Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “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
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, July 27, 2023

AI Summary. Because high earners save a larger share of their income and consume less of it than workers and the middle class, rising income inequality shifts income toward savers and reduces overall consumption. Unless offset by higher investment, the argument holds that maintaining total demand requires either policies encouraging household borrowing or government borrowing to replace lost consumption.

Michael Pettis Financial Times
Date Posted:

.@michaelxpettis argues that high US income inequality leads to structurally low US demand, as the wealthy are prone to save. As a result, the US is forced to choose between more debt and more unemployment.

.@michaelxpettis argues that high US income inequality leads to structurally low US demand, as the wealthy are prone to...

Does rising income inequality push up household and government borrowing?

Core argument: Because the wealthy save a much larger share of their income than workers and the middle class, rising income inequality reduces overall consumption and forces up savings by transferring income from high consumers to high savers.

The wealthy save a much larger part of their income than do workers or the middle class, and use a much smaller part for consumption, rising income inequality automatically reduces overall consumption and forces up savings by effectively transferring income from high consumers to high savers. If lower consumption is not balanced by higher investment, total demand must decline. To prevent this from happening, Washington typically does one of two things. First, the Federal Reserve can implement policies that encourage household borrowing to fund additional consumption. In that case, the reduction in the income share of ordinary Americans is balanced by an increase in their borrowing, so the same level of consumption can be maintained. Second, Washington can itself borrow and use the proceeds to replace the demand lost by the reduction in household consumption.

Takeaways by Macro Roundup® AI

  1. Because the wealthy save a much larger share of their income than workers and the middle class, rising income inequality reduces overall consumption and forces up savings by transferring income from high consumers to high savers.
  2. If the lower consumption caused by rising inequality is not balanced by higher investment, total demand must decline.
  3. Washington typically responds in one of two ways: the Federal Reserve encourages household borrowing to sustain consumption, or the government borrows to replace the demand lost from reduced household consumption.

Related Articles:

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

AI Summary. After adjusting for population aging and gender composition, the U.S. employment-to-population ratio has returned to its pre-pandemic trend and the age-adjusted labor force participation rate matches rates last seen in 2001. The authors argue that on this basis the labor market is historically strong, with elevated and even record participation and employment measures.

Ernie Tedeschi Council of Economic Advisors
Date Posted:

After adjusting for population aging, the employment-to-population ratio is within .1% of its Feb 2020 level and labor force participation ratio is at its highest level since 2001. @ernietedeschi

Is the labor market historically strong after adjusting for population aging?

Core argument: The age- and gender-adjusted employment-to-population ratio has returned to its prepandemic trend.

The employment-to-population ratio (EPOP) has returned to its age (and gender)-adjusted prepandemic trend. The labor force participation rate (LFPR) age-adjusted in June 2023 was consistent with rates last seen in 2001. When looking over extended periods of time, labor market indicators should be age-adjusted to distinguish between secular demographic trends versus other cyclical economic effects. Second, after accounting for demographic shifts in labor supply and demand, the current U.S. labor market is unusually strong from a historical perspective, posting elevated and even record measures of participation and employment.

Takeaways by Macro Roundup® AI

  1. The age- and gender-adjusted employment-to-population ratio has returned to its prepandemic trend.
  2. The age-adjusted labor force participation rate in June 2023 was consistent with rates last seen in 2001, with participation and employment measures elevated and in some cases at record levels.
  3. Labor market indicators compared over extended periods should be age-adjusted to separate secular demographic trends from cyclical economic effects.

Related Articles:

  • Unions’ Inflation Warning? — The share of people aged 16 and over working or looking for work fell when the pandemic hit and has only partly recovered, with population aging accounting for most of the remaining shortfall. That implies economic activity must run at a lower level to avoid persistent wage and price inflation.

AI Summary. Household debt and housing booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak. Korea's debt service ratio has risen substantially to an exceptionally high level, a pattern historically associated with slower growth.

