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
  • “…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 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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, October 11, 2023

AI Summary. Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.

Leila Bengali, Evgeniya Duzhak, and Cindy Zhao Federal Reserve Bank of San Francisco
Date Posted:

Prime-age male workforce nonparticipation has risen across generations, from 5.8% in 1976 to 11.4% last year. There is evidence of generation convergence around age 40 likely driven by younger generations’ higher education attainment. @sffed

Why has men's labor force nonparticipation risen across generations?

Core argument: Nonparticipation rates among prime-age men have risen with each successive generation, leaving millennials with higher nonparticipation than earlier cohorts.

Nonparticipation rates have increased with each generation of prime-age men. Millennials experience a notably different nonparticipation rate trajectory over their lifetime compared with previous generations, with rates starting at a higher level and declining more steeply until their mid-30s. This temporarily higher level of nonparticipation is driven by school enrollment. Even though nonparticipation rates for millennials are still higher than in previous generations, given the increasing educational attainment for younger generations and the trends we observe by education groups, the pace of the sustained rise in male nonparticipation rates may slow in the future, which could benefit economic growth.

Takeaways by Macro Roundup® AI

  1. Nonparticipation rates among prime-age men have risen with each successive generation, leaving millennials with higher nonparticipation than earlier cohorts.
  2. Millennial men's nonparticipation follows a different lifetime path, starting at a higher level and declining more steeply until their mid-30s, a temporary elevation driven by school enrollment.
  3. Given rising educational attainment among younger generations and observed trends by education group, the sustained rise in male nonparticipation rates may slow, which could benefit economic growth.

Related Articles:

AI Summary. High interest rates will likely crowd out private investment and weaken long-term growth prospects. Because Social Security, health care, other safety-net programs, defense, and interest payments make up most federal spending, leaving only a small and already squeezed slice of nondefense discretionary spending, deficit reduction requires either cutting popular benefits or raising taxes.

Paul Krugman Krugman Wonks Out
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.@paulkrugman argues “high interest rates will almost surely crowd out private investment, hurting our long-term prospects,” but doesn’t see paths for either federal spending reductions or “a tax increase that would make a large dent in the deficit.”

Why is deficit reduction so difficult without cutting benefits or raising taxes?

Core argument: Krugman argues high interest rates will almost surely crowd out private investment, harming long-term U.S. prospects, with particular concern about the effects of high rates on renewable energy investment.

Even if there’s no immediate crisis, high-interest rates will almost surely crowd out private investment, hurting our long-term prospects. I’m especially concerned about the effects of high rates on investments in renewable energy, which are of existential importance. The federal government is essentially an insurance company with an army. Look at spending in fiscal 2023: Social Security, health care and other safety net programs accounted for most government spending. Add military spending and interest payments, and what’s left — NDD, for “nondefense discretionary” spending — is a small slice of the total. Furthermore, NDD has been squeezed by past austerity. So there’s no possibility for major spending cuts unless we slash programs that are extremely popular. The point is that the economics of deficit reduction are straightforward. It can be accomplished either by reducing social benefits or by raising taxes. Given that America has weak social spending compared with other countries, taxes are the most plausible route. But I don’t see any plausible political path to a tax increase that would make a large dent in the deficit.

Takeaways by Macro Roundup® AI

  1. Krugman argues high interest rates will almost surely crowd out private investment, harming long-term U.S. prospects, with particular concern about the effects of high rates on renewable energy investment.
  2. Social Security, health care and other safety net programs accounted for most federal spending in fiscal 2023, leaving nondefense discretionary spending a small slice once military spending and interest payments are added.
  3. Krugman contends deficit reduction requires either cutting social benefits or raising taxes, and that weak U.S. social spending relative to other countries makes taxes the most plausible route, though he sees no plausible political path to a large tax increase.

