Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, August 1, 2024

AI Summary. Analyzing long-maturity real interest rates across eight advanced economies over seven centuries, the authors find rates are trend stationary with a persistent downward trend since the Renaissance. They argue demographic and productivity factors are not convincing drivers, finding population and output growth negatively predict real rates over long spans.

Kenneth Rogoff, Barbara Rossi, and Paul Schmelzing American Economic Review
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Long-term real rates over the last 7 centuries show a long downward trend and exhibit no positive correlation with growth in output or population. @krogoff @paul_schmelzing

Do demographics and productivity explain the centuries-long decline in real interest rates?

Core argument: Global long-maturity real interest rates across 8 countries covering over 80% of advanced-economy GDP are trend stationary and show a persistent downward trend since the Renaissance, based on annual data spanning 1311–2022.

We analyze the statistical properties of global long-maturity real interest rates over the past seven centuries. The series covers over 80% of advanced-economy GDP on an annual level across 8 countries, both marketable (consolidated) debt and relevant personal loans transactions by sovereign creditors. We deflate the nominal rate in year t with a seven-year lagged inflation measure to approximate inflation expectations. Real interest rates are trend stationary and exhibit a persistent downward trend since the Renaissance. We show that demographic and productivity factors do not represent convincing drivers of real interest rates over long spans; [indeed] we can qualitatively go beyond these existing facts and find strong evidence in favor of a long-run negative prediction of aggregate population growth and aggregate real output growth for real rates. The most recent decades in which the correlation with real rates is positive appear [to be] a unique exception in a multicentury perspective.

Takeaways by Macro Roundup® AI

  1. Global long-maturity real interest rates across 8 countries covering over 80% of advanced-economy GDP are trend stationary and show a persistent downward trend since the Renaissance, based on annual data spanning 1311–2022.
  2. The authors find that demographic and productivity factors are not convincing drivers of real interest rates over long spans, reporting strong evidence that aggregate population growth and aggregate real output growth predict real rates negatively over the long run.
  3. The positive correlation with real rates observed over the most recent decades appears to be a unique exception in a multicentury perspective, according to the authors.

Related Articles:

  • Markets Think Inflation Will Be Too High For The Next 20 Years — Inflation expectations derived from the gap between regular Treasury yields and inflation-indexed Treasury yields show expected annual inflation over the next 10 and 20 years running considerably above expected inflation for the decade beginning 20 years out. Before the pandemic-era inflation surge, actual inflation and expected future inflation tracked each other closely.
  • The Big Picture: Back to the Future — The secular backdrop has shifted from disinflationary to more inflationary, with interest rates no longer near zero and real rates no longer negative. Household balance sheets are as healthy as they have been in 20 years, leaving room to borrow, while the public sector is as indebted as it has ever been.
  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.

AI Summary. Inflation-adjusted US house prices stand 1.9% below their 2022 peak. The monthly principal-and-interest payment on a $500,000 house bought with 20% down has roughly doubled over three years, rising 102% as prices climbed 26% and 30-year mortgage rates went from 2.96% to 7.06%.

Bill McBride Calculated Risk
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Real house prices are 1.9% under the 2022 peak and 11% above the bubble peak. Affordability remains at levels last seen in the early 1980s when 30-year mortgage rates were over 14%. @calculatedrisk

How much have monthly mortgage payments risen over three years?

Core argument: Inflation-adjusted U.S. house prices in May stood 1.9% below their 2022 peak, while nominal prices rose 5.9% year over year.

For May: a year ago, the payment on a $500,000 house, with a 20% down payment and 6.43% 30-year mortgage rates, would be around $2,510 for principal and interest. The monthly payment for the same house, with house prices up 5.9% y/y and mortgage rates at 7.06% in May 2024, would be $2,835 - an increase of 13%. However, if we compare to three years ago, there is a huge difference in monthly payments. In May 2021, the payment on a $500,000 house, with a 20% down payment and 2.96% 30-year mortgage rates, would be around $1,678 for principal and interest. The monthly payment for the same house, with house prices up 26% over three years and mortgage rates at 7.06% in May 2024, would be $3,383 - an increase of 102%! Double!!!

