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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…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


Thursday, August 8, 2024

AI Summary. Comparing low- and high-wage businesses to isolate the disincentive effects of unemployment insurance, the authors find the employment gap between them widened while a $600 weekly federal supplement was in place and narrowed rapidly after it expired.

Andreas Hornstein, Marios Karabarbounis, Andre Kurmann, Etienne Lale and Lien Ta National Bureau of Economic Research
Date Posted:
Is Database:
Database

.@KurmannAndre and team find that the relative generosity of CARES Act unemployment insurance programs “held back the aggregate employment recovery by 4.7 percentage points between April and December 2020.”

Do expanded unemployment benefits reduce employment at low-wage businesses?

Core argument: With the arrival of the CARES Act's additional $600 weekly unemployment supplement, the employment gap between low- and high-wage businesses stopped closing and widened until the supplement expired at the end of July 2020.

By comparing low and high wage businesses we difference out common demand shifts arising from the [unemployment insurance (UI)] stimulus and construct a measure of the disincentive effects of UI benefits only, [and we exploit the fact that] the pandemic UI programs [increase] the difference between the average replacement rates of low- and high-wage businesses. [Figure 4 shows] that after an initial bigger drop of employment in low-wage businesses at the onset of the pandemic, low-wage businesses are catching up with high-wage businesses and the employment gap narrows from the end of March 2020 to early April 2020. We mark the period from April 2020 to August 2020 when the CARES Act provided an additional $600 weekly supplement and the subsequent period when the Lost Wages Assistance (LWA) program provided a $300 weekly supplement for six weeks, With the arrival of the CARES Act the employment gap not only stops closing, but it starts to widen until the $600 weekly supplement expires at the end of July 2020. Thereafter, employment in low-wage businesses rapidly gains ground and partially closes the employment gap to the high-wage businesses.

Takeaways by Macro Roundup® AI

  1. With the arrival of the CARES Act's additional $600 weekly unemployment supplement, the employment gap between low- and high-wage businesses stopped closing and widened until the supplement expired at the end of July 2020.
  2. After the $600 weekly supplement expired, employment in low-wage businesses gained ground and partially closed the gap with high-wage businesses; the Lost Wages Assistance program then provided a $300 weekly supplement for six weeks.
  3. Comparing low- and high-wage businesses differences out common demand shifts from the unemployment insurance stimulus, exploiting the pandemic UI programs' increase in the difference between the two groups' average replacement rates.

Related Articles:

  • Do Reemployment Bonuses Increase Employment? Evidence from the Idaho Return to Work Bonus Program — The authors estimate that Idaho's return-to-work bonus program, which paid up to $1,500 to people leaving nonemployment, raised employment among prime-age workers by 3.2 percentage points and the flow of unemployed workers into jobs by 18.2 percentage points. State-level estimates associate the program with a 2.9-point higher employment-population ratio and a 0.4-point lower unemployment rate.
  • Measuring Unemployment Risk — The authors estimate individual unemployment risk using employment status, demographic, job, and geographic characteristics, and find that before a recession this risk is concentrated: unemployment risk is below 5% for the vast majority of employed workers. Unemployed individuals, a small share of the population, average nearly 22% risk, about 10x the average for employed (2.7%) or out-of-the-labor-force (2.4%) individuals.
  • The Dual U.S. Labor Market Uncovered — The authors identify a dual U.S. labor market in which a primary segment of about 55% of the population is almost always employed, while a secondary segment of about 14% absorbs most seasonal and business-cycle fluctuations. Workers in the secondary segment have 6x higher turnover and are 10x more likely to be unemployed than primary-segment workers.

AI Summary. Immigrant visas—including employer-based and family-sponsored categories—are being issued at a near record-high monthly level. The author suggests the rising unemployment rate may reflect the government gradually clearing a Covid-related backlog of visa applications, which adds to labor supply.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues that an increase in legal immigrant visas was a factor in the rise of the US unemployment rate from 3.5% in July ‘23 to 4.3% in July ‘24.