Related Articles:

  • U.S. Deficit Explodes Even As Economy Grows — The Committee for a Responsible Federal Budget projects the federal deficit will roughly double to about $2tn for the fiscal year, driven by higher interest payments and lower tax receipts despite robust economic growth. After falling from close to $3tn to roughly $1tn in its largest-ever decline, the deficit turned upward rather than returning to pre-pandemic levels.
  • American Gothic — US tax increases since 1950 of 2% of GDP or more occurred when overall tax receipts were a much smaller share of GDP than today. Restoring the ratio of entitlement to non-defense discretionary spending to its earlier level of 2.2x would require tax increases larger than those historical precedents.
  • The Limits of Taxing the Rich — Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

AI Summary. The median existing-home sale price exceeds what a buyer spending 25% of gross household income with a 15% down payment and a 30-year fixed mortgage could afford, leaving affordability more strained than in 2004-07. With for-sale supply very low and most existing mortgages carrying below-market rates, the authors expect home prices to rise slowly.

Roger Ashworth Goldman Sachs
Date Posted:

A @GoldmanSachs analysis expects housing price growth to be positive in 2023 and 2024, as there is a low supply of existing homes that is expected to persist due to the mortgage lock-in effect. They don’t see conditions at all analogous to 2006-2010.

Will home prices keep rising slowly despite strained affordability?

Core argument: The median sale price of an existing U.S. home exceeds an "affordable" price — defined as spending 25% of gross household income on a mortgage payment with a 15% down payment and a 30-year fixed rate loan — leaving affordability for the incremental buyer more challenged than in 2004–07.

Regardless of current credit standards, affordability remains challenging for the incremental home buyer. Exhibit 13 stacks up the median sale price of an existing home vs. a theoretically ‘affordable’ home price. This affordable home is calculated by assuming a borrower spends 25% of gross household income on a mortgage payment, uses a 15% down payment, and borrows the remainder with a 30-year fixed rate mortgage. Now that interest rates have reversed course and are now far higher, affordability for the incremental home buyer is more challenged than during the 2004-07 period. But, the limited supply of homes for sale remains very low and most of the mortgage market has mortgage rates far below current levels (Exhibit 14). As a result, we continue to expect home prices to rise at a slow pace over the medium term.

Takeaways by Macro Roundup® AI

  1. The median sale price of an existing U.S. home exceeds an "affordable" price — defined as spending 25% of gross household income on a mortgage payment with a 15% down payment and a 30-year fixed rate loan — leaving affordability for the incremental buyer more challenged than in 2004–07.
  2. Interest rates have reversed course to far higher levels, worsening affordability for the incremental U.S. home buyer regardless of current credit standards.
  3. With the supply of homes for sale very low and most of the mortgage market carrying rates far below current levels, home prices are expected to rise at a slow pace over the medium term.

Related Articles:

  • U.S. Deficit Explodes Even As Economy Grows — The Committee for a Responsible Federal Budget projects the federal deficit will roughly double to about $2tn for the fiscal year, driven by higher interest payments and lower tax receipts despite robust economic growth. After falling from close to $3tn to roughly $1tn in its largest-ever decline, the deficit turned upward rather than returning to pre-pandemic levels.
  • American Gothic — US tax increases since 1950 of 2% of GDP or more occurred when overall tax receipts were a much smaller share of GDP than today. Restoring the ratio of entitlement to non-defense discretionary spending to its earlier level of 2.2x would require tax increases larger than those historical precedents.
  • The Limits of Taxing the Rich — Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

AI Summary. Household saving rose in the United States and other high-income economies during the COVID-19 pandemic, but only in the U.S. and Canada did income-support measures push incomes well above pre-pandemic trajectories, while consumption fell everywhere. The divergence between U.S. and foreign saving behavior has no clear explanation.

Thomas Klitgaard and Matthew Higgins Federal Reserve Bank of New York
Date Posted:

The US household saving rate is now lower than its pre-pandemic level, unlike other advanced economies where savings rates remain elevated. @NYFedResearch

Why did only U.S. households spend down their pandemic savings?

Core argument: Household saving, measured as disposable income less consumer spending, surged in the United States and other high-income economies during the COVID-19 pandemic as consumption plummeted across all of them.

Household saving, measured as the difference between disposable income and consumer spending, soared in the United States and other high-income economies during the COVID-19 pandemic. In the U.S. and Canada, stepped-up social benefit payments and other income support measures pushed incomes well above pre-pandemic trajectories, while similar measures in the euro area, United Kingdom, and Japan kept incomes near their trend paths. Meanwhile, consumption plummeted in all these economies. We have no clear explanation for the divergence in U.S. and foreign saving behavior.

