China’s youth jobless rate edged up to a fresh record in May as the economy’s recovery slowed, adding to challenges for policymakers as new graduates join the workforce. The unemployment rate among those aged between 16 and 24 reached 20.8%, up from 20.4% in April, according to data published by the National Bureau of Statistics on Thursday. That’s four times the overall surveyed jobless rate, which was unchanged at 5.2%.

Takeaways by Macro Roundup® AI

  1. China's unemployment rate among those aged 16–24 reached a record 20.8% in May, up from 20.4% in April, according to data published by the National Bureau of Statistics.
  2. China's youth jobless rate of 20.8% is four times the overall surveyed unemployment rate, which held unchanged at 5.2%.
  3. China's record youth unemployment came as the economy's recovery slowed, adding to challenges for policymakers as new graduates join the workforce.