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
  • “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
  • “…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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 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


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:

Friday, October 13, 2023

AI Summary. American labor productivity rose well above its pre-pandemic estimated trend starting in 2020, but subsequently returned to that trend and, by early 2023, fell slightly below it. The estimated trend allows for a slowdown after 2004, capturing the end of the Internet-led boom.

John Fernald and Huiyu Li Federal Reserve Bank of San Francisco
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John Fernald @sffed finds that the trajectory of productivity growth post-pandemic is consistent with its pre-pandemic productivity track since 2004.

Did the pandemic productivity boom lift American productivity above its trend?

Core argument: U.S. labor productivity rose well above its statistically estimated pre-2020 trend starting in 2020, a sizeable boom that drew exuberant press discussion at the time.

The black line shows the level of American labor productivity. The blue dashed line is a statistically estimated trend, estimated through 2019 and then extended. The trend is allowed to change after 2004; the slowdown in trend captures the end of the late-90s/early 2000s Internet-led boom. Starting in 2020, you can see the sizeable productivity boom, as the black line moved well above the trend. Press discussions at the time were often quite exuberant about the possibilities. Unfortunately, since that bump, productivity has retreated right back to its pre-pandemic trend or, even, by early 2023, a little below the trend.

Takeaways by Macro Roundup® AI

  1. U.S. labor productivity rose well above its statistically estimated pre-2020 trend starting in 2020, a sizeable boom that drew exuberant press discussion at the time.
  2. By early 2023, U.S. labor productivity had retreated back to its pre-pandemic trend or slightly below it.

Related Articles:

  • The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? — Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and its growth has been lackluster across large advanced economies since the mid-2000s. The authors find this slowdown appears in both manufacturing and market services, with U.S. productivity growth slowing before the Great Recession.
  • Will A.I. Transform the Economy, and if So, How? — During the 1995-2005 information technology boom, productivity ended about 12% above the trend implied by growth from 1973 to 1995, and a comparable or larger gain of around 15% from artificial intelligence is plausible. If such optimistic estimates hold, growth would exceed conventional long-run estimates such as the Federal Reserve's roughly 1.8%, lifting revenue and easing debt concerns.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Artificial intelligence is projected to pass through to productivity faster than past general-purpose technologies, though peak effects remain years away. The argument rests on lower capital spending per unit of labor saved, capital spending concentrated among major software players that can distribute AI tools through platforms businesses already use, and low unemployment with high wage growth raising incentives to automate.

Karen Karniol-Tambour and Josh Moriarty Bridgewater Associates
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Bridgewater argues AI’s impact will show up sooner than previous general-purpose technologies but their base case is “inflationary secular dynamics will be more dominant in the next few years than the deflationary impacts of AI.”

Will AI boost productivity faster than past general-purpose technologies?

Core argument: AI will flow through to productivity faster than past general-purpose technologies, though the peak impacts remain far off.

AI will flow through to productivity faster than past general-purpose technologies, but the peak impacts remain far off. AI will likely proceed more quickly for a few reasons. First, the uses of AI typically require less capex, so the marginal cost per unit of labor saved is lower than for past technologies. Second, that capex is more concentrated among major software players and therefore easier to coordinate; much of the adoption will take the form of AI tools being rolled out to software-as-a-service platforms that businesses already use. Finally, secularly low unemployment and high wage growth today may also increase the incentive to automate, although temporary cyclical pressures are unlikely to have a major impact on this decades-long process. Much of the impact of AI could come from accelerating the highest-value research and development work.

Takeaways by Macro Roundup® AI

  1. AI will flow through to productivity faster than past general-purpose technologies, though the peak impacts remain far off.
  2. AI uses typically require less capex than past technologies, lowering the marginal cost per unit of labor saved, and that capex is more concentrated among major software players and therefore easier to coordinate, with much adoption coming via software-as-a-service platforms businesses already use.
  3. Secularly low unemployment and high wage growth may increase the incentive to automate, though temporary cyclical pressures are unlikely to have a major impact on this decades-long process, and much of AI's impact could come from accelerating the highest-value research and development work.

Related Articles:

  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • AI, Mass Evolution, and Weickian Loops — Early consumer artificial intelligence applications have largely been wrappers around marketing copy, image generation, and office tasks like spreadsheets and presentations. In shared spaces such as the image generator Midjourney's Discord server, users can see each other's prompts and results and iterate on them in real time, producing rapid collective experimentation and greater sophistication.