Is rising immigration pushing up the unemployment rate?

Core argument: Immigrant visas are being issued at a near record-high level every month, continuing an uptrend in immigration.

The uptrend in immigration continues with a near record-high level of immigrant visas issued every month. Examples of immigrant visas include employer-based visas and family-sponsored visas (such as spouses of US citizens). Maybe the reason why the unemployment rate is rising is because the government is gradually working through a Covid-related backlog of visa applications, which increases the labor supply.

Takeaways by Macro Roundup® AI

  1. Immigrant visas are being issued at a near record-high level every month, continuing an uptrend in immigration.
  2. Immigrant visa categories include employer-based visas and family-sponsored visas, such as those for spouses of U.S. citizens.
  3. The rising unemployment rate may reflect the government gradually working through a Covid-related backlog of visa applications, which increases labor supply.

Related Articles:

  • 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.
  • Recent Spike in Immigration and Easing Labor Markets — States with higher per capita volumes of undocumented immigrants broadly had a lower ratio of job vacancies to unemployed workers, a common gauge of labor market tightness. Using state data, the author estimates that about one-fifth of the decline in that ratio was associated with higher immigration.
  • 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.

AI Summary. The US operates 81% of commercial satellites in orbit and 86% of global effective launch capacity, with NATO allies second in satellites at 11% and China second in launch capacity at 9%. China is pursuing mega satellite constellations and reusable rockets, in many cases copying approaches already proven by US companies.

Todd Harrison American Enterprise Institute
Date Posted:

In 2024 the US had 81% of commercial satellites in operation and 86% of global effective launch capacity. @ToddHarrisonDC @AEI argues this creates “a once-in-a-generation opportunity to extend a rules-based international order into space.”

Does the US lead China in commercial satellites and launch capacity?

Core argument: The United States operates 81% of commercial satellites in orbit and holds 86% of global effective launch capacity so far in 2024, with NATO allies second in satellites at 11% and China second in launch at 9%.

The United States holds a commanding lead in the number of commercial satellites (81% of all commercial satellites in operation today) and in launch (86% of global effective launch capacity so far in 2024). NATO allies (mainly the United Kingdom and France) are a distant second place in the number of commercial satellites (11%), and China is a distant second in effective launch capacity (9%). China is working hard to catch up, and it has plans for mega constellations of satellites and reusable rockets. In many cases, however, it is merely copying what has already proven successful for US companies. The other major space powers, such as Russia, India, and Japan, are well behind the United States, Europe, and China in the commercial space competition. The United States has a window of opportunity to build and extend its lead in nearly all areas of the competition in space, but it must act quickly and in partnership with like-minded nations to remain competitive in all events. This is a once-in-a-generation opportunity to extend a rules-based international order into space.

Takeaways by Macro Roundup® AI

  1. The United States operates 81% of commercial satellites in orbit and holds 86% of global effective launch capacity so far in 2024, with NATO allies second in satellites at 11% and China second in launch at 9%.
  2. China is pursuing mega constellations of satellites and reusable rockets to close the gap, in many cases copying approaches already proven successful by US companies.
  3. Russia, India, and Japan trail the United States, Europe, and China in commercial space competition, and the United States has a window to extend its lead by acting quickly in partnership with like-minded nations.

Related Articles:

  • SpaceX’s Starship Rocket Successfully Completes 1st Return From Space — SpaceX's Starship completed its first return from space, with the booster setting down in the Gulf of Mexico and the upper-stage spacecraft surviving atmospheric re-entry for a controlled splashdown in the Indian Ocean. The flight was not flawless — the vehicle lost many heat-shield tiles and sustained a damaged flap — and technical hurdles remain.
  • Building an Enduring Advantage in the Third Space Age — The United States and China each logged their highest-ever annual launch rates, at 103 and 66 launches, while Russia fell to 19 and Europe recorded three. The US accounted for roughly half of global launches but 81% of effective launch capacity, since Falcon 9 and Falcon Heavy comprised 93% of US launches.
  • Space: The Missing Element of Your Strategy — Private-sector funding of space-related companies has topped $10bn, close to a tenfold rise over the past decade, though the US government remains the largest source of space funding. If current momentum continues, commercial funding for space ventures could surpass government funding within 20 years.