Amir Sufi National Bureau of Economic Research
Date Posted:

The rapid rise of China and South Korea’s household debt to GDP ratio has strong parallels to EU and North American real-estate boom-bust cycles in 2007. @profsufi

Do housing and household debt booms point to weaker consumer spending ahead?

Core argument: The housing and household debt booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak.

The Chinese and Korean booms are comparable with the booms that occurred in the United States and United Kingdom from 2001 to 2007. [Going forward] in both countries, consumer spending could be quite weak. This is an especially pronounced problem in Korea, where the debt service ratio has risen substantially and is now at an exceptionally high level. A rise in the debt service ratio during a household debt boom portends slower growth in the historical data, and Korea appears likely to follow that historical pattern. The allocation of production to real estate and construction activities over the past decade in China is historically unprecedented. It is difficult to imagine that the rate of activity in the real estate sector is sustainable, and it is difficult to see what sectors can take up the production slack if there is a continued decline in real estate activity.

Takeaways by Macro Roundup® AI

  1. The housing and household debt booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak.
  2. Korea's debt service ratio has risen substantially to an exceptionally high level, and since rising debt service ratios during household debt booms portend slower growth in the historical data, Korea appears likely to follow that pattern.
  3. China's allocation of production to real estate and construction over the past decade is historically unprecedented, and it is difficult to see which sectors could absorb the production slack from a continued decline in real estate activity.

Related Articles:

AI Summary. A major physics journal is retracting a paper on how a chemical compound transforms when compressed between diamonds, co-led by a University of Rochester physicist who also claimed to have discovered a room-temperature superconductor. While the researcher defends the work, some scientists who reviewed reports on it say the data submitted were falsified.

Kenneth Chang New York Times
Date Posted:

Earlier work by Ranga Dias, the researcher who claimed a breakthrough on room-temperature superconductors, has been retracted due to willfully submitted false data.

Earlier work by Ranga Dias, the researcher who claimed a breakthrough on room-temperature superconductors, has been...

Does falsified data undermine a high-profile superconductivity research claim?

Core argument: A major physics journal is retracting a two-year-old paper co-authored by University of Rochester professor Ranga Dias that described the transformations of a chemical compound squeezed between two pieces of diamond.

A major physics journal is retracting a two-year-old scientific paper that described the transformations of a chemical compound as it was squeezed between two pieces of diamond. Such an esoteric finding — and retraction — would not typically garner much attention. But one of the leaders of this research is Ranga Dias, a professor at the University of Rochester in New York who made a much bigger scientific splash earlier this year, touting the discovery of a room-temperature superconductor. While Dr. Dias continues to defend the work, to some scientists, there is now clear evidence of misconduct. “There’s no plausible deniability left,” said N. Peter Armitage, a professor of physics and astronomy at Johns Hopkins University in Baltimore who is among the scientists who have seen the reports. “They submitted falsified data. There’s no ambiguity there at all.”

Takeaways by Macro Roundup® AI

  1. A major physics journal is retracting a two-year-old paper co-authored by University of Rochester professor Ranga Dias that described the transformations of a chemical compound squeezed between two pieces of diamond.
  2. Ranga Dias, who touted the discovery of a room-temperature superconductor, continues to defend the work, while some scientists who have seen the reports say there is clear evidence of misconduct.
  3. N. Peter Armitage, a physics and astronomy professor at Johns Hopkins University who has seen the reports, said, "They submitted falsified data. There's no ambiguity there at all.".

Related Articles:

  • The Scientific Breakthrough That Could Make Batteries Last Longer — Researchers at the University of Rochester report creating a superconductor that operates at 69 degrees Fahrenheit and 145,000 pounds per square inch of pressure, roughly 1/360th of the pressure at Earth's core. The authors say this is about 10 degrees warmer and about 1/1000th the pressure of their earlier material.
  • Room-Temperature Superconductor Discovery Meets with Resistance — A claim of superconductivity at everyday temperatures and comparatively low pressures in a lutetium-based material has met resistance within the high-pressure physics community, and the researcher behind it denies all allegations of wrongdoing. He states the paper underwent multiple rounds of peer review over the better part of a year, with raw data shared and published alongside the result.