AI Summary. The authors forecast that wage growth in developed markets will gradually decelerate before stabilizing at levels roughly consistent with 2% inflation, as labor markets rebalance in a controlled manner. They project that slower nominal wage growth combined with a sharper slowdown in headline inflation will push real wage growth into positive territory, supporting real incomes, consumer spending, and overall growth.

Joseph Briggs and Giovanni Pierdomenico Goldman Sachs
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According to @GoldmanSachs labor markets have eased in advanced economies; though they are still tighter relative to the pre-pandemic period. Wage growth is decelerating in the US to a level ~ consistent with the 2% target.

Will slowing wage growth in developed markets support real incomes and spending?

Core argument: The authors forecast wage growth in developed-market economies decelerating gradually through end-2024 before stabilizing at levels roughly consistent with 2% target inflation, as labor market rebalancing continues in a relatively controlled manner.

Given our forecast that labor market rebalancing continues to unfold in a relatively controlled manner, we expect wage growth to gradually decelerate through end-2024, before stabilizing at levels roughly consistent with 2% target inflation. This slow deceleration in nominal wage growth—combined with a sharper deceleration in headline inflation—should lead real wage growth to swing comfortably into positive territory, thereby providing a strong tailwind for real income, consumer spending, and overall GDP growth in 2024.

Takeaways by Macro Roundup® AI

  1. The authors forecast wage growth in developed-market economies decelerating gradually through end-2024 before stabilizing at levels roughly consistent with 2% target inflation, as labor market rebalancing continues in a relatively controlled manner.
  2. Slow deceleration in nominal wage growth combined with a sharper deceleration in headline inflation should push real wage growth comfortably into positive territory, according to the authors' forecast.
  3. Positive real wage growth should provide a tailwind for real income, consumer spending, and overall GDP growth in 2024, in the authors' assessment.

Related Articles:

  • U.S. Incomes Fall for Third Straight Year — The Census Bureau reported that US inflation-adjusted median household income fell 2.3% to $74,580, a 4.7% decline from its peak. Wage growth for the typical worker subsequently outstripped inflation, with inflation-adjusted wages rising about 3%, according to Atlanta Federal Reserve and Labor Department data.
  • Growth in Working-Age Population Ends. That’s Not All Bad — 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.
  • 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.

AI Summary. Bank of America internal data show the share of its customers receiving income from gig platforms rose to 3% from 2.7%, an increase concentrated in ridesharing and younger workers. An increased supply of ridesharing gig workers has driven average monthly ridesharing gig pay down.

Anna Zhou Bank of America
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According to @BankofAmerica microtransaction data gig work is rising. 3% of the banks’ customers earned money from gig work in August, up from 2.7% in April and 2% prior to the pandemic.

Is a rising supply of gig workers pushing their pay down?

Core argument: The share of Bank of America customers receiving gig platform income via direct deposit or debit card rose to 3% in August 2023 from 2.7% in April, driven particularly by ridesharing jobs and younger workers.

The percentage of Bank of America customers who received income from gig platforms through direct deposits or debit cards reached 3% in August 2023, up from 2.7% in April. This increase was driven particularly by ridesharing jobs and younger people, the former of which can be largely explained by strong travel-related spending. We also found that ridesharing gig workers do not tend to also have a traditional job and an increased supply of these workers has driven average monthly ridesharing gig pay down in recent months. Millennials and Gen Z have seen the biggest increase in gig work as they tend to be more exposed to the rising cost of living. But it seems gig work may not provide enough support: younger generations' credit and debit card spending growth has consistently lagged that of Baby Boomers since mid-March, according to Bank of America internal data.

Takeaways by Macro Roundup® AI

  1. The share of Bank of America customers receiving gig platform income via direct deposit or debit card rose to 3% in August 2023 from 2.7% in April, driven particularly by ridesharing jobs and younger workers.
  2. Bank of America found that ridesharing gig workers do not tend to also hold a traditional job, and an increased supply of these workers has driven average monthly ridesharing gig pay down in recent months.
  3. Millennials and Gen Z showed the biggest increase in gig work, as they tend to be more exposed to the rising cost of living, yet their credit and debit card spending growth has lagged Baby Boomers' since mid-March, according to Bank of America internal data.