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices in May stood 1.9% below their 2022 peak, while nominal prices rose 5.9% year over year.
  2. The monthly principal-and-interest payment on a $500,000 house with 20% down rose 102% over three years, from $1,678 in May 2021 at a 2.96% mortgage rate to $3,383 in May 2024 at 7.06%, with prices up 26%.
  3. The payment on a $500,000 house with 20% down rose 13% in a year, from about $2,510 at a 6.43% mortgage rate to $2,835 at 7.06% in May 2024.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.
  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.

AI Summary. Bank of America deposit data indicates fewer households are moving between cities, with cross-city moves down 4% year-over-year, while those who do move skew toward Gen Z and lower-income households. Payments data show "hidden" homeownership costs such as insurance and property taxes are up significantly, especially in the Sun Belt.

Joe Wadford and David Tinsley Bank of America
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Aggregated deposit data from @BankofAmerica suggests that fewer households are moving between cities and movers “skewing towards Gen Z and lower-income households, as more households apparently move out of necessity as opposed to choice.”

Are rising hidden homeownership costs slowing moves between cities?

Core argument: Bank of America aggregated deposit data suggest moves across cities fell 4% year-over-year in the second quarter of 2024, following a 15% year-over-year decline a year earlier.

Bank of America aggregated deposit data suggests that fewer households are moving between cities. In the second quarter of 2024, moves across cities fell 4% year-over-year after a 15%y/y decrease this time last year. Those that are moving, however, are skewing towards Gen Z and lower-income households, likely as more households move out of necessity as opposed to choice. Some households are likely deferring moves due to increased "hidden" costs of homeownership (e.g., insurance, property taxes). Bank of America aggregated payments data suggests these costs are up significantly y/y especially in the Sun Belt. Looking across cities, we continue to see large population declines in many northeastern and western MSAs as of the second quarter 2024, continuing a long-term trend since the start of the pandemic. In the Northeast, New York and Boston continue to see large net population outflows. And in the West, San Francisco, Los Angeles, Seattle, and Portland all saw significant y/y declines. The situation in the South remains mixed with Austin, San Antonio, Jacksonville, and Tampa again seeing significant inflows, while Miami, Orlando, and DC appear to be having marked declines in population.

Takeaways by Macro Roundup® AI

  1. Bank of America aggregated deposit data suggest moves across cities fell 4% year-over-year in the second quarter of 2024, following a 15% year-over-year decline a year earlier.
  2. Bank of America finds movers skewing toward Gen Z and lower-income households, likely reflecting moves made out of necessity, while other households defer moves as "hidden" homeownership costs such as insurance and property taxes rise year-over-year, especially in the Sun Belt.
  3. New York, Boston, San Francisco, Los Angeles, Seattle, and Portland saw large net population outflows in the second quarter of 2024, while Austin, San Antonio, Jacksonville, and Tampa saw significant inflows and Miami, Orlando, and DC declined.

Related Articles:

  • Young Families Have Continued Leaving Big Cities Post-Pandemic — Large urban counties have continued to lose population of young children even as their overall population growth resumed, driven by immigration. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade, and the number of children under five fell in 58% of all US counties.
  • Economic Prosperity is Shifting Toward the Mountain West and Southeast — The most economically prosperous U.S. zip codes house 80.6m residents and averaged nearly 3x the job growth of "comfortable" zip codes and 10x that of "at-risk" ones. In several Southeast and Mountain West states, a much greater share of the population now lives in top-ranked prosperous zip codes than a decade earlier.
  • Snow Belt to Sun Belt Migration: End of an Era? — The correlation between US county population growth or net migration and historical extreme heat and cold days has declined over roughly the past 50 years, and in 2010–2020 was essentially zero. The authors argue this pivoting is likely to continue and reverse the 20th-century Snow Belt to Sun Belt migration pattern.

AI Summary. Thirteen states and Washington, D.C., have immigrant population shares above the national figure of 14.9%, including California, New Jersey, and New York. After the 2007-09 recession, immigrant shares were roughly flat in California and Nevada while continuing to grow in New Jersey, New York, and Florida.

Subhayu Bandyopadhyay and Hoang Le Federal Reserve Bank of St. Louis
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Thirteen states and DC have a higher foreign-born share of the population than the 14.9% national average. Immigrant shares in the western states were fairly flat from 2009-22, while immigrant shares in the eastern states continued to grow.

How do immigrant population shares differ across states?

Core argument: 13 states and Washington, D.C., exceed the U.S. immigrant share of 14.9%, with states including California, New Jersey, and New York ranking high on the list.

13 states and Washington, D.C., exceeded the 14.9% immigrant share of the U.S. as a whole. As one might expect, some more prosperous states like California, New Jersey, and New York feature high on the list. The 1990s show sharply rising immigrant shares in most of the selected states. The period between 2000 and the 2007-09 Great Recession shows a continuation of this growth, albeit at a somewhat slower pace for some of the states. In the post-Great Recession period, we can observe an interesting divergence between the western U.S. states of California and Nevada on the one hand and the eastern U.S. states of New Jersey, New York, and Florida on the other. Immigrant shares in the western states were fairly flat from 2009 to 2022, while immigrant shares in the eastern states exhibited continuing growth, although New York’s growth was modest.

Takeaways by Macro Roundup® AI

  1. 13 states and Washington, D.C., exceed the U.S. immigrant share of 14.9%, with states including California, New Jersey, and New York ranking high on the list.
  2. Immigrant shares rose sharply across most of the selected states during the 1990s and continued growing from 2000 to the 2007–09 Great Recession, albeit at a somewhat slower pace in some states.
  3. From 2009 to 2022, immigrant shares in California and Nevada were fairly flat while New Jersey, New York, and Florida showed continuing growth, with New York's growth modest.

Related Articles:

  • The Cost of Illegal Immigration — The US foreign-born population rose by 6.6mm to 51.6mm over a roughly three-year span, lifting immigrants to 15.6% of the population, above the prior records of 14.8% in 1890 and 14.7% in 1910. The authors estimate about 13.7mm illegal immigrants now live in the US, a net increase of 3.7mm.
  • What The Data Says About Immigrants In The U.S. — The U.S. foreign-born population reached a record 46.1mm, or 13.8% of the population, roughly 3x the 4.7% share in 1970 but below the record 14.8% in 1890. Mexico is the top country of birth at 23% of immigrants, and unauthorized immigrants numbered about 11mm, or 23% of the foreign-born population.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.

AI Summary. China's household consumption fell from 53% of GDP in 1983 to 37% in 2022, versus 68% in the US, 61% in India and 55% in Vietnam. The author argues this underconsumption limits services to 45% of jobs, well below the 70–80% in comparable economies, driving youth unemployment and falling fertility.

Fuxian Li The Diplomat
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.@fuxianli argues that the CCP’s “planned reforms could indirectly help balance China-U.S. trade by boosting consumption, thereby reducing political hostility between the two major powers.”

Does China's low household consumption limit service jobs and fertility?

Core argument: China's household consumption fell from 53% of GDP in 1983 to 37% in 2022, below 68% in the United States, 61% in India, and 55% in Vietnam.

Household consumption typically accounts for 85 to 90% of household disposable income. China’s declining share of disposable income in GDP has led to a decline in household consumption as a share of GDP from 53% in 1983 to 37% in 2022. Compare that with 68% in the United States, 61% in India, and 55% in Vietnam. China has paid a terrible price for its low household income – and low domestic consumption – in the form of demographic collapse. Many ordinary families cannot afford to raise even one child, and as a result, China’s fertility rate fell from 2.3 births per woman in 1990 to 1.0 last year. Both the two- and three-child policies have been abject failures. When other countries reached China’s current rate of enrollment in tertiary education, the service sector provided 70-80% of jobs. However, due to underconsumption, China’s service sector provides only 45% of jobs, which makes it difficult for college graduates, who are primarily engaged in the service sector, to find jobs. The result: high youth unemployment and declining marriage and fertility rates.

Takeaways by Macro Roundup® AI

  1. China's household consumption fell from 53% of GDP in 1983 to 37% in 2022, below 68% in the United States, 61% in India, and 55% in Vietnam.
  2. China's service sector provides only 45% of jobs, versus the 70-80% other countries reached at comparable tertiary enrollment levels, making it difficult for college graduates to find work.

Related Articles:

  • Why Xi Jinping Is Afraid to Unleash China’s Consumers — China's push for self-sufficiency began in the mid-2000s, and its reliance on global supply chains for inputs into its products has declined alongside that strategy, alongside a doctrine of "comprehensive national security" spanning the economy and society. Analysts argue China now gauges national power in military capacity rather than purely economic terms, making manufacturing central.
  • Can China’s Long-Term Growth Rate Exceed 2–3 Percent? — China invests roughly 42–44% of its GDP, while more mature, capital-intensive economies typically invest about 15–20%. Modeling a ten-year path that lowers China's investment share to 30% of GDP, the author argues the resulting growth rate depends mainly on how fast consumption grows.
  • No Quick Fixes: China’s Long-Term Consumption Growth — China's real household consumption growth is projected at around 3 to 4% annually over the next five to ten years, reflecting a continued slowdown in urban per capita spending growth. If household consumption stays near 39% of GDP, it would contribute only about 1.2 to 1.6 percentage points to annual GDP growth, well below its contribution in the 2010s.

Friday, August 2, 2024

AI Summary. Using congressional representation as an instrument — an extra senator or representative per million residents predicts roughly $1,000 more aid per capita — the authors estimate that federal pandemic relief strongly predicts incumbent performance in state-wide elections.

Jeffrey Clemens, Julia Payson, and Stan Veuger American Enterprise Institute
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An additional senator or representative per mm residents predicted about $1,000 dollars in additional COVID aid per capita over 2020-2022, yielding incumbents an extra 4 ppt of the two-candidate vote share. @jeffreypclemens @payson_julia @stanveuger

Does federal pandemic aid boost incumbent performance in state elections?

Core argument: Each additional senator or representative per million residents predicts roughly $1,000 more COVID-19 aid per capita, and overrepresented states received systematically more federal pandemic funding.

Identifying the effect of revenue windfalls on economic voting is challenging because whatever conditions led to the influx of cash might also benefit or harm incumbent politicians for a variety of other reasons. We leverage the fact that pandemic assistance varied based on congressional representation, with an additional senator or representative per million residents predicting roughly $1,000 dollars in additional aid per capita. As a result, overrepresented states received systematically more funding. By predicting aid levels using congressional representation as an instrument, we seek to isolate the effect of COVID-19 spending on state-wide election results. We find that federal pandemic aid strongly predicts incumbent performance in the 2020, 2021, and 2022 elections. The exclusion restriction here [the basis for the econometric identification] assumes that higher per capita representation in Congress did not benefit incumbents through channels other than the increase in COVID-19 funding.

Takeaways by Macro Roundup® AI

  1. Each additional senator or representative per million residents predicts roughly $1,000 more COVID-19 aid per capita, and overrepresented states received systematically more federal pandemic funding.
  2. Using congressional representation as an instrument for pandemic aid, the authors find that federal COVID-19 aid strongly predicts incumbent performance in the 2020, 2021, and 2022 elections.
  3. The identification rests on an exclusion restriction assuming that higher per capita congressional representation did not benefit incumbents through channels other than increased COVID-19 funding.

Related Articles:

AI Summary. Inflation-adjusted median weekly earnings for US workers aged 25-64 without a college degree rose 4.6% from $829 to $867, outpacing the 3.3% gain for college-educated workers, a reversal from the Great Recession when college wages grew faster. Inflation-adjusted wealth grew 5.5% for non-college households versus 4.8% for college households.

Ernie Tedeschi Third Way
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Real median weekly earnings for non-college workers grew by 4.6% from Q4 2019 to Q1 2024, vs. 3.3% for their college peers, a reversal from the Great Recession “when real college wages consistently grew faster than non-college wages.” @ernietedeschi

Have non-college workers' wages and wealth grown faster than college graduates'?

Core argument: Real median weekly earnings for non-college workers aged 25–64 rose 4.6% from $829 in 2019 to $867 over the four quarters ending 2024 Q1, in inflation-adjusted 2023 dollars, higher than any pre-pandemic quarter on record.

The pandemic has been extraordinary among recent US recessions in the growth of non-college wages. In 2019, the typical non-college worker aged 25-64 earned $829 a week in inflation-adjusted 2023 dollars. Over the four quarters ending in 2024 Q1, their weekly earnings were $867, a 4.6% increase and higher than any pre-pandemic quarter on record. In contrast, college workers have seen a 3.3% increase in real median weekly earnings since 2019. The stronger performance of non-college wages is in stark contrast with the Great Recession when real college wages consistently grew faster than non-college wages. [Similarly,] Inflation-adjusted wealth has grown by 5.5% for non-college households, versus 4.8% for college households.

Takeaways by Macro Roundup® AI

  1. Real median weekly earnings for non-college workers aged 25–64 rose 4.6% from $829 in 2019 to $867 over the four quarters ending 2024 Q1, in inflation-adjusted 2023 dollars, higher than any pre-pandemic quarter on record.
  2. College-educated workers saw real median weekly earnings rise 3.3% since 2019, less than the 4.6% gain for non-college workers, in contrast with the Great Recession when real college wages consistently grew faster.
  3. Inflation-adjusted wealth grew 5.5% for non-college households versus 4.8% for college households.

Related Articles:

AI Summary. In 2000 the 10 largest US stocks traded at 60x earnings after 22% annual fundamental returns, then delivered only 8% a year as telecom earnings fell following 3G spectrum auctions. Today's top 10 have delivered 19% annual fundamental returns but trade at a median 27x, implying lower investor expectations.

Ty Cobb, Tom Hancock, and Anthony Hene GMO
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GMO argues that comparisons between the current market and the 2000 tech bubble are overdrawn given the current top 10 companies’ stronger fundamentals and median P/E of 27x, vs. 60X for the top 10 companies in 2000.

Are today's largest stocks priced more modestly than in 2000?

Core argument: In 2000, the top 10 traded at a 60x price-to-earnings ratio after delivering fundamental returns of 22% p.a. over the preceding five years, while 2024's top 10 carry a median P/E of 27x after 19% p.a. returns since 2019.

In 2000, the price-to-earnings ratio of the top 10 was 60x. Market participants were intoxicated by the ongoing communication revolution and heady fundamental returns of 22% per annum (p.a.) for the group over the preceding five years. Even if the fundamental return expectation of 19% p.a. had been delivered and stock prices held, the top 10’s multiple would have still exceeded 25x by 2005. In reality, the fundamental return was a relatively puny 8% p.a. for the group, with earnings falling at the telecom companies after what turned out to have been disastrous capital allocation in 3G spectrum auctions. 2024’s top 10 have delivered similarly impressive fundamental returns of 19% p.a. since 2019, but the set-up is rather different to 2000, with a median P/E of 27x. If today’s top 10 were to deliver on 19% fundamental return expectations and prices were to stay the same this time around, the multiple would collapse to 12x by 2029. Implicitly, investors expect less from the mega-caps now than they did in 2000.

Takeaways by Macro Roundup® AI

  1. In 2000, the top 10 traded at a 60x price-to-earnings ratio after delivering fundamental returns of 22% p.a. over the preceding five years, while 2024's top 10 carry a median P/E of 27x after 19% p.a. returns since 2019.
  2. The 2000 top 10 delivered fundamental returns of 8% p.a. against expectations of 19% p.a., with earnings falling at telecom companies after capital allocation in 3G spectrum auctions proved disastrous.
  3. If the 2024 top 10 were to deliver 19% p.a. fundamental returns and prices were to stay the same, the group's multiple would collapse to 12x by 2029, implying investors expect less from mega-caps now than in 2000.

Related Articles:

  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Five Easy Pieces — The rally in the seven largest US technology stocks has been driven by earnings rather than valuation: of the group's 28% return, 21 percentage points came from sales growth, 6 from margin expansion, and 1 from multiple expansion. Market concentration has reached its highest level since 1972, and large spikes in concentration have frequently coincided with or preceded prior recessions.
  • Magnificently Concentrated — Since 1957, the 10 largest stocks in the S&P 500 have trailed an equal-weighted index of the remaining 490 stocks by 2.4% per year on average, though over the past decade the largest 10 outperformed by 4.9% per year. The authors argue history suggests the capitalization-weighted S&P 500 is likely to underperform the equal-weighted version over the next decade.

AI Summary. A study of 84,985 mergers reported to U.S. antitrust agencies, of which 1,477 were challenged in court, finds that the likelihood agencies win fully litigated cases and the likelihood challenged mergers proceed to litigation both increased following the Chicago School's influence. The authors read this as a shift toward stricter judicial enforcement standards.

Mark Jamison American Enterprise Institute
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@drj_policy @AEI argues that from 1982–2021 antitrust enforcement standards “have become more pro-enforcement—exactly the opposite of the accepted wisdom.”

Has merger enforcement actually become stricter in the courts?

Core argument: Of 84,985 mergers reported to U.S. antitrust agencies from 1982 to 2021 under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, the agencies challenged 1,477 by petitioning a court to stop the merger, according to the study.

The new study systematically analyzed the evolution of judicial standards for proposed mergers and found that the Chicago School in fact upgraded antitrust enforcement. The study examined 84,985 mergers reported to the agencies from 1982 to 2021 under the Hart-Scott-Rodino Antitrust Improvement Act of 1976. The agencies challenged 1,477 mergers, meaning that one of the agencies petitioned a court to stop the merger. The study found that the likelihood that agencies would win fully litigated cases rose since the Chicago School’s influence. It also found that the likelihood of challenged mergers proceeding to litigation increased. Both findings indicate a shift towards stricter enforcement standards in the courts. The study’s findings are consistent with those of an earlier study by some of the same authors. This earlier study found that the intensity of merger challenges increased from 1979 to 2017 and that the rising enforcement did not depend on who was in the White House.

Takeaways by Macro Roundup® AI

  1. Of 84,985 mergers reported to U.S. antitrust agencies from 1982 to 2021 under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, the agencies challenged 1,477 by petitioning a court to stop the merger, according to the study.
  2. The study found that the likelihood agencies would win fully litigated merger cases rose since the Chicago School's influence and that challenged mergers became more likely to proceed to litigation, indicating a shift toward stricter enforcement standards in the courts.
  3. An earlier study by some of the same authors found that the intensity of merger challenges increased from 1979 to 2017 and that the rising enforcement did not depend on who was in the White House.

Related Articles:

  • Trends in Competition in the United States: What Does the Evidence Show? — The authors argue the ratio of price to marginal cost, not market concentration, is the meaningful measure of market power. U.S. corporate pretax profits rose from 8.6% of GDP in the 1990s to 11.9% in the 2010s, but domestic profits were far flatter, with much of the gain from foreign operations.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
  • Has Market Concentration in U.S. Manufacturing Increased? — Measuring U.S. manufacturing concentration by domestic production alone shows the top 20 firms' share rising, but including imports and excluding exports leaves the top 20 firms' share of total U.S. sales flat. The authors argue the falling market share of U.S. firms suggests their market power may have declined.

AI Summary. Chinese manufacturing competitiveness was built on transfers that acted as implicit supply-side support, so reversing them to raise household consumption would likely erode that competitiveness and cause a short-term contraction. Manufacturing accounts for 27–28% of China's economy versus 15–16% of global output, making any such hit especially painful.

Michael Pettis Carnegie Endowment for International Peace
Date Posted:

Increasing China’s consumption share in a sustainable manner would require an offset by “the business sector, local governments, or Beijing,” likely reducing the competitiveness of China’s manufacturing sector. @michaelxpettis

Why is it so hard for China to raise household consumption?

Core argument: Manufacturing accounts for 27–28% of China's GDP versus 15–16% of global GDP, a disproportionately large share the author attributes to three decades of one-directional transfers supporting Chinese manufacturers.