AI Summary. Canada's labor productivity is about 30% below the United States and roughly 10% below Australia's, and Canada has fallen from the 6th to the 18th most productive economy in the OECD. The authors attribute this to a shortfall in investment outside real estate, construction, and public services, plus negative multifactor productivity growth.

Nathan Janzen, Rajeshni Naidu-Ghelani, and Darren Chow Royal Bank of Canada
Date Posted:
Is Database:
Database

.@RBC analysts argue that slow investment is the biggest cause of Canada’s drop from the 6th most productive economy in the OECD in 1970 to the 18th as of 2022.

Why has Canada's productivity fallen behind other advanced economies?

Core argument: Canada has fallen from the 6th most productive economy in the OECD in 1970 to 18th as of 2022, and is 30% less productive than the United States, closer in economic performance to Alabama than to California or New York.

At the turn of the [21st] century, the economic output ofthe average Canadian was on par with Australia. Today,Australians are almost 10% more productive, while theireconomy has grown 50% per person faster than Canada’s. We’re further behind the United States. Canada is 30% less productive than the U.S. and closer to lower-income states like AL in terms of economic performance than tech-rich CA or NY. The result: We’ve fallen from the 6th most productive economy in the OECD in 1970 to the 18th as of 2022. Our relatively low [labor] productivity has been held back by a shortfall in investment, especially outside real estate, construction, and public services like hospitals. Since 1999, negative growth in multifactor productivity has been a secondary but important headwind. As a result, we’ve not been able to capitalize on the immigration boom that has added seven million people —most of them working-age and well-educated— since the turn of the century and offset the retirement wave of baby boomers.

Takeaways by Macro Roundup® AI

  1. Canada has fallen from the 6th most productive economy in the OECD in 1970 to 18th as of 2022, and is 30% less productive than the United States, closer in economic performance to Alabama than to California or New York.
  2. Australia and Canada had comparable economic output per person at the turn of the century, but Australians are now almost 10% more productive and Australia's economy has grown 50% faster per person.
  3. Canada's relatively low labor productivity has been held back by a shortfall in investment outside real estate, construction, and public services, with negative multifactor productivity growth since 1999 a secondary headwind, leaving an immigration boom of seven million people uncapitalized.

Related Articles:

  • A “Heat Dome” of Immigration — Canada has adopted some of the most aggressive immigration policies in the OECD, adding 1.273m residents in a year to reach a population of 41m — proportionally equivalent to the US admitting more than 10m immigrants annually. Canadians are increasingly angry as housing prices soar, sprawl expands, and traffic worsens.
  • Immigration Surge Fuels Male Population Boom in Canada — Canada's adult male population grew 3.4% over the past year versus 2.9% for women, the widest gap in nearly 50 years of records, as a higher share of male newcomers shifts the gender ratio. Among those aged 25 to 44, men outnumber women by 141,000, against a long-run average of zero.
  • Canadian Conservatives Have Found A Way To Win Back Young Voters — Canada's Conservative Party has doubled its vote share and moved into the lead, which the author attributes to an explicitly pro-youth platform centered on housebuilding, including proposals to withhold funds from cities that don't build enough housing and reward those that do. Housing affordability ranks as the second most important issue in Canada, behind the broader cost-of-living crisis.

Friday, August 9, 2024

AI Summary. The authors estimate that mortgage rate lock-in reduced cumulative household moves across ZIP codes from about 7.3% to 6.1% over a year, preventing roughly 800,000 moves. They calculate the resulting deadweight loss at about $296 per household, or around $20bn in aggregate.

Jack Liebersohn and Jesse Rothstein National Bureau of Economic Research
Date Posted:

.@liebersohn and @rothstein_jesse estimate that since rate hikes began in mid-2021, “around 1,000,000 fewer people with a mortgage moved than would have if there had been no rate lock,” resulting in a deadweight loss of $20 billion per year.

How much does mortgage rate lock-in reduce household mobility and welfare?

Core argument: Mortgage rate lock reduced cumulative ZIP code mobility from about 7.3% to 6.1% between 2022q3 and 2023q2, preventing an estimated 800,000 moves across ZIP codes.

Figure B.1 shows the actual and counterfactual mobility hazards by quarter. In 2021q2, when the average rate gap was essentially zero, both the actual and counterfactual quarterly ZIP code mobility hazard in our sample were around 1.5%. Over the entire last year of our sample, which extends from 2022q3 to 2023q2, rate lock reduced cumulative mobility from about 7.3% to 6.1%; 800,000 moves across ZIP codes were prevented. To calculate the deadweight loss [from reduced mobility we] consider the demand for moving as a linear function of the present value of the payment gap and decreasing in wealth; by integrating under the demand curve for moving, we can calculate the welfare losses. We calculate that a 2.7 percentage point rate gap is equivalent to a difference in average mortgage balance value – the “price” of moving – of $49,400. This implies a deadweight loss of about $296 per household from 2022q3-2023q2, the last year of the sample. In aggregate, these losses amount to around $20bn in that year.

Takeaways by Macro Roundup® AI

  1. Mortgage rate lock reduced cumulative ZIP code mobility from about 7.3% to 6.1% between 2022q3 and 2023q2, preventing an estimated 800,000 moves across ZIP codes.
  2. The authors estimate a deadweight loss from reduced mobility of about $296 per household over 2022q3–2023q2, amounting to roughly $20bn in aggregate that year.
  3. A 2.7 percentage point rate gap is equivalent to a $49,400 difference in average mortgage balance value, the "price" of moving, in the authors' linear demand model for moving.

Related Articles:

  • A Huge Number of Homeowners Have Mortgage Rates Too Good to Give Up — About 70% of US mortgage holders hold rates more than three percentage points below what a new loan would cost, compared with a 1998–2020 period in which no more than 40% had rates even one point below market. Economists at the Federal Housing Finance Agency estimate this lock-in effect accounts for roughly 1.3m fewer home sales.
  • The Transmission Mechanism of Monetary Policy Is Much Slower than Normal — The share of outstanding US mortgages with interest rates below 4% has risen from 38% before the pandemic to 63%, leaving millions of households insulated from Federal Reserve rate increases. The author argues this slows the transmission of monetary policy and will require the Federal Reserve to hold rates higher for longer to contain inflation.
  • The Lock-In Effect of Rising Mortgage Rates — The authors estimate that each percentage point by which market mortgage rates exceed a homeowner's original rate lowers the probability of sale by 18.1%, an effect they calculate prevented 1.33m US home sales. They estimate this supply reduction raised home prices by 5.7%, outweighing a 3.3% price decline from higher rates.

AI Summary. China's National Bureau of Statistics reports that about 30% of industrial firms were loss-making, above the prior recorded peak during the 1998 Asian financial crisis, with the number of loss-making companies up 44% over six months. China's leadership has said the market must filter out weak producers and promote strong ones.

Economist Staff The Economist
Date Posted:

In June ~ 30% of China’s industrial firms were loss-making, up from 10% in 2011; In its July plenum, “China’s politburo said that the market must filter out weak producers and promote strong ones.” @TheEconomist

Are a record share of China's industrial firms losing money?

Core argument: About 30% of China's industrial firms were loss-making at the end of June, exceeding the previous recorded peak set during the 1998 Asian financial crisis, according to the National Bureau of Statistics.

About 30% of industrial firms were loss-making at the end of June, rising above the previous recorded peak during the Asian financial crisis in 1998, according to the National Bureau of Statistics. Its survey of more than 500,000 companies shows a startling deterioration in the conditions for industrial firms in the first half of the year, during which the number of loss-making companies surged by 44%. In its July meeting, China’s politburo said that the market must filter out weak producers and promote strong ones. In time, that should lead to more capital and labour being allocated to China’s most productive manufacturers, making them mightier still. But it will be painful.

Takeaways by Macro Roundup® AI

  1. About 30% of China's industrial firms were loss-making at the end of June, exceeding the previous recorded peak set during the 1998 Asian financial crisis, according to the National Bureau of Statistics.
  2. The National Bureau of Statistics survey of more than 500,000 companies shows the number of loss-making industrial firms surged by 44% in the first half of the year.
  3. China's politburo said at its July meeting that the market must filter out weak producers and promote strong ones, which should in time allocate more capital and labour to the most productive manufacturers, though painfully.

Related Articles:

  • China’s Real Economic Crisis — China's emphasis on industrial output has produced overinvestment in sectors where domestic demand is already saturated and foreign governments are wary of Chinese supply chain dominance, with surplus steel capacity eventually exceeding the combined steel output of Germany, Japan, and the United States. Similar excesses have appeared in coal, aluminum, glass, cement, robotics, and electric-vehicle batteries.
  • Which Country Should Design U.S. Industrial Policy? — Manufacturing is 15% of global GDP but 11% of U.S. GDP versus 19% in Germany, 21% in South Korea, 26% in mainland China, and 34% in Taiwan, according to World Bank data. The author argues this gap stems from trade and industrial policies in surplus economies that effectively force households to subsidize manufacturing, drawing global manufacturers toward the largest subsidies.
  • China’s Record Manufacturing Surplus — China's manufacturing trade surplus has reached about 2% of world GDP, exceeding the peak surpluses of export powerhouses like Japan and Germany, and shows no signs of shrinking as policy continues to emphasize advanced manufacturing capacity. The main offsetting manufactured-goods deficit is in the United States rather than commodity exporters.

AI Summary. Japan's consumption share of GDP bottomed at 63.3% and took seventeen years to rise 10 percentage points, to 73.8%, while Japan's share of global GDP fell from 15% to 7.9%; China's consumption share was 53.4%. Countries including the Soviet Union and Japan have tried to resolve demand imbalances through technology-driven supply-side measures, which has proved harder than expected.

Michael Pettis Carnegie Endowment for International Peace
Date Posted:

.@michaelxpettis argues that supply-side measures focused on developing new technologies won’t substitute for rebalancing the Chinese economy; he notes the same approach failed in Japan in the early 1990s.

Can technology-driven supply-side measures resolve deep domestic demand imbalances?

Core argument: Japan's consumption share of GDP bottomed at 63.3% in 1991 and took seventeen years to rise 10 percentage points to 73.8% by 2008, still below the global average, while China's stood at 53.4% in 2022.

The consumption share of Japan’s GDP bottomed out at 63.3% in 1991 (compared to 53.4% for China in 2022), and it took seventeen years for the consumption share to rise by 10 percentage points. In 2008, it had reached 73.8% (still below the global average). During that time, Japan’s share of global GDP dropped from 15% to 7.9%. I am not arguing that an intense supply-side focus on developing new technology won’t make a difference for China and will fail. It is certainly possible that such a focus could help China avoid—or at least reduce—a long and difficult adjustment associated with boosting a very weak demand side of the economy. But it is foolish to suggest that such a focus must inevitably work, and even more foolish to claim that China is the first country to try this approach. Many countries have tried to resolve demand imbalances with technology-driven supply-side measures—most notoriously the Soviet Union in the 1960s and Japan in the late 1980s and early 1990s—but it has always proved far more difficult than expected.

Takeaways by Macro Roundup® AI

  1. Japan's consumption share of GDP bottomed at 63.3% in 1991 and took seventeen years to rise 10 percentage points to 73.8% by 2008, still below the global average, while China's stood at 53.4% in 2022.
  2. Japan's share of global GDP fell from 15% to 7.9% over the seventeen years its consumption share was rising.
  3. Many countries have tried to resolve demand imbalances with technology-driven supply-side measures—most notoriously the Soviet Union in the 1960s and Japan in the late 1980s and early 1990s—but it has always proved far more difficult than expected.

Related Articles:

  • How Xi Jinping Plans To Overtake America — China's leadership has pledged a "whole of nation" push for technological self-reliance, applying science and technology to production, with the central government's budget raising annual science and technology spending by 10%, the largest percentage increase of any category. Rhodium Group estimates China spent about $420bn, or 2.8% of GDP, on science and technology.
  • The Dangerous Myth of Deglobalization — China's manufacturing surplus rose by about 1 percentage point of global GDP over a four-year span and is far larger than those of Germany and Japan. China's $800bn goods trade surplus depends on the large U.S. trade deficit, which is still indirectly financed by China through the large offshore dollar stockpiles held by Chinese exporters.
  • The Neoclassical Growth of China — China's per capita GDP growth path closely tracks those of Japan, South Korea, and Taiwan from similar starting income levels, indicating nothing unusual about its growth rate. The authors' model projects China's per capita GDP will level off at about 41% of the US level, reflecting a slowdown in productivity catch-up.

AI Summary. The argument that a sharp stock decline reflects investors unwinding borrowing in low-interest yen to buy higher-yielding dollar assets has holes, since bonds are safer and easier collateral for harvesting the interest-rate gap. An unwind should therefore involve selling US bonds too, not rotating from US stocks into bonds.

John Cochrane The Grumpy Economist
Date Posted:

John Cochrane argues that the yen carry trade was not the cause of the August 5 stock market crash: “The most natural ‘carry trade’ is to borrow in Japan and invest in US short-term fixed income, not equities.”

Does the carry trade unwind explain a stock market decline?

Core argument: The stock market reaction is out of proportion to any of the alleged news events cited as its cause.

The stock market reaction is clearly way out of proportion to any of the alleged news events. One story being told is the unwinding of the “Japanese carry trade.” Interest rates in Japan have been very low. So, investors borrow in yen (near 0%) to invest in dollars (5%), or dollar stocks (5% plus equity premium). That strategy makes a lot of money until the yen rises. Losers then sell their US stocks to repay the loans, pushing prices down more. Nice story. Does it hang together? This “currency carry trade” has been around for decades, produces steady returns from the lower interest rate in the borrowing country than the lending country, and ends with an occasional crash when the exchange rate movers. On a market level, the story has a few holes. Bonds are easier to use as collateral, and are less risky. You can harvest the 5% difference in interest rates with a lot less risk. So when the music stops, you’d expect investors to be selling US bonds at least as well as stocks, not to rotate from US stocks to bonds.

Takeaways by Macro Roundup® AI

  1. The stock market reaction is out of proportion to any of the alleged news events cited as its cause.
  2. The yen carry trade story holds that investors borrow in yen near 0% to invest in dollar assets yielding 5%, profiting until the yen rises and losers sell US stocks to repay the loans.
  3. The carry trade explanation has holes: bonds are easier to use as collateral and less risky for harvesting the 5% interest rate difference, so an unwinding would involve selling US bonds at least as much as stocks rather than rotating from stocks into bonds.

Related Articles:

  • There’s No Place Like Home — Deutsche Bank estimates Japanese households, pension plans, banks and the Bank of Japan built a $20tn carry trade funded by low-cost yen deposits and invested in overseas and longer-duration assets. A Bank of Japan hike of 25 basis points helped trigger a 14% yen rally, among the largest in 40 years.

AI Summary. An antitrust remedy barring Google from making payments or revenue-sharing deals for search distribution would spur more innovation and competition from both Google and its rivals, benefiting consumers. This approach is the opposite of European Union regulation, which pushes toward product stasis.

Ben Thompson Stratechery
Date Posted:

.@BenThompson argues that Google “stagnates by being too nice” to potential competitors. Banning default search deals, like the one that generates profits of ~$20B/year for Apple, would promote competition and ultimately benefit consumers.

Would banning payments for search distribution spur more innovation and competition?

Core argument: The author argues the remedy should be an injunction barring Google from making any payments or revenue share for search, on the view that consumers and Google are both better off if the company has more enemies.

I would also note that the behavior I am calling for — more innovation and competition, not just from Google’s competitors, but Google itself — is the exact opposite of what the European Union is pushing for, which is product stasis. I think the E.U. is mistaken for the exact same reasons I think Judge Mehta is right. There’s also the political point: I am an American, and I share the societal sense of discomfort in dominant entities that made the Sherman Antitrust Act law in the first place; yes, it’s possible this decision doesn’t mean much in the end, but it’s pushing in a direction that is worth leaning into. This is why, ultimately, I am comfortable with the implications of my framework, and why I think the answer to the remedy question is an injunction against Google making any sort of payments or revenue share for search; It has been very profitable to be Google’s friend; I think consumers — and Google — are better off if the company has a few more enemies.

Takeaways by Macro Roundup® AI

  1. The author argues the remedy should be an injunction barring Google from making any payments or revenue share for search, on the view that consumers and Google are both better off if the company has more enemies.
  2. The author contends the goal should be more innovation and competition from Google itself as well as its competitors, the opposite of the European Union's push for product stasis, which he considers mistaken.
  3. The author supports Judge Mehta's decision, citing the discomfort with dominant entities that made the Sherman Antitrust Act law, while allowing the ruling may not mean much in the end.

Related Articles:

  • Lax Merger Enforcement Is a Myth — 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.
  • 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.

AI Summary. US defence technology start-up Anduril Industries raised $1.5bn at a $14bn valuation, double its valuation at its previous fundraising, amid surging investment in the sector. The company will fund new manufacturing facilities intended to mass produce tens of thousands of autonomous weapons systems for the US and its allies.

George Hammond and Tabby Kinder Financial Times
Date Posted:

Defense technology start-up Anduril has raised $1.5B to accelerate mass production of “tens of thousands of autonomous weapons systems addressing the urgent needs of the United States and our allies.”

Is investment surging in defence technology start-ups building autonomous weapons?

Core argument: Anduril Industries raised $1.5bn at a $14bn valuation, double its valuation at its previous fundraising in December 2022, as investment in defence technology surges on the back of the conflict in Ukraine.

Defence technology start-up Anduril Industries has raised $1.5B to accelerate the production of autonomous weapons for the US military and its allies, as investment in the sector surges on the back of conflict in Ukraine. This latest investment values the California-based start-up at $14B, double its valuation in December 2022, the last time the company raised money. The seven-year-old company will invest the funds into new manufacturing facilities capable of mass producing “tens of thousands of autonomous weapons systems addressing the urgent needs of the United States and our allies”. Anduril will invest “hundreds of millions” of dollars to develop the first factory, named Arsenal-1, which will be in the US — although the company declined to specify where.

Takeaways by Macro Roundup® AI

  1. Anduril Industries raised $1.5bn at a $14bn valuation, double its valuation at its previous fundraising in December 2022, as investment in defence technology surges on the back of the conflict in Ukraine.
  2. Anduril will direct the funds into new manufacturing facilities capable of mass producing what it describes as "tens of thousands of autonomous weapons systems" for the US military and its allies.
  3. The seven-year-old company will spend "hundreds of millions" of dollars on its first factory, Arsenal-1, to be located in the US at a site Anduril declined to specify.

Related Articles:

  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.
  • Why is the U.S. Navy Running Out of Tomahawk Cruise Missiles? — The U.S. Navy has been firing Tomahawk land-attack cruise missiles faster than it can replace them, with opening-day strikes in Yemen expending more than 80 missiles against 30 targets. An entire year's purchase of 55 Tomahawks accounted for 68% of the precision munitions fired at the Houthis in a single day.
  • U.S. Weapons Industry Unprepared for a China Conflict, Report Says — A Center for Strategic and International Studies report argues the U.S. defense industrial base is not prepared for the current security environment and operates in a manner better suited to peacetime. The study recommends reassessing total munitions requirements and stockpile replenishment needs, creating a strategic munitions reserve, and setting a sustainable procurement plan.