Related Articles:

  • Do 60 Percent Of American Workers Have Insecure Jobs? — A survey by American Compass concludes that only 40% of American workers have secure jobs, a finding critics dispute on methodological grounds. On one of the survey's own criteria, 96% of workers reported either a regular weekly schedule or satisfaction with their control over a varying one.
  • Upward Mobility Is Alive and Well in America — Comparing children's adult incomes with the inflation-adjusted income quintiles of their childhood rather than contemporaneous quintiles produces much higher measured upward mobility: only 28% of children raised in the bottom quintile remained below that childhood threshold as adults, while 26% reached the top childhood quintile, which required $111,416 (2016 dollars) for a family of four.

AI Summary. The author calculates that the average age of death among the shortest-lived 10% of Americans is 36, versus 55 in the Netherlands and 57 in Sweden, after falling by about eight years over the past decade. Wealthy Americans live equally long regardless of local opioid use and gun violence, while poor Americans in those areas live far shorter lives.

John Burn-Murdoch Financial Times
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Lower life expectancy for America’s poor is largely driven by opioids and gun deaths. Among the 10% of Americans who die youngest, the mean age of death is 36.

Why do the shortest-lived Americans die decades earlier than Europeans?

Core argument: The author calculates that the average age of death among the shortest-lived 10% of Americans is 36 years, compared with 55 in the Netherlands and 57 in Sweden.

My calculations suggest the average age of death in [the shortest-lived 10%] is just 36 years old, compared with 55 in the Netherlands and 57 in Sweden. It hasn’t always been this way. In the 1980s, the most disadvantaged Americans lived about as long as their counterparts in France. By the early 2000s, lives at the bottom had lengthened considerably, and while a deficit was opening up, it wasn’t worrisome. But in the past decade, the lives of America’s least fortunate have shortened by an astonishing eight years. Wealthy Americans who live in the parts of the country with high opioid use and gun violence live just as long as those who live where fentanyl addiction and gunshot incidents are relatively rare. But poor Americans live far shorter lives if they grow up surrounded by guns and drugs than if they don’t.

Takeaways by Macro Roundup® AI

  1. The author calculates that the average age of death among the shortest-lived 10% of Americans is 36 years, compared with 55 in the Netherlands and 57 in Sweden.
  2. America's most disadvantaged lived about as long as their French counterparts in the 1980s, and lives at the bottom lengthened considerably by the early 2000s, but over the past decade they have shortened by eight years.
  3. Wealthy Americans live equally long whether or not they reside in areas with high opioid use and gun violence, while poor Americans live far shorter lives if they grow up surrounded by guns and drugs.

Related Articles:

AI Summary. The U.S. Defense Department's schools, serving about 66,000 children of military members and civilian employees, outscored every state and large district in math and reading on the National Assessment of Educational Progress and avoided widespread pandemic losses. While overall U.S. student achievement has stagnated over the past decade, the military's schools have gained on the national test.

Sarah Mervosh New York Times
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The Defense Department manages schools for about 66,000 students and achieves proficiency outcomes far higher than national averages. DoD schools performed better than any US state in 2022, in part because they avoided pandemic declines. @nytimes

Do military-run schools outperform every state on national tests?

Core argument: The Defense Department's schools outscored every state and large district in both math and reading on the National Assessment of Educational Progress last year, and avoided widespread pandemic learning losses.

With about 66,000 students — more than the public school enrollment in Boston or Seattle — the Pentagon’s schools for children of military members and civilian employees quietly achieve results most educators can only dream of. On the National Assessment of Educational Progress, a federal exam that is considered the gold standard for comparing states and large districts, the Defense Department’s schools outscored every jurisdiction in math and reading last year and managed to avoid widespread pandemic losses. While the achievement of U.S. students overall has stagnated over the last decade, the military’s schools have made gains on the national test since 2013.

Takeaways by Macro Roundup® AI

  1. The Defense Department's schools outscored every state and large district in both math and reading on the National Assessment of Educational Progress last year, and avoided widespread pandemic learning losses.
  2. The Pentagon's schools enroll about 66,000 children of military members and civilian employees, more than the public school enrollment of either Boston or Seattle.
  3. While U.S. student achievement overall has stagnated over the last decade, the military's schools have made gains on the National Assessment of Educational Progress since 2013.

Related Articles: