Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, August 20, 2024

AI Summary. The authors find China's tariff cuts after joining the World Trade Organization exceeded the norm of reciprocity, which raised aggregate real incomes in the United States and the rest of the world through better terms of trade while amplifying the China Shock. They estimate this shifted employment from tradable to non-tradable sectors abroad.

Chad Bown, Lorenzo Caliendo, Fernando Parro, Robert Staiger, and Alan Sykes National Bureau of Economic Research
Date Posted:
Is Database:
Database

.@ChadBown and team find that China’s tariff reductions in its WTO accession exceeded reciprocity norms, increasing real incomes but driving an incremental 4% decline in labor demand for tradable goods in the rest of the world.

Did one-sided tariff cuts raise incomes while amplifying trade shocks?

Core argument: China's tariff reductions after its WTO accession exceeded the norm of reciprocity, under which exchanged tariff cuts leave relative world prices between countries unchanged.

When countries exchange tariff cuts that abide by reciprocity, relative world prices (the terms of trade between them) do not change. We find the tariff reductions China implemented after its WTO accession exceeded the norm of reciprocity. This deviation from reciprocity increased aggregate real incomes in the United States and in the rest of the world through improvements in their terms of trade, but it also amplified the magnitude of the China Shock. Figure 2 presents the percentage change in employment in the tradable sector and in the non-tradable sector in the rest of the world due to the movement in the terms of trade resulting from the actual changes in tariff between China and the rest of the world from 1990-2007. We find that China exceeding reciprocity resulted in employment shifting from the tradable sector to the nontradable sector in the rest of the world.

Takeaways by Macro Roundup® AI

  1. China's tariff reductions after its WTO accession exceeded the norm of reciprocity, under which exchanged tariff cuts leave relative world prices between countries unchanged.
  2. China's deviation from reciprocity raised aggregate real incomes in the United States and the rest of the world through improvements in their terms of trade, while also amplifying the magnitude of the China Shock.
  3. Terms-of-trade movements from the actual tariff changes between China and the rest of the world from 1990 to 2007 shifted employment in the rest of the world from the tradable sector to the non-tradable sector.

Related Articles:

AI Summary. The authors introduce "fiscal r-star," the real interest rate needed to stabilize government debt, and find across 140+ years of data for 16 advanced economies that wider gaps between market and fiscal r-star are associated with rising debt, higher inflation, financial repression, and elevated crisis risks.

Marijn Bolhuis, Jakree Koosakul and Neil Shenai International Monetary Fund
Date Posted:

.@MA_Bolhuis notes that over the last 60 years, monetary R* was significantly below “fiscal R*”, the rate required to stabilize debt as a % of GDP, but that a narrowing gap requires growth-enhancing reforms and fiscal consolidation to avoid inflation.

Does a gap between market and debt-stabilizing interest rates raise inflation?

Core argument: Drawing on over 140 years of data from 16 advanced economies, the authors find larger gaps between monetary r* and fiscal r* are associated with rising debt levels, higher inflation, financial repression, and lower real returns on bonds and cash.

This paper explores tensions between active fiscal and monetary policies by introducing the concept of “fiscal r-star,” which is the real interest rate required to stabilize debt levels when the primary balance is set exogenously, output is growing at potential, and inflation is at target. An analysis of over 140 years of data from 16 advanced economies shows that larger gaps [between monetary r* and fiscal r*] are associated with rising debt levels, higher inflation, financial repression, lower real returns on bonds and cash, with elevated risks of future debt, inflation, currency, housing, and systemic crises. Current estimates indicate that fiscal-monetary tensions are at historic highs. Given the tepid growth outlook, growth-enhancing reforms and fiscal consolidation, among other policy adjustments, may be needed to attenuate fiscal-monetary tensions over time.

Takeaways by Macro Roundup® AI

  1. Drawing on over 140 years of data from 16 advanced economies, the authors find larger gaps between monetary r* and fiscal r* are associated with rising debt levels, higher inflation, financial repression, and lower real returns on bonds and cash.
  2. The authors define "fiscal r-star" as the real interest rate required to stabilize debt levels when the primary balance is set exogenously, output grows at potential, and inflation is at target.
  3. Larger gaps between monetary r* and fiscal r* are associated with elevated risks of future debt, inflation, currency, housing, and systemic crises, and current estimates place fiscal-monetary tensions at historic highs.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
  • Weaker Demand for Treasuries — Recent 10-year and 30-year US Treasury auctions each cleared three basis points above the yields trading minutes beforehand, signaling demand significantly weaker than the market expected. Larger and more frequent such gaps since the Federal Reserve began raising interest rates make auction metrics an early indicator of weakening Treasury demand.

AI Summary. An analysis of 39 cities with consistent monthly crime reporting found homicides, robberies and aggravated assaults all lower in the first half of the year than in both the prior year and the first half of 2019. High-frequency data from 277 cities showed murders down 17.6% year over year.

Justin Fox Bloomberg
Date Posted:
Is Database:
Database

While noting a decline in homicides reported by the FBI, @foxjust argues the upcoming release of the 2023 National Crime Victimization Survey will be a better confirmation that the crime wave is in fact receding.

Are violent crime rates falling below pre-pandemic levels?

Core argument: Murders across the 277 cities tracked by AH Datalytics were down 17.6% as of mid-August versus the same period last year, a decline that if sustained and nationally representative would retrace all of the 2020–2021 murder rate rise and more.

A Council on Criminal Justice analysis of data from 39 cities that have been consistently reporting monthly crime statistics for the past six years found that homicides, robberies and aggravated assaults were all down in the first half of this year relative not just to last year but to the first half of 2019. In the 277 cities from which AH Datalytics collects high-frequency data, murders were down 17.6% as of mid-August relative to the same period last year — a decline that if it (1) holds up for the full year and (2) turns out to be representative of murders nationwide would mean the national murder rate would have retraced all of its rise in 2020 and 2021 and then some. Over the decades, the [National Crime Victimization] survey’s findings have mostly paralleled the FBI’s crime numbers, but the 2022 edition found a marked increase in violent crime victimization over 2020 and 2021 even as reported violent crime fell. I’m betting it will have fallen back again in 2023. If it doesn’t, like many Americans, I’ll get a little more skeptical of the crime decline.

Takeaways by Macro Roundup® AI

  1. Murders across the 277 cities tracked by AH Datalytics were down 17.6% as of mid-August versus the same period last year, a decline that if sustained and nationally representative would retrace all of the 2020–2021 murder rate rise and more.
  2. A Council on Criminal Justice analysis of 39 cities consistently reporting monthly crime data over the past six years found homicides, robberies and aggravated assaults all lower in the first half of this year than in the first halves of both last year and 2019.
  3. The National Crime Victimization Survey's findings have mostly paralleled FBI crime numbers over the decades, but its 2022 edition found a marked increase in violent crime victimization over 2020 and 2021 even as reported violent crime fell.

Related Articles:

  • Violent Crime Is Falling, But That’s Not the Whole Story — Violent crime in large US cities and some of the largest suburban counties fell 2.6% and homicides fell 10.4% after three straight years of increases, but both remained above pre-pandemic levels, according to the Major Cities Chiefs Association. Federal Bureau of Investigation data show a milder pattern because they also cover suburbs, small towns, and rural areas.
  • New York’s Subways Have Less Crime but More Violence — Major crime on New York's subways is on track to run 13.4% below 2019 levels, but ridership remains down about a third, so crime per rider is much higher this year than from 2006 through 2019. Property crime has not risen; violent incidents account for the increase.
  • Homicides Are Plummeting in American Cities — Felony assaults in New York City's subway have risen two- to threefold since the pandemic, a pattern that does not match the rest of the country and appears connected to local criminal justice practices. Research finds that ending cash bail for most misdemeanors and nonviolent felonies is associated with increased repeat offending among those previously charged with violent felonies.

AI Summary. The Silver Bulletin presidential election forecast rates the race as essentially 50/50, with Harris holding a slight edge. Newly added state-level polls more favorable to Trump left the forecast's topline numbers unchanged.

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

Going into the democratic convention @NateSilver538 model gave Harris a 53.6% probability of winning the electoral college versus a 45.7% probability of a Trump win; the race is a coin flip though “Harris has the ever-so-slightly stronger hand.”

Is the presidential race still essentially a coin flip?

Core argument: The Silver Bulletin 2024 presidential forecast holds the race at basically 50/50, with Kamala Harris holding a slightly stronger position than Donald Trump.

As the DNC kicks off our forecast is holding steady. We’ve added some new state-level polls that are much better for Trump than last week’s New York Times/Siena poll, but they didn’t change our topline numbers. The race is still basically 50/50, though Harris has the ever-so-slightly stronger hand.

Takeaways by Macro Roundup® AI

  1. The Silver Bulletin 2024 presidential forecast holds the race at basically 50/50, with Kamala Harris holding a slightly stronger position than Donald Trump.
  2. State-level polls added to the Silver Bulletin forecast are much better for Trump than the prior week's New York Times/Siena poll, yet they left the topline numbers unchanged.

Related Articles:

  • Harris Puts Four Sun Belt States Back in Play, Times/Siena Polls Find — Polling of likely voters in four Sun Belt states shows Harris leading Trump 50% to 45% in Arizona, edging ahead in North Carolina, and narrowing his lead in Georgia and Nevada, with the two tied at 48% across the four-state average.
  • Let’s Recap: 2023 At A Glance — Bank of America found that Sun Belt cities such as Phoenix, Miami, Tampa, and Atlanta experienced a stronger housing boom, with rents and mortgage costs rising more than in the Northeast and West. Potential explanations include domestic migration driven by affordability, above-average employment gains, and a growing share of higher-paid jobs.
  • The 2024 Election Won’t Be Up To the Same Voters Who Chose Biden — Polling of likely voters in four Sun Belt states shows Harris leading Trump 50% to 45% in Arizona, edging ahead in North Carolina, and narrowing his lead in Georgia and Nevada, with the two tied at 48% across the four-state average.

Wednesday, August 21, 2024

AI Summary. The share of patients taking semaglutide for weight control rather than type 2 diabetes rose from under 10% in 2019 to 41.7%. Obesity and overweight, affecting 1 in 8 people worldwide, cost the global economy $2tn — nearly 70 cents on the dollar from premature mortality and lost productivity — an impact projected to double by 2035 absent intervention.

Azeem Azhar and Nathan Warren Exponential View
Date Posted:

.@ExponentialView argues that GLP-1 agonists like Ozempic and Mounjaro “will be the most impactful technology in the US over the next two years,” countering the $2T global economic costs of overweight and obesity, projected to double by 2035.

Are weight-loss drugs poised to deliver trillions in economic gains?

Core argument: The share of semaglutide patients taking the drug for weight control rose from under 10% in 2019 to 41.7% by the middle of last year, expanding use beyond its initial type 2 diabetes focus.

While GLP-1s were initially focused on patients with type 2 diabetes, their effectiveness for weight management has seen demand grow outside of their initial treatment purpose. In 2019, fewer than 10% of patients on semaglutide were taking it for weight control. By the middle of last year, that proportion surged to 41.7%. Besides bolstering the pockets of big pharma, the economic potential of GLP-1s comes in its second and third-order impacts. 1 in 8 people worldwide are living with obesity. Alongside those who are overweight, they cost the global economy $2 trillion. Nearly 70 cents in the dollar is due to indirect costs – premature mortality and productivity losses associated with ill health. Without intervention, this impact is expected to double by 2035.

Takeaways by Macro Roundup® AI

  1. The share of semaglutide patients taking the drug for weight control rose from under 10% in 2019 to 41.7% by the middle of last year, expanding use beyond its initial type 2 diabetes focus.
  2. Obesity affects 1 in 8 people worldwide, and together with those who are overweight costs the global economy $2 trillion, with nearly 70 cents on the dollar from indirect costs such as premature mortality and productivity losses.
  3. Without intervention, the economic cost of obesity and being overweight is expected to double by 2035, and the economic potential of GLP-1s lies in such second- and third-order impacts beyond pharmaceutical revenue.

Related Articles:

  • The Year of Ozempic — GLP-1 medications act on receptors in the gut, liver, muscles, and brain, and studies report they reduce heart attacks and strokes, slow kidney disease progression, and shrink liver fat deposits. Users have also reported diminished cravings for alcohol, tobacco, gambling, and other compulsive behaviors, though anecdotal reports outpace clinical studies.
  • How Weight Loss Drugs Stopped a Danish Recession — Strong demand for the weight-loss and diabetes drugs Ozempic and Wegovy has kept Denmark out of recession: GDP is up about 1.1% over the past year but down 0.9% excluding pharmaceuticals, meaning drugmakers added roughly 2% to growth. Booming exports let Denmark's central bank hold rates lower while maintaining its euro peg.