AI Summary. A South Korean research team claims to have created a superconductor that works at room temperature and ambient pressure, reporting that electrical resistance in their LK-99 samples fell to near zero and that the material showed the magnetic levitation effect characteristic of superconductivity. The team says levitation was only partial, which they attribute to impurities in the material.

Bob Yirka Phys.org
Date Posted:

In a preprint a team in South Korea claims to have created a room-temperature/ambient-pressure superconducting material.

Has a room-temperature, ambient-pressure superconductor been created?

Core argument: A Korean team claims to have created LK-99, described as the first room-temperature, ambient-pressure superconductor, reporting that its measured sensitivity fell to near zero when electricity was applied.

In their papers, the team claims to have measured samples of LK-99 as electricity was applied and found its sensitivity fell to near zero. They also claim that in testing its magnetism, it exhibited the Meissner effect—another test of superconductivity. In such a test, a sample should levitate when placed on a magnet. The team has provided a video of the material partially levitating. They claim that the levitation was only partial because of impurities in their material.

Takeaways by Macro Roundup® AI

  1. A Korean team claims to have created LK-99, described as the first room-temperature, ambient-pressure superconductor, reporting that its measured sensitivity fell to near zero when electricity was applied.
  2. The Korean team claims LK-99 exhibited the Meissner effect in magnetism testing, a test of superconductivity in which a sample should levitate when placed on a magnet.
  3. The Korean team provided a video showing LK-99 partially levitating and attributes the partial levitation to impurities in the material.

Friday, July 28, 2023

AI Summary. Research classifying incomes by percentile finds that among top students, 19% of those who attended elite schools reach the richest 1% of the income distribution, versus 12% of those who did not. The authors compare these upper-tail outcomes to lottery tickets: elite schools offer many, most worth nothing, a few a jackpot.

Josh Zumbrun Wall Street Journal
Date Posted:
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.@JoshZumbrun, evaluating the differences between @OppInsights recent research on elite schools and Krueger’s earlier findings, shows that elite schools don’t have that much impact outside of lottery-like tail outcomes.

Do elite schools raise top students' odds of reaching the top 1%?

Core argument: Among top students, 19% of those attending elite schools reach the richest 1% of the income distribution, versus 12% of comparable students who did not attend, according to Chetty and his co-authors.

Dale and Krueger had classified everyone who earned more than $200,000 into the same category, making no distinction between an affluent doctor earning $250,000 and Jeff Bezos. Chetty and his authors use a slightly different approach. They classify everyone’s income into percentiles—80th, 81st, etc. Among top students, 19% who attend the top schools make it to the richest 1% of the income distribution, versus 12% who didn’t attend. Chetty’s co-author Deming compares those upper-tail outcomes to winning the lottery: Elite schools have lots of lottery tickets lying on the ground, whereas most other colleges only have a few. For most people, the lottery ticket will be worth nothing. For a few, it is a jackpot.

Takeaways by Macro Roundup® AI

  1. Among top students, 19% of those attending elite schools reach the richest 1% of the income distribution, versus 12% of comparable students who did not attend, according to Chetty and his co-authors.
  2. Dale and Krueger grouped all earners above $200,000 into a single category, making no distinction between a doctor earning $250,000 and Jeff Bezos, while Chetty and his co-authors classify income by percentile.
  3. Chetty's co-author Deming likens elite-school upper-tail outcomes to a lottery in which top schools have many tickets lying on the ground and most other colleges only a few, with most tickets worth nothing and a few paying a jackpot.