After three decades when Chinese manufacturers’ global competitiveness was effectively built on transfers in one direction, what would happen to their manufacturing prowess if these transfers were reversed? Their prowess would almost certainly decline, as they would struggle to manage in a significantly less friendly supply-side environment. One likely result could be a short-term contraction, as Chinese manufacturers learn to live without the implicit supply-side support and essentially return the various subsidies. Because one of the consequences of these transfers has been a disproportionately large manufacturing share of the economy (27–28% of China’s GDP, compared to 15–16% of global GDP, as I explained in this June 2024 piece), anything that undermines China’s manufacturing competitiveness in the short term is likely to be especially painful for the economy. This is why Beijing’s unwillingness to boost the consumption share of GDP is not as bizarre as it seems.

Takeaways by Macro Roundup® AI

  1. Manufacturing accounts for 27–28% of China's GDP versus 15–16% of global GDP, a disproportionately large share the author attributes to three decades of one-directional transfers supporting Chinese manufacturers.
  2. Reversing those transfers would almost certainly reduce Chinese manufacturers' prowess, the author argues, as they would struggle in a significantly less friendly supply-side environment and essentially return the various subsidies.
  3. Given China's outsized manufacturing share of GDP, the author contends that anything undermining manufacturing competitiveness in the short term would be especially painful, which renders Beijing's unwillingness to raise the consumption share less bizarre than it seems.

Related Articles:

  • Why Xi Jinping Is Afraid to Unleash China’s Consumers — China's push for self-sufficiency began in the mid-2000s, and its reliance on global supply chains for inputs into its products has declined alongside that strategy, alongside a doctrine of "comprehensive national security" spanning the economy and society. Analysts argue China now gauges national power in military capacity rather than purely economic terms, making manufacturing central.
  • No Quick Fixes: China’s Long-Term Consumption Growth — China's real household consumption growth is projected at around 3 to 4% annually over the next five to ten years, reflecting a continued slowdown in urban per capita spending growth. If household consumption stays near 39% of GDP, it would contribute only about 1.2 to 1.6 percentage points to annual GDP growth, well below its contribution in the 2010s.
  • Assessing China’s Efforts to Increase Self-Reliance — China's import growth has been notably weaker than export growth over the past five years, and the correlation between GDP growth and import growth has run below that between GDP growth and export growth for about a decade, which could be an early sign of increasing self-reliance. China is reducing reliance on imported inputs while maintaining reliance on foreign demand.

AI Summary. A presidential election forecasting model puts Kamala Harris ahead of Donald Trump by 1.1 points in its national polling average and gives her a 47% chance of winning the Electoral College, placing the race in toss-up territory. Weaker economic news lowers the model's economic index and reduces the incumbent party's estimated chances.

Nate Silver and Eli McKown-Dawson Silver Bulletin
Date Posted:

.@NateSilver538 estimates that Trump has a 53% chance of winning the Electoral College, down from 61% on Monday. Trump has a 48% probability of winning WI, a 44% of winning MI, and a 51% chance of winning PA. The race is a toss-up.

Does weaker economic news reduce the incumbent party's election odds?

Core argument: Kamala Harris leads Donald Trump by 1.1 points in the Silver Bulletin national polling average and has a 47% chance of winning the Electoral College, placing the race well into toss-up territory.

Despite a bad day of economic news — which worsens the model’s economic index and therefore harms the incumbent party’s chances — Kamala Harris continues to inch ahead in the forecast on the strength of fairly strong polling. She now leads Donald Trump by 1.1 points in our national polling average, and has a 47% chance of winning the Electoral College, putting the race well into toss-up territory.

Takeaways by Macro Roundup® AI

  1. Kamala Harris leads Donald Trump by 1.1 points in the Silver Bulletin national polling average and has a 47% chance of winning the Electoral College, placing the race well into toss-up territory.
  2. A day of bad economic news worsened the Silver Bulletin model's economic index, harming the incumbent party's chances, yet Harris continued to inch ahead on fairly strong polling.

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