AI Summary. Sharply higher prices during disasters or demand surges—often labeled price gouging—occur in competitive markets rather than through monopoly, collusion, or price-fixing, arising when supply contracts or demand spikes. Allowing prices to rise directs limited supply to those who need it most.

John Cochrane The Grumpy Economist
Date Posted:

.@JohnHCochrane argues “We should praise price-gouging. “Windfall” profits belong in the pantheon of saints along with price-gouging. In competitive industries, that’s what encourages people to enter and offer new supply.”

Do sharply higher prices during shortages allocate scarce supply efficiently?

Core argument: Price gouging arises in perfectly competitive markets when a demand surge or supply contraction leaves too little to go around, which distinguishes it from monopoly pricing, collusion, or price-fixing.

The classic case of “price gouging” happens in a natural disaster or pandemic. A hurricane is coming, people run down to hardware stores and clean out the 4’x8’ plywood to board up their windows. Stores raise their prices, people who have them sell at high prices to those that don’t. In the pandemic, people got worried about toilet paper and went out to buy, cleaning out shelves. Stores that raised prices were accused of “gouging.” Price gouging is fundamentally different from monopoly pricing, collusion, or price-fixing. Price gouging happens in perfectly competitive markets. There suddenly isn’t enough to go around, either from a surge in demand or a contraction in supply. Prices rise sharply above what people are used to paying. Those that have inventories, bought when prices were lower, can turn around and make a temporary profit. Price gouging is wonderful for all the reasons that letting supply equal demand is wonderful. When there is a limited supply, then a sharply higher price directs that supply to those who really need it.

Takeaways by Macro Roundup® AI

  1. Price gouging arises in perfectly competitive markets when a demand surge or supply contraction leaves too little to go around, which distinguishes it from monopoly pricing, collusion, or price-fixing.
  2. Sharply higher prices for a limited supply direct that supply to those who really need it, the same reason letting supply equal demand works, the author argues.
  3. Hurricanes and the pandemic illustrate the pattern, as buyers cleared hardware stores of 4'x8' plywood and emptied shelves of toilet paper, and stores that raised prices were accused of gouging.

Related Articles:

  • When Your Opponent Calls You ‘Communist,’ Maybe Don’t Propose Price Controls? — Proposed federal legislation would ban "grossly excessive" prices during any "atypical disruption" of a market without defining those terms, empowering the Federal Trade Commission to enforce the ban using whatever metric it chooses. The author argues this amounts to sweeping government price controls across every industry, replacing supply and demand with bureaucratic judgment.
  • What Was Up with Grocery Prices? — Retail grocery workers' wages rose roughly 15 percentage points more than wages in food manufacturing and the overall workforce, and profit margins at food and beverage stores increased from 2.9% to 4.4% while food manufacturing margins were little changed at about 6.8%. That margin increase is small relative to the 25% rise in grocery prices.
  • An Update About How Inflation Has Affected Households at Different Income Levels Since 2019 — The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.

AI Summary. New York City's population is shrinking as domestic out-migration has accelerated, with those leaving tending to be younger, higher-income, and with fewer children than the city's overall population. Census Bureau surveys that ask movers their reasons indicate jobs matter more than any other consideration, including housing affordability.

Aziz Sunderji Home Economics
Date Posted:

New York City’s population has shrunk by 6% since 2020 driven by older people moving to Florida, and job opportunities luring higher-income younger people to Tier 1 cities, and lower-income younger people to low-cost cities. @AzizSunderji

Are jobs driving out-migration from New York City more than housing costs?

Core argument: New York City's population is shrinking because domestic out-migration has accelerated, with those leaving skewing younger, higher income, and having fewer children than the overall city population.

New York City is shrinking because the pace of domestic out-migration has accelerated. Most people who leave the city are younger, higher income, and have fewer kids, compared to the overall New York City population. Jobs seem to be the most important driver of emigration, more than housing affordability. Higher-earning young New Yorkers are moving to places like Los Angeles, San Francisco, and Washington, DC—hardly bastions of cheap homes. Moreover, Census Bureau surveys that directly ask about the reason for moving show that, for emigrating New Yorkers, jobs are more important than any other consideration. There is evidence that some of these emigrants are motivated by concerns about stretched home affordability: some younger, lower income New Yorkers are moving to cheaper cities, particularly in Texas. This is not incompatible with jobs also being a key concern: payroll data shows that companies in Florida and Texas have been hiring more people than those in New York, especially over the last decade.

Takeaways by Macro Roundup® AI

  1. New York City's population is shrinking because domestic out-migration has accelerated, with those leaving skewing younger, higher income, and having fewer children than the overall city population.
  2. Jobs appear to outweigh housing affordability as the driver of departures from New York City, with higher-earning young residents moving to Los Angeles, San Francisco, and Washington, DC, and Census Bureau surveys ranking jobs above any other stated reason for moving.
  3. Some younger, lower-income New Yorkers are moving to cheaper cities, particularly in Texas, and payroll data show companies in Florida and Texas hiring more people than those in New York, especially over the last decade.

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.
  • Booming Southern Cities and the Shrinking Northeast — Population growth since 2020 has been concentrated in southern cities and across most of the West except its largest metros such as San Francisco, San Jose, and Portland, while the Midwest and Northeast have lost population, especially in smaller towns. Larger places continue to grow faster than smaller ones, though by a narrower margin than before 2020.
  • On The Move: Hidden Costs And Slowing Spending — 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.

AI Summary. China has stopped publishing daily data on foreign investment flows into mainland stocks through the Hong Kong trading link, shifting to quarterly disclosure of foreign holdings. International investors have withdrawn more than $12bn from mainland Chinese equities, pushing net flows for the year negative; there has never been a full year of net outflows since the link launched in 2014.

Arjun Neil Alim Financial Times
Date Posted:

Beijing has restricted trading data that traced net investment flows from foreign funds into Chinese stocks; since June foreign investors have pulled more than $12B out of Chinese equities.

Is China limiting foreign investment flow data as investors withdraw?

Core argument: International investors have pulled more than $12bn out of mainland Chinese equities since the start of June, according to Hong Kong stock exchange data, reversing earlier inflows and pushing year-to-date net flows negative.

On Monday, daily data showing net investment flows from foreign funds into stocks in mainland China — so-called northbound trades from Hong Kong via the Stock Connect trading link — was no longer available. Information on foreign stock holdings will instead be available quarterly. The move comes as international investors have pulled more than $12bn out of mainland Chinese equities since the start of June, according to Hong Kong stock exchange data, reversing earlier inflows that many analysts said were driven by the offshore arms of state-backed institutions, and taking year-to-date net flows into the red. There has never been a full year of net outflows since Stock Connect — which allows foreign investors access to China’s stock market — launched in 2014.

Takeaways by Macro Roundup® AI

  1. International investors have pulled more than $12bn out of mainland Chinese equities since the start of June, according to Hong Kong stock exchange data, reversing earlier inflows and pushing year-to-date net flows negative.
  2. Daily data on net foreign investment flows into mainland Chinese stocks via the Stock Connect link became unavailable on Monday, with information on foreign stock holdings to be published quarterly instead.
  3. Stock Connect, which opened China's stock market to foreign investors in 2014, has never recorded a full year of net outflows.

Related Articles:

  • Anatomy of Capital Fight in China… — Unaccounted capital outflows from China show up not only in the balance of payments' net errors and omissions category but also in net other investment and in the gap between customs-reported and foreign-exchange-reported goods trade balances. This combined residual averaged roughly $100bn per quarter, and about twice that during periods of heavier outflow pressure.
  • The New Money Laundering Network Fuelling The Fentanyl Crisis — Analysts estimate private capital flight from China has run at an annualized rate of roughly $516bn, peaking near $738bn, compared with about $94bn before the pandemic. Chinese officials and analysts attribute the outflows to wealthy entrepreneurs losing confidence in China's future and seeking ways to move money abroad through informal or illicit channels.
  • China to See Biggest Millionaire Exodus in 2024 as Many Head to U.S. — China is projected to see a record 15,200 high-net-worth individuals — those with at least $1m in assets — leave the country, the world's largest such outflow, according to a Henley & Partners report. The prior year's 13,800 departures went mostly to the US, Canada, and Singapore.