Related Articles:

AI Summary. Medicare pays hospital-owned facilities 2-3x what it pays independent physician offices for the same service, creating an incentive for hospital chains to acquire outpatient practices; the share of hospital-owned physician practices rose from 14% to 31% over six years. Equalizing payments is estimated to save $346bn-$672bn over a decade.

Bobby Jindal and Charlie Katebi Wall Street Journal
Date Posted:
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.@BobbyJindal argues that simple reforms in Medicare billing could save patients and taxpayers somewhere between $346B and $672B over the next 10 years.

.@BobbyJindal argues that simple reforms in Medicare billing could save patients and taxpayers somewhere between $346B and...

How much would paying the same rate regardless of ownership save?

Core argument: Medicare pays hospital-owned facilities two to three times as much as independent physician offices for the same service, according to the Alliance for Site Neutral Payment Reform, creating an incentive for large hospital chains to acquire outpatient practices.

Cur­rently, Medicare pays hos­pi­tal-owned fa­cil­i­ties two to three times as much as in­de­pen­dent physi­cian of­fices for the same ser­vice, ac­cord­ing to the Al­liance for Site Neu­tral Pay­ment Re­form. This cre­ates an enor­mous in­cen­tive for large hos­pi­tal chains to ac­quire out­pa­tient prac­tices. A re­port by the Physi­cian Ad­vo­cacy In­sti­tute found that the share of hos­pi­tal-owned physi­cian prac­tices more than dou­bled, from 14% to 31%, be­tween 2012 and 2018. By 2020 more than half of physi­cians worked di­rectly for a hos­pi­tal or at a physi­cian prac­tice owned by a hos­pi­tal, ac­cord­ing to the Amer­i­can Med­ical As­so­ci­a­tion.  Re­mov­ing these per­verse in­cen­tives could save pa­tients and tax­pay­ers be­tween $346 bil­lion and $672 bil­lion over the next decade.

Takeaways by Macro Roundup® AI

  1. Medicare pays hospital-owned facilities two to three times as much as independent physician offices for the same service, according to the Alliance for Site Neutral Payment Reform, creating an incentive for large hospital chains to acquire outpatient practices.
  2. The share of hospital-owned physician practices more than doubled, from 14% to 31%, between 2012 and 2018, according to a Physician Advocacy Institute report, and by 2020 more than half of physicians worked for a hospital or hospital-owned practice, according to the American Medical Association.
  3. Removing Medicare's site-based payment differences could save patients and taxpayers between $346 billion and $672 billion over the next decade.

AI Summary. Core personal consumption inflation came in very low, the second-lowest pace of the inflationary period, at a 2.3% annual rate over the past three months, and substituting new rents for all rents shows a more pronounced slowdown. Inflation is slowing with reason to expect further slowing as shelter costs come down, though some of the good news may prove transitory.

Jason Furman @jasonfurman
Date Posted:

.@jasonfurman notes the Fed’s preferred inflation measure, Core-PCE, came in very low, running at 4.1% y/y. He says that this “Confirms the good June CPI news (but no real new info).”

Is core inflation slowing as shelter costs come down?

Core argument: Core PCE inflation came in very low, a touch above expectations but the second-lowest pace of the inflationary period, according to Jason Furman.

Core PCE inflation came in very low (albeit a touch above expectations), the second lowest pace of the inflationary period. If you swap in new rents for all rents you see a more pronounced slowdown (although not nearly as dramatic as the same adjustment for the CPI). This is a 2.3% annual rate over the last 3 months. In sum, this tells the same story as the CPI: inflation is slowing, there is reason to believe there will be further slowing as shelter comes down but also some worries about some of the good news being transitory. But overall the June inflation data was good news.