Takeaways by Macro Roundup® AI

  1. Household saving, measured as disposable income less consumer spending, surged in the United States and other high-income economies during the COVID-19 pandemic as consumption plummeted across all of them.
  2. In the United States and Canada, stepped-up social benefit payments and other income support pushed household incomes well above pre-pandemic trajectories, while comparable measures in the euro area, United Kingdom, and Japan kept incomes near trend.
  3. The authors report no clear explanation for the divergence between U.S. and foreign saving behavior, describing the spending down of pandemic savings as an "only-in-the-U.S." phenomenon.

Related Articles:

  • Accumulated Savings During the Pandemic: An International Comparison with Historical Perspective — The authors construct measures of excess household savings accumulated during the COVID-19 pandemic and find they have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies. Past recessions featured smaller increases in excess savings and greater persistence in the accumulated stock.
  • Excess No More? Dwindling Pandemic Savings — Research on U.S. household savings after the pandemic recession points to rapid accumulation and then drawdown of excess savings, with cumulative drawdowns exceeding $1.9tn and less than $190bn of excess savings remaining in the aggregate economy. The authors estimate that if recent drawdown rates persist, aggregate excess savings would be depleted.
  • The Trickling Up of Excess Savings — The authors argue that excess savings created by debt-financed government transfers do not disappear as households spend them down; instead they "trickle up" to wealthier households with lower propensities to spend, so the boost to aggregate demand fades only slowly. Their benchmark estimate puts this at roughly 5 years rather than a few quarters.

AI Summary. Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25tn in foreign-exchange reserves, making the Bank of Japan reluctant to raise short-term policy rates. A 3% increase would sharply raise government debt-servicing costs and strain Japanese banks, especially if long-term rates also rose.

Ken Rogoff Project Syndicate
Date Posted:

.@krogoff argues a Japanese hiking cycle, which is likely given the uptick in domestic inflation, could trigger a systemic Japanese financial crisis.

.@krogoff argues a Japanese hiking cycle, which is likely given the uptick in domestic inflation, could trigger a systemic...

Does high government debt keep a central bank from raising rates?

Core argument: Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25 trillion in foreign-exchange reserves, which helps explain the Bank of Japan's reluctance to raise short-term policy rates.

The BOJ’s reluctance to increase its short-term policy rates is understandable, given that Japan’s gross government debt currently stands at 260% of GDP, or 235% of GDP after netting out $1.25 trillion in foreign-exchange reserves. Should the Bank be compelled to raise its short-term policy interest rates by 3% – about half as much as the US Federal Reserve has – the government’s debt-servicing costs would explode. Moreover, a sharp interest-rate increase would put enormous pressure on the Japanese banking sector, particularly if long-term rates were to rise as well.

Takeaways by Macro Roundup® AI

  1. Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25 trillion in foreign-exchange reserves, which helps explain the Bank of Japan's reluctance to raise short-term policy rates.
  2. A 3% increase in the Bank of Japan's short-term policy rates, about half the Federal Reserve's increase, would cause the Japanese government's debt-servicing costs to explode.
  3. A sharp interest-rate increase would put enormous pressure on Japan's banking sector, particularly if long-term rates rose as well.

Related Articles:

  • BOJ Shock Has Wall Street Gaming Out the Global Spillovers — The Bank of Japan has signaled it will allow yields to trade toward 1% from roughly 0.5%, though its intervention in the market suggests that shift is not imminent. With Japanese domestic investors holding around $2.5tn of US stocks, bonds and credit, Wall Street is weighing volatile spillovers that could reinforce higher-for-longer interest rates.

AI Summary. Data centers have accounted for a relatively stable 1% of global electricity use, excluding cryptocurrency mining, but there is growing concern that the computing needed to build and run AI models could raise that share. Estimates suggest a single large language model query uses about 3 Wh of electricity, versus 0.3 Wh for a standard Google search.

Alex de Vries Cell
Date Posted:

AI servers could use 0.5% of the world’s electrical generation by 2027. For context, data centers currently use around 1% of global electrical generation.

Is AI set to raise data centers' share of global electricity use?

