Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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
  • “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
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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.

Friday, June 16, 2023

AI Summary. Investors are paying a sizable premium for artificial intelligence exposure: the 32 stocks in a generative AI exchange-traded fund have returned 77% this year, with the 22 holdings projected to have positive earnings trading at an average price-to-earnings ratio of 31x and the other 10 at effectively infinite ratios.

Michael Cembalest J.P. Morgan
Date Posted:

Michael Cembalest @jpmorgan notes “the AI hype machine is in full swing right now.” Thirty-two stocks in the $CHAT Generative AI ETF have returned 77% this year with a mean P/E of 31x. 

How large a premium are investors paying for AI exposure?

Core argument: The 32 stocks in the $CHAT Generative AI ETF have returned 77% this year, which the author cites as evidence that investors are paying a sizable premium for AI exposure.

Investors are paying a sizable premium for AI exposure. One example: the 32 stocks in the $CHAT Generative AI ETF have returned 77% this year. The 22 $CHAT ETF stocks that have positive earnings projected for the next 12 months trade at an average P/E of 31x. The other 10 $CHAT ETF stocks have infinite P/Es, either due to negative earnings or trivially positive earnings that create nonsense P/E ratios over 100x. The large language model revolution is going to have to live up to the high end of expectations to justify this. I have seen estimates that AI will eventually add ~10% to the fair value of the S&P 500 due to some combination of augmented employee productivity and staff reductions, but I’m not sure how one would measure that. 

Takeaways by Macro Roundup® AI

  1. The 32 stocks in the $CHAT Generative AI ETF have returned 77% this year, which the author cites as evidence that investors are paying a sizable premium for AI exposure.
  2. Of the $CHAT ETF's 32 holdings, the 22 with positive projected earnings over the next 12 months trade at an average P/E of 31x, while the other 10 have negative or trivially positive earnings producing infinite or over-100x P/Es.
  3. The author argues the large language model revolution must meet the high end of expectations to justify these valuations, and notes estimates that AI will eventually add roughly 10% to the S&P 500's fair value through productivity gains and staff reductions.

AI Summary. A national study matched over 6,500,000 student-level observations, including more than 1,853,000 charter school students, against comparable students in the traditional public schools they would otherwise have attended, drawing on data covering 81% of tested US public school students. Learning outcomes are reported in days of learning relative to the average traditional public school student's year of progress.

Margaret Raymond and Meghan Mazzola Stanford University
Date Posted:

A new study of national charter schools by Margaret Raymond and Meghan Mazzola shows that, in a sample matched for student quality, charter school students experience the equivalent of 25 days more learning relative to non-charter school students.

Do charter school students learn more than comparable public school students?

Core argument: The National Charter School Study III assembled over 6,500,000 student-level observations, drawn from more than 1,853,000 charter students and a matched comparison group, to compare charter outcomes with the traditional public schools those students would otherwise have attended.

In this report, we look at students in charter schools compared to the experience they would have had in the traditional public schools (TPS) they would otherwise have attended.  Using both student and school level data, our resulting data set included 81% of tested public school students in the United States, making it one of the largest data sets of student-level observations created to date. We used this information to create a matched student data set with over 6,500,000 student-level observations from over 1,853,000 charter students and a matched comparison group. We present our findings about learning outcomes measured in days of learning. The measure uses a benchmark of learning: the average student in TPS will obtain a year’s learning in a year’s time. If a student makes more (or less) progress [during a 180 day school year,] we present that as additional (or fewer) days of learning. 

Takeaways by Macro Roundup® AI

  1. The National Charter School Study III assembled over 6,500,000 student-level observations, drawn from more than 1,853,000 charter students and a matched comparison group, to compare charter outcomes with the traditional public schools those students would otherwise have attended.
  2. The study's data set covered 81% of tested public school students in the United States, which the authors describe as one of the largest student-level observation data sets created to date.
  3. The study reports learning outcomes in days of learning, benchmarking the average traditional public school student at a year's learning in a year's time and expressing charter results as additional or fewer days within a 180-day school year.

AI Summary. Most of the rich world's decline in inflation had already occurred before the fastest period of growth in world trade and global supply chains ended, and the gap between goods and services inflation stayed constant despite goods being far more traded. Items facing low-cost Chinese competition, such as clothing and footwear, are roughly 5% of the eurozone consumer price basket.

Alan Beattie Financial Times
Date Posted:

.@alanbeattie argues geopolitical fracturing won’t be inflationary as the deflationary pressure associated with “hyperglobalisation” was overstated.

Did globalization drive the rich world's decline in inflation?

Core argument: In the eurozone, apparel and footwear account for about 5% of the consumer price basket, compared with 15% for housing and utilities and 10% for restaurants and hotels.

The “hyperglobalisation” period when world trade and global value networks grew most rapidly ran from the late 1990s until shortly before the global financial crisis began in 2008. By that point the fall in inflation in the rich world had largely already happened. Given that goods are much more highly traded than services, you’d have expected rising inflation differentials between the two. In fact, the gap remained constant until after the financial crisis, when services inflation actually fell while goods inflation rose. As a rough sense check of the impact of cheaper imports, those goods subject to low-cost Chinese competition like clothing, shoes and electronics make up quite small parts of the consumer price basket. In the eurozone, apparel and footwear are about 5% of the total, compared with 15% for housing and utilities and 10% for restaurants and hotels.

Takeaways by Macro Roundup® AI

  1. In the eurozone, apparel and footwear account for about 5% of the consumer price basket, compared with 15% for housing and utilities and 10% for restaurants and hotels.
  2. The "hyperglobalisation" era of fastest growth in world trade and global value networks ran from the late 1990s until shortly before the 2008 global financial crisis, by which point most of the rich world's fall in inflation had already occurred.
  3. Despite goods being far more highly traded than services, the goods-services inflation gap stayed constant until after the financial crisis, when services inflation fell while goods inflation rose.

AI Summary. About 40–45% of China's manufacturing output comes from exports and 55–60% from domestic demand, making the sector mainly domestically oriented while still relying substantially on external demand. Estimates extending the data beyond the available database suggest the export share has picked up, reflecting a pandemic-era export boom.

Andrew Batson The Tangled Woof
Date Posted:

.@andrewbatson notes China’s growing dependence on external demand as measure by manufacturing value-added output.  China accounts for 31% of global of manufacturing value-added.

How much of China's manufacturing output depends on exports?

Core argument: About 40–45% of China's manufacturing output has come from exports and 55–60% from domestic demand, a split established in 2009 by China's property-and-infrastructure stimulus responding to the 2008 global financial crisis.

In recent years, about 40-45% of China’s manufacturing output has come from exports, while 55-60% has come from domestic demand. This pattern was established in 2009 by China’s massive property-and-infrastructure stimulus in response to the 2008 global financial crisis. Since then, the level of investment activity in the economy has stayed very elevated. So, we can say that China’s manufacturing sector is indeed mainly oriented to domestic demand, but it’s definitely true that the contribution from exports is quite large. A 55-45 split in an economy of China’s size is a pretty significant reliance on external demand. And that reliance has increased more recently. The current edition of the OECD TiVA database ends in 2018; extending the estimates to 2022 shows that the export contribution has probably picked up quite a bit due to the pandemic export boom.  

Takeaways by Macro Roundup® AI

  1. About 40–45% of China's manufacturing output has come from exports and 55–60% from domestic demand, a split established in 2009 by China's property-and-infrastructure stimulus responding to the 2008 global financial crisis.
  2. A 55-45 domestic-export split in an economy of China's size represents significant reliance on external demand, even though China's manufacturing sector is mainly oriented to domestic demand.
  3. The OECD Trade in Value Added database ends in 2018, and extending the estimates to 2022 suggests the export contribution has probably picked up considerably because of the pandemic export boom.

AI Summary. The number of countries with fertility rates below the 2.1 replacement level rose from 98 in 2010 to 124 in 2021, more than half of those with available data, and all 15 of the world's largest economies are below replacement. Fertility is now falling among less-educated women too.

Economist Staff The Economist
Date Posted:

Fertility is declining globally.  In all of the world’s 15 largest economies, fertility is under the replacement rate. @TheEconomist

Are fertility rates falling below replacement across most of the world?

Core argument: The number of nations and territories with fertility rates below the 2.1 replacement rate rose from 98 in 2010 to 124 in 2021, more than half of those with available data, according to the United Nations.

In 2010, there were 98 nations and territories with fertility rates below 2.1 (known as the replacement rate) according to the United Nations. In 2021, that number had risen to 124, or more than half the countries for which data were available. The world’s 15 largest economies all have fertility rates below the replacement rate. Educated women have for decades tended to have fewer children. But fertility among the less educated is now falling. On a global level the link between national incomes and fertility rates has also weakened. India’s fertility rate, for example, fell below 2.1 in 2020, despite a gross domestic product of less than $3,000 per person.

Takeaways by Macro Roundup® AI

  1. The number of nations and territories with fertility rates below the 2.1 replacement rate rose from 98 in 2010 to 124 in 2021, more than half of those with available data, according to the United Nations.
  2. All 15 of the world's largest economies have fertility rates below the replacement rate, and fertility is now falling among less educated women as well as the educated women who have for decades tended to have fewer children.
  3. India's fertility rate fell below 2.1 in 2020 despite a gross domestic product of less than $3,000 per person, as the global link between national incomes and fertility rates has weakened.