Takeaways by Macro Roundup® AI

  1. Core PCE inflation came in very low, a touch above expectations but the second-lowest pace of the inflationary period, according to Jason Furman.
  2. Furman notes that substituting new rents for all rents shows a more pronounced slowdown, though not nearly as dramatic as the same adjustment for the CPI, amounting to a 2.3% annual rate over the last three months.
  3. Furman reads the June inflation data as good news telling the same story as the CPI, with reason to expect further slowing as shelter comes down but some worry that part of the good news is transitory.

Related Articles:

AI Summary. China imports nearly three-quarters of the oil it consumes and holds reserves sufficient for about three months at current consumption, so a sustained buildup of those reserves would be among the clearest signals it is preparing for war. China is also the world's largest agricultural importer, with wheat reserves an official described as covering 18 months of demand.

Economist Staff The Economist
Date Posted:

.@TheEconomist argues that increasing stockpiles of imported food and energy could signal China’s intent to invade Taiwan.

Do stockpiles of oil and grain signal China's war preparations?

Core argument: China imports nearly three-quarters of the oil it consumes and holds reserves sufficient for about three months at today's consumption rate, so a sustained build-up of those reserves would be one of the best indicators that it is preparing for war.

China imports nearly three-quarters of the oil it uses. The substance accounts for only 20% of the country’s energy use, but it would be crucial to any war effort. If China were to start increasing its reserves—it currently has enough to last three months at today’s consumption rate—that would be one of the best indicators that it is preparing for war. China imports more agricultural produce than any other country. Obsessed with food security, it already has enormous stockpiles. In 2021 an official said its wheat reserves could meet demand for 18 months. Over the past decade, China has greatly increased its purchases of wheat, corn, rice, and soybeans.

Takeaways by Macro Roundup® AI

  1. China imports nearly three-quarters of the oil it consumes and holds reserves sufficient for about three months at today's consumption rate, so a sustained build-up of those reserves would be one of the best indicators that it is preparing for war.
  2. Oil accounts for only 20% of China's energy use but would be crucial to any war effort.
  3. China imports more agricultural produce than any other country and has greatly increased purchases of wheat, corn, rice, and soybeans over the past decade, with an official stating in 2021 that wheat reserves could meet demand for 18 months.

AI Summary. Analysts argue the historical record offers limited guidance because this has not been a typical business cycle: pandemic shutdowns abruptly halted growth and widespread government stimulus fueled a rapid rebound, producing shortages, bottlenecks and unusually strong demand in unexpected parts of the economy. That disruption contributed to inflation, and the slow return to normal is helping it fade.

Jeanna Smialek New York Times
Date Posted:

On Wednesday, Jerome Powell said Fed staff economists are no longer predicting a recession in 2023. @jeannasmialek notes such optimism has been wrong in the past: 1994-95 was the only true soft landing.

Does history offer useful guidance for this unusual business cycle?

Core argument: Michael Feroli, chief U.S. economist at J.P. Morgan, said the historical record may not be particularly instructive in 2023, because this has not been a typical business cycle of heady growth, recession, and gradual recovery.

The historical record may not be particularly instructive in 2023, said Michael Feroli, the chief U.S. economist at J.P. Morgan. This has not been a typical business cycle, in which the economy grew headily, fell into recession, and then clawed its way back. Instead, growth was abruptly halted by coronavirus shutdowns and then rocketed back with the help of widespread government stimulus, leading to shortages, bottlenecks and unusually strong demand in unexpected parts of the economy. All of the weirdness contributed to inflation, and the slow return to normal is now helping it fade.

Takeaways by Macro Roundup® AI

  1. Michael Feroli, chief U.S. economist at J.P. Morgan, said the historical record may not be particularly instructive in 2023, because this has not been a typical business cycle of heady growth, recession, and gradual recovery.
  2. Growth was abruptly halted by coronavirus shutdowns and then rocketed back with the help of widespread government stimulus, leading to shortages, bottlenecks, and unusually strong demand in unexpected parts of the economy.
  3. The economy's distortions contributed to inflation, and the slow return to normal is now helping inflation fade.