Core argument: Data center electricity consumption has held at roughly 1% of global electricity use, excluding cryptocurrency mining, amid apprehension that the computing required to develop and run AI models could raise that share.

In recent years, data center electricity consumption has accounted for a relatively stable 1% of global electricity use, excluding cryptocurrency mining. There is increasing apprehension that the computational resources necessary to develop and maintain AI models and applications could cause a surge in data centers' contribution to global electricity consumption. Alphabet’s chairman indicated in February 2023 that interacting with an LLM could “likely cost 10 times more than a standard keyword search." As a standard Google search reportedly uses 0.3 Wh of electricity, this suggests an electricity consumption of approximately 3 Wh per LLM interaction. This figure aligns with SemiAnalysis’ assessment of ChatGPT’s operating costs in early 2023, which estimated that ChatGPT [requires] 2.9 Wh per request.

Takeaways by Macro Roundup® AI

  1. Data center electricity consumption has held at roughly 1% of global electricity use, excluding cryptocurrency mining, amid apprehension that the computing required to develop and run AI models could raise that share.
  2. Alphabet's chairman said in February 2023 that an interaction with a large language model likely costs 10 times more than a standard keyword search, implying about 3 Wh per interaction given a reported 0.3 Wh per Google search.
  3. SemiAnalysis estimated that ChatGPT required 2.9 Wh per request in early 2023, consistent with the roughly 3 Wh per large language model interaction implied by Alphabet's comparison.

Related Articles:

  • Elon Musk’s Latest Mission: Rev Up the Electricity Industry — U.S. electricity demand has grown at an average of 1% a year over the past 20 years, but McKinsey projects it will double by 2050 and PG&E expects a 70% rise over the next 20 years. Deloitte estimates the largest U.S. electric companies will together spend as much as $1.8tn by 2030.
  • Gridlock: How a Lack of Power Lines Will Delay the Age of Renewables — A study led by Lawrence Berkeley National Laboratory found nearly 2,000GW of solar, wind and storage projects waiting in queues to connect to US long-distance transmission grids, more than the installed capacity of the entire US power plant fleet. The authors find only about a fifth of such requested projects are typically built.

AI Summary. Chinese researchers report that their JiuZhang 3 photonic quantum computer solved a highly complex mathematical problem in a millionth of a second, a task they say the fastest classical supercomputer would take over 20bn years to complete. The team also reports a one-million-fold increase in calculation speed over the prior prototype in the series.

Dannie Peng South China Morning Post
Date Posted:

Chinese scientists claim a breakthrough in quantum computing, completing calculations in less than a second that would have taken the world’s fastest conventional supercomputer 20 billion years. @SCMPNews

Chinese scientists claim a breakthrough in quantum computing, completing calculations in less than a second that would have...

Has a new photonic quantum computer vastly outpaced the fastest classical supercomputer?

Core argument: Chinese researchers say their JiuZhang 3 quantum prototype solved a complex mathematical problem within a millionth of a second, a task they say the US-built Frontier supercomputer would take over 20 billion years to complete.

Scientists in China say their latest quantum computer has solved an ultra-complicated mathematical problem within a millionth of a second-more than 20 billion years quicker than the world’s fastest supercomputer could achieve the same task. The JiuZhang 3 prototype also smashed the record set by its predecessor in the series, with a one million-fold increase in calculation speed, according to a paper published on Tuesday by the peer-reviewed journal Physical Review Letters. The fastest classical supercomputer Frontier-developed in the US and named the world’s most powerful in mid-2022 would take over 20 billion years to complete the same task, the researchers said.

Takeaways by Macro Roundup® AI

  1. Chinese researchers say their JiuZhang 3 quantum prototype solved a complex mathematical problem within a millionth of a second, a task they say the US-built Frontier supercomputer would take over 20 billion years to complete.
  2. JiuZhang 3 achieved a one million-fold increase in calculation speed over its predecessor in the series, according to a paper published in the peer-reviewed journal Physical Review Letters.
  3. Frontier, the classical supercomputer used as the comparison benchmark, was developed in the US and named the world's most powerful in mid-2022.

Related Articles:

  • Quantum Computing Advance Begins New Era, IBM Says — 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.
  • White House Unveils Ban On US Investment In Chinese Tech Sectors — The US will ban certain American investments in China's quantum computing, advanced chips, and artificial intelligence sectors, and require companies to notify the government of other investments in those areas, aiming to block the Chinese military's access to US technology and capital. Private equity and venture capital firms are most affected.

Thursday, October 12, 2023

AI Summary. Firms that begin supplying a foreign multinational for the first time show productivity gains of about 8% after three years, along with higher sales to other customers. The authors find similar performance gains when firms start supplying other "superstar firms," defined as the largest or most export-intensive firms.

Mary Amiti, Cédric Duprez, Jozef Konings and John Van Reenen National Bureau of Economic Research
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Evidence from Belgian btw 2002-14 suggests that large firms generate significant TFP spillovers to domestic suppliers. Firms that start a serious relationship with a superstar firm increase their TFP by 8% three or more years after the relationship is formed.

Does supplying a large firm raise a domestic supplier's productivity?

Core argument: Firms that begin supplying a foreign multinational for the first time see productivity rise about 8% after three years, alongside gains in other performance measures such as sales to firms other than the new multinational partner.

We use an event study approach, examining what happens when a firm begins supplying a foreign multinational for the first time. We uncover a sharp increase in productivity (which rises by about 8% after three years) and other performance measures (e.g. sales to firms other than the new multinational partner). The fraction of aggregate value accounted for by multinationals declined by about ten percentage points in Belgium in our sample period (2002 and 2014), which would suggest a strong headwind against productivity growth. However, in a novel result we are also able to document that when we look at similar events of starting a serious relationship with other “superstar firms” - defined as those who are in the top thousandth of the size distribution and/or export intensively - we find very similar performance impacts.

Takeaways by Macro Roundup® AI

  1. Firms that begin supplying a foreign multinational for the first time see productivity rise about 8% after three years, alongside gains in other performance measures such as sales to firms other than the new multinational partner.
  2. The share of aggregate value accounted for by multinationals in Belgium fell about ten percentage points between 2002 and 2014, which would suggest a strong headwind against productivity growth.
  3. Beginning a serious relationship with other “superstar firms” — those in the top thousandth of the size distribution and/or intensive exporters — yields very similar performance impacts to supplying foreign multinationals.

Related Articles:

AI Summary. The average ACT college admissions test score fell to 19.5 out of 36, a 30-year low and a sixth consecutive annual decline, with scores down across English, math, reading and science. The testing organization says the results indicate fewer high-school seniors are ready for college.

Joseph Pisani Wall Street Journal
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The average score on the ACT dropped to a 30-year low after being down .3 points in 2023, the sixth consecutive year of decline. @WSJ

Are fewer high school seniors prepared for college?

Core argument: The average ACT score for the class of 2023 fell to 19.5 out of 36, down 0.3 points from 2022 and a 30-year low, marking the sixth consecutive annual decline, according to ACT.

The average score on the ACT dropped to a new 30-year low, indicating fewer high-school seniors are ready for college, the organization behind the college admissions test said. Test takers had an average score of 19.5 out of 36 in 2023, down 0.3 points from 2022, according to ACT. About 1.4 million high-school seniors took the ACT in 2023, up slightly from the year before, but still down from the more than two million who took it in 2017, according to ACT. Scores for the class of 2023 were down across all the subjects its test covers, ACT said. They fell 0.3 points for math, reading and science. They were down 0.4 points for English.

Takeaways by Macro Roundup® AI

  1. The average ACT score for the class of 2023 fell to 19.5 out of 36, down 0.3 points from 2022 and a 30-year low, marking the sixth consecutive annual decline, according to ACT.
  2. ACT said scores for the class of 2023 fell across all subjects, dropping 0.3 points in math, reading and science and 0.4 points in English.
  3. About 1.4 million high-school seniors took the ACT in 2023, up slightly from the year before but down from more than two million in 2017, according to ACT.

Related Articles:

AI Summary. Immigration is the only factor keeping the US working-age population from shrinking, as about 4 million baby boomers turn 65 each year and more than 820,000 Americans aged 15–64 died last year. Forecasts project immigration will hold the US 15-to-64 population roughly constant through 2100, versus projected declines of 20% across high-income countries and 62% in China.

Justin Fox Bloomberg
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The American working-age population, and thus our potential labor force, is shrinking relative to the economy. Population aging is the main driver, as 4mm baby boomers, or 2% of the working-age population, turn 65 each year. @foxjust

Is immigration the only thing keeping the working-age population from shrinking?

Core argument: About 4 million baby boomers, equal to 2% of the working-age population, turn 65 each year, while the annual cohort of Gen Zers turning 15 exceeds that by only 200,000 to 300,000.

About 4 million baby boomers, or 2% of the working-age population, are turning 65 each year, and while the number of Gen Zers turning 15 each year is 200,000 to 300,000 higher than that, more than 820,000 Americans ages 15 through 64 died last year, and about 700,000 died annually in the years leading up to the pandemic. Immigration is thus the only thing keeping the working-age population from shrinking. Immigration spurs economic growth while in some cases depressing wages for some native-born workers. But in the US, if the forecasts are correct, immigration will only keep the 15-to-64 population just about constant through 2100 (as opposed to the 20% decline forecast for the world’s high-income countries overall and the 62% decline forecast for China). We truly have entered a new era for working-age population growth.

Takeaways by Macro Roundup® AI

  1. About 4 million baby boomers, equal to 2% of the working-age population, turn 65 each year, while the annual cohort of Gen Zers turning 15 exceeds that by only 200,000 to 300,000.
  2. More than 820,000 Americans ages 15 through 64 died last year, compared with about 700,000 annually in the years before the pandemic, leaving immigration as the only factor keeping the US working-age population from shrinking.
  3. Forecasts project US immigration holding the 15-to-64 population roughly constant through 2100, against a projected 20% decline for high-income countries overall and a 62% decline for China.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Economy — Wage inequality is falling for the first time in four decades as pay rises at the bottom, with real wages increasing among young high school graduates and workers in the lowest quartile. The authors argue this reflects intensified employer competition for workers rather than simply a tight labor market, implying wages better reflect productivity and higher aggregate productivity.
  • Kaiser Workers Launch Largest-Ever US Health Care Strike — Kaiser Permanente health care workers launched the largest health care strike in US history, a three-day walkout that could stall services for nearly 13mm people across at least six states. The strike is one of several high-profile US labor disputes attributed to a tight labor market, high inflation, and record corporate profits.
  • mmigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.

AI Summary. The number of researchers in the US economy has grown to 23x its 1930 level while the economy's growth rate has been constant or declining, contradicting the assumption that constant research input yields a constant growth rate. Bloom et al. explain this divergence by assuming ideas get harder to find as more are discovered.

Maxwell Tabarrok Maximum Progress
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.@MTabarrok argues that the decline in research productivity documented by @chadjonesecon @I_Am_NickBloom @johnvanreenen might be driven by misallocation of resources.

Why has growth stayed flat while researcher numbers multiplied twentyfold?

Core argument: Bloom et al. document that the number of researchers has grown to 23 times its 1930 level while the economy's growth rate has remained constant or declined over the same period.

Paul Romer’s original model of economic growth assumed that a constant population of researchers would produce a constant growth rate in the economy. For example, if our economy has a million researchers working every year, its output should grow by 1% every year. Bloom et al noticed that the number of researchers in our economy has grown to 23 times its size in 1930 but the growth rate of the economy has been constant, even decreasing, over that period. So Paul Romer’s assumption that constant research input ==> constant growth rate seems unsupported by the data. Bloom et al explain the divergence between growing research input and constant economic growth by assuming that ideas get harder to find as we discover more of them. “Are Ideas Getting Harder To Find?” documents a serious problem with economic growth: our investments into research are growing fast but the rate of economic growth is constant at best.

Takeaways by Macro Roundup® AI

  1. Bloom et al. document that the number of researchers has grown to 23 times its 1930 level while the economy's growth rate has remained constant or declined over the same period.
  2. Paul Romer's original growth model assumed a constant number of researchers would yield a constant growth rate, an assumption Bloom et al. find unsupported by the data.
  3. Bloom et al. explain the divergence between rapidly growing research investment and flat economic growth by assuming that ideas get harder to find as more of them are discovered.

Related Articles: