Edward Conard

Top Ten New York Times Bestselling Author

  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, October 10, 2024

AI Summary. The authors estimate that a rise in long-term Treasury yields was driven mainly by higher term premiums, reflecting the Federal Reserve shrinking its balance sheet, greater Treasury issuance, and heightened economic uncertainty. As yields later declined, shifting interest-rate expectations likely played a relatively larger role amid weaker-than-expected data.

Anthony Diercks and Dev Asnani Federal Reserve Board
Date Posted:

In 2023:H2 the 10-year soared from 4% to 5%, then retreated to 3.9%. Averaging existing term structure models, Diercks and Asnani note that the 2,10 spread moves almost one-for-one with the term premium, and interpret the 2023 episode accordingly.

What drove the rise in long-term Treasury yields?

Core argument: The authors attribute the rise in Treasury yields in the second half of 2023 primarily to higher term premiums, fueled by quantitative tightening, greater Treasury issuance, and heightened uncertainty about the economic outlook.

Our analysis suggests that the rise in yields [in the second half of 2023] was primarily driven by an increase in term premiums, fueled by the combination of quantitative tightening, greater Treasury issuance, and heightened uncertainty about the economic outlook. However, survey-based measures likely overstated the rise in term premiums due to their delayed response to economic developments, a sluggishness, for which we provide formal evidence. We find that as yields declined, expectations likely played a relatively larger role amid a series of lower than expected data prints. Additionally, we identify a useful rule of thumb that emerges when averaging across the models: a rise in the slope (10-year minus 2-year) corresponds nearlyone-to-one with a rise in term premiums, while changes in the 2-year yield seem to be evenly split between expectations and term premiums.

Takeaways by Macro Roundup® AI

  1. The authors attribute the rise in Treasury yields in the second half of 2023 primarily to higher term premiums, fueled by quantitative tightening, greater Treasury issuance, and heightened uncertainty about the economic outlook.
  2. Survey-based measures likely overstated the rise in term premiums because of their delayed response to economic developments, a sluggishness for which the authors provide formal evidence.
  3. Averaging across models yields a rule of thumb in which a rise in the 10-year minus 2-year slope corresponds nearly one-to-one with a rise in term premiums, while 2-year yield changes split evenly between expectations and term premiums.

Related Articles:

  • Liquidity Deteriorating in Treasury Markets — A liquidity gauge for US government debt measures the average gap between quoted yields and values implied by fitted yield curves across Treasury notes and bonds with at least one year to maturity, and it indicates deteriorating liquidity. Small average yield errors signal favorable conditions, as mispricings are corrected quickly.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.
  • Can U.S. Treasury Markets Add and Subtract? — Congressional Budget Office cost estimates of spending and tax legislation with large projected deficits lowered the valuation of outstanding U.S. Treasury securities by more than 20% over the period studied, with effects concentrated at longer maturities. The authors estimate 57 cents of every dollar of fiscal expansion is unbacked and passed through to Treasury valuations.

AI Summary. The United States remains the main outlier among developed countries resisting depopulation, with fertility of just over 1.6 births per woman — high for a rich country but below the 2.1 replacement threshold — plus steady immigration. The Census Bureau projects the U.S. population will peak around 2080 and decline continuously thereafter.

Nicholas Eberstadt Foreign Affairs
Date Posted:

Noting the global collapse in fertility – and in turn family structure – Nicholas Eberstadt @AEIecon notes “Just how depopulating societies will cope with this broad retreat of the family is by no means obvious.”

Will the United States eventually face population decline too?

Core argument: The U.S. total fertility rate stood at just over 1.6 births per woman in 2023, high for a rich country but far below the roughly 2.1 replacement threshold that applies in affluent countries with high life expectancy.

The United States remains the main outlier among developed countries, resisting the trend of depopulation. As a rule of thumb, a total fertility rate of 2.1 births per woman approximates the replacement threshold in affluent countries with high life expectancy. With relatively high fertility levels for a rich country (although far below replacement—just over 1.6 births per woman in 2023) and steady inflows of immigrants, the United States has exhibited what I termed in these pages in 2019 “American demographic exceptionalism.” But even in the United States, depopulation is no longer unthinkable. Last year, the Census Bureau projected that the U.S. population would peak around 2080 and head into a continuous decline thereafter. A revolution in the family—in family formation, not just in childbearing—is underway in societies around the world, [signs of which] include nonmarital cohabitation and temporary unions; and the increase in homes in which one person lives independently.

Takeaways by Macro Roundup® AI

  1. The U.S. total fertility rate stood at just over 1.6 births per woman in 2023, high for a rich country but far below the roughly 2.1 replacement threshold that applies in affluent countries with high life expectancy.
  2. The Census Bureau has projected that the U.S. population would peak around 2080 and enter continuous decline thereafter.
  3. Relatively high fertility for a rich country combined with steady immigrant inflows has given the United States what was termed in 2019 "American demographic exceptionalism.".

Related Articles:

  • The Global Fertility Crisis Is Worse Than You Think — Adjusting United Nations figures for lower recorded births, the author estimates the global fertility rate was 2.18, below the 2.21 replacement threshold. Population is not yet falling because women born in the 1990s and 2000s are having children while older generations live longer, so births still exceed deaths, with a projected peak in about 30 years.
  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.

AI Summary. Manufacturing's share of US employment has declined steadily since the end of the Second World War, with no obvious change in that rate after China joined the World Trade Organization or after the US adopted protectionist policies. The authors argue this suggests technology, including robotics and automation, primarily drives the trend.

Michael Strain Aspen Strategy Group
Date Posted:
Is Database:
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.@MichaelRStrain notes that US manufacturing employment declined steadily both before and after “The China Shock,” and cautions against the bipartisan turn to industrial policy and protectionism.

Does technology, not trade, drive the long decline in manufacturing employment?

Core argument: Manufacturing's share of US employment has fallen consistently since the end of the Second World War, with no obvious change in the rate of decline in the decade after China's 2001 WTO accession or during the post-2017 protectionist period.

Manufacturing’s share of employment has fallen consistently since the end of the Second World War. There is no obvious change in the rate at which manufacturing’s employment share declined during the decade following China’s accession to the World Trade Organization in 2001 or during the post-2017 period, when the US adopted protectionist policies. The slope of the trend line does change following the 2008 global financial crisis and Great Recession. This change roughly corresponds with the slowdown in aggregate US productivity growth, which is generally thought to have begun around 2005 and with the slowdown in manufacturing productivity growth. Labor productivity (output per hour for all workers) in the manufacturing sector has not grown since the 2008 financial crisis. Taken as a whole, this is suggestive evidence that advances in technology—robotics, automation—are primarily responsible for longer-term trends in manufacturing employment.

Takeaways by Macro Roundup® AI

  1. Manufacturing's share of US employment has fallen consistently since the end of the Second World War, with no obvious change in the rate of decline in the decade after China's 2001 WTO accession or during the post-2017 protectionist period.
  2. The slope of the manufacturing employment-share trend line does change after the 2008 financial crisis and Great Recession, roughly corresponding with the slowdown in aggregate US productivity growth generally thought to have begun around 2005 and in manufacturing productivity growth.
  3. Manufacturing labor productivity, measured as output per hour for all workers, has not grown since the 2008 financial crisis, evidence suggesting that advances in robotics and automation are primarily responsible for longer-term manufacturing employment trends.

Related Articles:

  • 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.
  • Manufacturing Jobs Have Recovered, But Not Everywhere — U.S. manufacturing employment recovered the 650,000 jobs lost in the 2020 recession, rising above 12.9m workers and exceeding the pre-pandemic level of 12.8m — the first such post-recession recovery since the late 1970s. Even so, manufacturing's share of private-sector employment fell from 31% in 1970 to 9.7%.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.

AI Summary. An analysis of American Time Use Survey data found that time Americans spend at home rose by 1 hour 39 minutes a day, or 10%, from 2003 through 2022, with much of it spent alone. Work done at home accounted for 29% of all work activity in 2022, up from 13% in 2003 and 17% in 2019.

Ronda Kaysen and Alicia Parlapiano New York Times
Date Posted:

Btw 2003 and 2022, Americans increased the amount of time spent at home by an hour and 40 minutes, or 10%. Americans 15-34 saw the greatest increase, gaining ~2 hours a day at home.

How much more time are Americans spending at home?

Core argument: Americans' time spent at home rose by 1 hour 39 minutes a day, or 10%, from 2003 through 2022, according to an analysis of American Time Use Survey census data, with much of that time spent alone.

A recent analysis of census data found that Americans are spending more time at home, and a large part of it alone. The analysis, based on responses to the American Time Use Survey, shows that time spent at home increased by 1 hour 39 minutes a day, or 10%, from 2003 through 2022. It’s a trend that rose sharply during the pandemic and had yet to return to more typical levels by 2022 — a sign that the pandemic may have hastened a cultural shift already in progress. The rise in working at home during the pandemic has been a big chunk of that, taking up 29% of all work activity in 2022. But even before then, from 2003 to 2019, the share of work time at home had crept up to 17% from 13%. Other activities followed a similar track — a gradual rise over years followed by a spike during the pandemic that was still felt sharply in the first two months of 2022.

Takeaways by Macro Roundup® AI

  1. Americans' time spent at home rose by 1 hour 39 minutes a day, or 10%, from 2003 through 2022, according to an analysis of American Time Use Survey census data, with much of that time spent alone.
  2. Work done at home accounted for 29% of all work activity in 2022, after the share of work time at home had already climbed from 13% in 2003 to 17% in 2019.
  3. Time at home rose sharply during the pandemic and had not returned to more typical levels by 2022, suggesting the pandemic may have hastened a cultural shift already in progress.

Related Articles:

AI Summary. Higher baseline Medicare prescription-drug spending plus a new demonstration program could cost $140bn through 2031, which the author estimates would eliminate nearly 60% of the deficit reduction projected from the Inflation Reduction Act. The Committee for a Responsible Federal Budget estimates the law's tax subsidies could cost $400bn above original projections.

James Capretta American Enterprise Institute
Date Posted:
Is Database:
Database

Savings from the 2022 Inflation Reduction Act will fall well short of @USCBO estimates. The promised deficit reduction will be 60% lower, mostly due to the higher-than-forecast cost of prescription drug coverage under Medicare Part D.

Is the projected deficit reduction from the drug-pricing law disappearing?

Core argument: If higher Medicare Part D baseline spending reaches $15 billion in 2025 and carries forward through 2031, the cost would total $105 billion, with a new CMS demonstration program maintained through 2031 adding $35 billion more.

Putting the data together, it is clear that higher baseline spending on Medicare part D, plus the added spending from the demonstration program, threatens to eliminate whatever might be left of the deficit reduction from the original IRA. Assuming the higher spending CBO cited for 2025 turns out to be $15 billion, and that this higher spending carries forward in the baseline through 2031, the total cost would be $105 billion. Further, if the new CMS demonstration is maintained through 2031 (which the PDPs are certain to press for), the total cost would go up by an additional $35 billion. The combined tab of $140 billion from the higher baseline and the new demonstration would eliminate nearly 60% of the total deficit reduction promised from the IRA. The other 40% was already at risk too. Based on data from the Joint Committee on Taxation and CBO, the Committee for a Responsible Federal Budget estimates the costs associated with the IRA’s various tax subsidies could be $400 billion above the original projections.

Takeaways by Macro Roundup® AI

  1. If higher Medicare Part D baseline spending reaches $15 billion in 2025 and carries forward through 2031, the cost would total $105 billion, with a new CMS demonstration program maintained through 2031 adding $35 billion more.
  2. The combined $140 billion tab from higher Part D baseline spending and the new CMS demonstration would eliminate nearly 60% of the total deficit reduction promised from the Inflation Reduction Act.
  3. The Committee for a Responsible Federal Budget estimates, drawing on Joint Committee on Taxation and CBO data, that costs of the IRA's various tax subsidies could run $400 billion above original projections.

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.
  • How to Balance the Budget Without Raising Taxes or Cutting Benefits — Medicare's projected doubling of cost as a share of GDP is accounted for by increased use of healthcare services, especially newly developed procedures and therapies; without that expansion, spending would fall from 3.2% to 2.4% of GDP rather than rise to 5.4%. The author argues beneficiaries wanting these added services should pay supplemental premiums.
  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.

AI Summary. A hurricane weakening to Category 3 before landfall means insured losses are estimated at $35bn–$45bn rather than a worst-case scenario above $100bn, according to analysts at Bloomberg Intelligence. Catastrophe-bond investors are projected to face a maximum loss of 4%, versus earlier warnings of 2%–15% from a direct hit on Tampa.

Gautam Naik Bloomberg
Date Posted:

Milton made landfall as a Category 3 hurricane. According to a Bloomberg estimate, this reduced insured losses to a $35-45B range, compared with >$100B if it had maintained its strength as a Category 5.

How much do storm losses fall when a hurricane weakens?

Core argument: Bloomberg Intelligence analysts estimate Hurricane Milton's weakening to a Category 3 storm before landfall means insured losses may total $35 billion to $45 billion rather than a worst-case scenario above $100 billion for insurers and reinsurers such as Munich Re and Swiss Re.

“Hurricane Milton’s weakening to a Category 3 storm before making landfall likely means the insurance industry and reinsurers such as Munich Re and Swiss Re may escape a worst-case scenario of more than $100 billion of losses,” according to analysts at Bloomberg Intelligence. Lower wind intensity suggests insured losses may instead be $35 billion to $45 billion, BI said. Catastrophe bonds Losses are expected to be in the range of $20 billion to $60 billion, meaning cat-bond investors look to be facing a maximum hit of 4%. Before Milton landed, Icosa Investments AG warned that a direct hit to Tampa threatened to cause insured losses anywhere from $40 billion to $150 billion, resulting in cat-bond losses of 2% to 15%.

Takeaways by Macro Roundup® AI

  1. Bloomberg Intelligence analysts estimate Hurricane Milton's weakening to a Category 3 storm before landfall means insured losses may total $35 billion to $45 billion rather than a worst-case scenario above $100 billion for insurers and reinsurers such as Munich Re and Swiss Re.
  2. Catastrophe bond investors appear to face a maximum hit of 4% from Hurricane Milton, with losses expected in the range of $20 billion to $60 billion.
  3. Icosa Investments AG warned before Hurricane Milton made landfall that a direct hit to Tampa threatened insured losses of $40 billion to $150 billion and cat-bond losses of 2% to 15%.

Related Articles:

  • Florida’s Home Insurance Industry May Be Worse Than Anyone Realizes — A working paper by researchers at Harvard, Columbia, and the Federal Reserve finds that nearly 20% of Florida insurers rated financially stable by the rating agency Demotech became insolvent, with 99.7% of that agency's ratings in the sample at A or above. The researchers argue this signals Florida's insurance market is more precarious than already known.
  • The Great Florida Migration Is Coming Undone — Florida's housing market is cooling amid excess inventory and weaker buyer demand, with analysts warning some cities could see a price correction. Home insurance premiums in parts of the state are up as much as 400% over five years, pricing out some homeowners and prompting institutional investors to sell properties.
  • 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. Chinese authorities are requiring a growing number of schoolteachers and other public sector workers to surrender their passports, under a "personal travel abroad management" system that lets local officials control who may travel abroad, how often and where. Restrictions have been expanded to rank-and-file staff at schools, universities, local governments and state-owned groups.

Ryan McMorrow, Nian Liu, Sun Yu, and Gloria Li Financial Times
Date Posted:

China is seemingly banning foreign travel for most schoolteachers and other public sector employees, forcing those individuals to turn their passports over to local governments.

Is China expanding passport confiscation to ordinary public sector workers?

Core argument: Chinese authorities are collecting passports from a growing number of schoolteachers and other public sector employees under a system known as "personal travel abroad management," which lets local officials control who travels abroad, how often and where.

Chinese authorities are demanding that a growing number of schoolteachers and other public sector employees hand in their passports. The passport collection drive, carried out under what is known as “personal travel abroad management”, allows local government officials to control and monitor who can travel abroad, how often and to where. Interviews with more than a dozen Chinese public sector workers and notices from education bureaus in half a dozen cities show restrictions on international travel have been greatly expanded from last year to include rank-and-file employees of schools, universities, local governments and state-owned groups. The passport collection appears to be based on national regulations from 2003 that established a system to restrict travel for key personnel such as mid- to high-level officials and allowed local authorities to set rules for all state employees’ international travel.

Takeaways by Macro Roundup® AI

  1. Chinese authorities are collecting passports from a growing number of schoolteachers and other public sector employees under a system known as "personal travel abroad management," which lets local officials control who travels abroad, how often and where.
  2. Interviews with more than a dozen Chinese public sector workers and notices from education bureaus in half a dozen cities show international travel restrictions expanded from last year to cover rank-and-file staff at schools, universities, local governments and state-owned groups.
  3. The passport collection appears to rest on national regulations from 2003 that established a system restricting travel for key personnel such as mid- to high-level officials and allowed local authorities to set rules for all state employees' international travel.

Related Articles:

  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.
  • 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.
  • China Shuts Down Its International-Adoption Machine — China became a leading source country for international adoption, with about 160,000 children placed abroad over three decades, and has now ended the program. American families adopted 82,658 Chinese children between 1999 and 2022, nearly one-third of all US adoptions from foreign countries.

Friday, October 11, 2024

AI Summary. The authors estimate that U.S. commuting zones an additional 200km (125 miles) from the nearest pre-2007 artificial intelligence innovation hotspot had 17% lower growth in AI jobs' share of online vacancies, an effect driven by distance from AI research papers rather than patents. About 20% of the effect is attributed to intervening state borders.

Jennifer Hunt, Iain Cockburn, and James Bessen National Bureau of Economic Research
Date Posted:

A commuting zone 125 miles farther from the closest pre-2007 AI hotspot has 17% lower growth in AI jobs’ share of vacancies over 7 years. A hotspot is defined as having 1,000 AI-related publications and patents related to “deep learning.”

Does distance from innovation hubs slow local AI job growth?

Core argument: A U.S. commuting zone an additional 200km (125 miles) from the closest pre-2007 AI innovation hotspot shows 17% lower growth in AI jobs' share of online vacancies, based on AI publication data merged with Burning Glass vacancies for 2007–2019.

Using our own data on Artificial Intelligence publications [related to “deep learning”] merged with Burning Glass vacancy data for 2007-2019, we investigate whether online vacancies for jobs requiring AI skills grow more slowly in U.S. locations farther from pre-2007 AI innovation hotspots. We find that a commuting zone which is an additional 200km (125 miles) from the closest AI hotspot has 17% lower growth in AI jobs' share of vacancies. This is driven by distance from AI papers rather than AI patents. Distance reduces growth in AI research jobs as well as in jobs adapting AI to new industries, as evidenced by strong effects for computer and mathematical researchers, developers of software applications, and the finance and insurance industry. 20% of the effect is explained by the presence of state borders between some commuting zones and their closest hotspot. Distance does not capture difficulty of in-person or remote collaboration nor knowledge and personnel flows within multi-establishment firms hiring in computer occupations.

Takeaways by Macro Roundup® AI

  1. A U.S. commuting zone an additional 200km (125 miles) from the closest pre-2007 AI innovation hotspot shows 17% lower growth in AI jobs' share of online vacancies, based on AI publication data merged with Burning Glass vacancies for 2007–2019.
  2. The distance effect is driven by remoteness from AI papers rather than AI patents, and it reduces growth in AI research jobs as well as jobs adapting AI to new industries, with strong effects for computer and mathematical researchers, software application developers, and finance and insurance.
  3. State borders between commuting zones and their closest AI hotspot explain 20% of the estimated distance effect, which does not capture difficulty of in-person or remote collaboration or knowledge and personnel flows within multi-establishment firms hiring in computer occupations.

Related Articles:

  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • Assessing the Implications of a Productivity Miracle — If artificial intelligence can perform economically valuable cognitive tasks at very low marginal cost, consumers would buy far more of the cheapened goods and spend the savings in other categories, expanding activity and employment in sectors facing new demand. Where supply is inherently limited, such as real estate, those savings could bid up prices and produce inflation.
  • 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.

AI Summary. U.S. economic output has exceeded pre-pandemic forecasts, but the outperformance is mostly attributable to an unexpected surge in immigration rather than new technology. Long-run technology forecasts made in the 1960s correctly anticipated innovations such as smartphones while predicting roughly 60 others that never materialized.

Cardiff Garcia and Paul Krugman Economic Innovation Group
Date Posted:

.@paulkrugman argues “if we believe our numbers, which maybe we shouldn’t, but if we believe our numbers, total factor productivity growth has been really pretty lousy” for the last 20 years, even with significant technological changes.

Is the economy's post-pandemic outperformance driven by immigration rather than technology?

Core argument: U.S. economic output has exceeded pre-pandemic forecasts since Covid, but that outperformance is attributed mostly to an unexpected surge in immigration rather than to new technology.

If you weren't paying attention, you might have thought that with all of this new technology — the U.S. economy has definitely outperformed post-Covid, we're above pre-pandemic forecasts, which is really amazing — but if you start to look into it, it's mostly because of an unexpected surge in immigration. And so with the technological stuff, we really don't know. Back in the 60s, there was all this futurism. There were people making long-run projections, and Herman Kahn had this thing called the Year 2000, which was about what the world would look like in this far distant year of 2000. There were like a hundred predicted innovations, and he got almost all of the ones that actually did happen. There’s stuff in there that is recognizably smartphones. There are things that recognizably are pretty much all of the sexy technologies that have come along since the 1960s. There's also like 60 technologies he predicted that didn't come to pass. We have a much more pokey backwards world than what people in the 1960s thought we were going to be even 10 or 15 years ago.

Takeaways by Macro Roundup® AI

  1. U.S. economic output has exceeded pre-pandemic forecasts since Covid, but that outperformance is attributed mostly to an unexpected surge in immigration rather than to new technology.
  2. Herman Kahn's 1960s "Year 2000" project listed about 100 predicted innovations and anticipated almost all of those that did arrive, including recognizable descriptions of smartphones.
  3. Kahn also predicted roughly 60 technologies that never came to pass, and today's world is more pokey and backward than 1960s futurists expected.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • The AI Transition One Year Later: On Track, but Macro Impact Still Several Years Off — Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.
  • How AI & Robots are Smashing Economics, and Why It Matters — As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.

AI Summary. The Advanced Placement program states that most of its 40 subjects have historically had exam pass rates of 60–80%, while nine subjects—including world history, English literature, biology, macroeconomics, and U.S. history—fluctuated between 40–50% and 70–80%. New data collection and analysis methods are now used to set pass rates, bringing those nine subjects in line with the others.

Frederick Hess American Enterprise Institute
Date Posted:

The College Board periodically changes standards for AP exams to better match college performance, raising concerns of grade inflation. @AP_Trevo, representing the Board, claims standards have not systematically fallen. @rickhess99 is skeptical.

Why have pass rates risen in nine advanced high school subjects?

Core argument: Trevor Packer, senior vice president of the AP program since 2003, says most of the 40 AP subjects have historically had exam pass rates of 60–80%, while nine subjects, primarily in the humanities, fluctuated between 40–50% and 70–80%.

[According to] Trevor Packer, senior vice president for the AP program, who has overseen it since 2003, “historically, most of the 40 AP subjects have had exam pass rates of 60 to 80%. However, in nine subjects—primarily those in the humanities—pass rates have fluctuated between 40 to 50% and 70 to 80% over time. New technologies for rapid data collection and analysis have recently enabled researchers to utilize such evidence to derive AP pass rates rather than rely on the more subjective process used in the past. As a result, the pass rates in these nine AP subjects—world history, English literature, biology, macroeconomics, microeconomics, chemistry, U.S. government, U.S. history, and European history—are now consistent with the traditional pass rates in the other AP subjects. We brought about these changes in part because, over the years, we’ve polled hundreds of college faculty and admissions officers, and they have consistently expressed a conviction that AP students—typically the most academically strong of American high schoolers—should be able to achieve 60 to 80% pass rates on AP exams.”

Takeaways by Macro Roundup® AI

  1. Trevor Packer, senior vice president of the AP program since 2003, says most of the 40 AP subjects have historically had exam pass rates of 60–80%, while nine subjects, primarily in the humanities, fluctuated between 40–50% and 70–80%.
  2. Pass rates in world history, English literature, biology, macroeconomics, microeconomics, chemistry, U.S. government, U.S. history, and European history are now consistent with the traditional pass rates in other AP subjects, according to Packer.

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  • 2024 SAT Data Drop — Race gaps in SAT scores are consistent across years, with most differences within the range expected from sampling error; the exceptions are Amerindian scores falling and Asian scores rising relative to White scores. The author attributes those shifts to changes in who selects into SAT test-taking rather than genuine population changes.
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AI Summary. Polling analysis from Echelon Insights finds that white progressive Americans hold views on immigration, racism, patriotism, and meritocracy that are out of line with the average black or Hispanic voter, while hardline conservatives are equally distant in the opposite direction. By self-reported ideology, Americans of colour now sit roughly equidistant between the two groups.

John Burn-Murdoch Financial Times
Date Posted:

Racial polarization in Americans’ political ideology is declining as white liberals’ views have diverged from Hispanic and black Americans. “Americans of colour are now roughly equidistant between white progressives and conservatives.” @jburnmurdoch

Are white progressives' views out of step with minority voters?

Core argument: White progressive Americans hold views on immigration, racism, patriotism, and meritocracy that are out of line with the average black or Hispanic voter, according to analysis from pollster Echelon Insights.

The sharp leftward turn among educated white liberals has caused white Democrats to overshoot the minority position on a growing number of issues, including immigration, racism, patriotism, and meritocracy. White progressive Americans now hold views on these culture questions that are completely out of line with the average black or Hispanic voter, according to analysis from pollster Echelon Insights. To be clear, hardline US conservatives are just as far in the opposite direction. But where, historically, the left was the natural home for non-white Americans, that is growing less obviously the case. In terms of self-reported political ideology, Americans of colour are now roughly equidistant between white progressives and conservatives.

Takeaways by Macro Roundup® AI

  1. White progressive Americans hold views on immigration, racism, patriotism, and meritocracy that are out of line with the average black or Hispanic voter, according to analysis from pollster Echelon Insights.
  2. By self-reported political ideology, Americans of colour sit roughly equidistant between white progressives and conservatives, making the left less obviously the natural home for non-white Americans than it was historically.
  3. The sharp leftward turn among educated white liberals has pushed white Democrats past the minority position on a growing number of issues, while hardline US conservatives sit just as far in the opposite direction.

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AI Summary. Swing-state polling shifted toward Trump, though the movements are relatively minor and the electoral map remains scrambled and close, with each candidate gaining ground in states that had been among their weakest.

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

The latest @NateSilver538 update shows Harris leading in the national popular vote by 3pp. His model shows a 52% probability of Harris winning the electoral college where the “map is as scrambled (and close) as ever.”

Is the swing-state map still close despite recent polling shifts?

Core argument: Silver Bulletin records Trump's best week of swing state polling since the presidential debate, while noting the underlying shifts are probably relatively minor.

I'll just be expedient about the themes of the week. 1) Best week of swing state polling for Trump since the debate; 2) Nonetheless also probably some tendency for the media to exaggerate what are relatively minor shifts; 3) Also a weird week insofar as Trump has gained ground in what were some of his worst states before but the same is also true for Harris… map is as scrambled (and close) as ever.

Takeaways by Macro Roundup® AI

  1. Silver Bulletin records Trump's best week of swing state polling since the presidential debate, while noting the underlying shifts are probably relatively minor.
  2. Silver Bulletin argues the media likely exaggerates what are comparatively small movements in swing state polling.
  3. Trump gained ground in what had been some of his worst states, as did Harris, leaving the electoral map as scrambled and as close as ever.

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AI Summary. Federal authorities are investigating breaches of Verizon, AT&T and Lumen networks attributed to Salt Typhoon, a hacking group tied to Chinese intelligence. Investigators believe the compromises may have given the hackers access to systems the U.S. government uses for court-authorized wiretapping requests, though the severity remains unclear.

Dustin Volz and Drew FitzGerald Wall Street Journal
Date Posted:

A major hack of American broadband providers may have allowed Chinese intelligence to observe ongoing American domestic surveillance efforts, including court-ordered wiretapping.

Have Chinese hackers breached U.S. telecom networks used for wiretapping?

Core argument: Federal authorities and cybersecurity investigators are probing breaches of Verizon Communications, AT&T and Lumen Technologies, which a stealthy hacking group known as Salt Typhoon and tied to Chinese intelligence is believed to have carried out.

Federal authorities and cybersecurity investigators are probing the breaches of Verizon Communications, AT&T and Lumen Technologies. A stealthy hacking group known as Salt Typhoon tied to Chinese intelligence is believed to be responsible. The compromises may have allowed hackers to access information from systems the federal government uses for court-authorized network wiretapping requests. Hackers still had access to some parts of U.S. broadband networks within the last week, and more companies were being notified that their networks had been breached, people familiar with the matter said. Investigators remain in the dark about precisely what the hackers were seeking to do, according to people familiar with the response. The breaches are considered by some investigators to be a possibly catastrophic security lapse that could have enabled China to spy on U.S. domestic wiretapping efforts, but others have cautioned that it is too soon to know the severity of the intrusions.

Takeaways by Macro Roundup® AI

  1. Federal authorities and cybersecurity investigators are probing breaches of Verizon Communications, AT&T and Lumen Technologies, which a stealthy hacking group known as Salt Typhoon and tied to Chinese intelligence is believed to have carried out.
  2. The compromises may have allowed hackers to access information from systems the federal government uses for court-authorized network wiretapping requests, a lapse some investigators consider possibly catastrophic while others caution it is too soon to judge its severity.
  3. Hackers retained access to some parts of U.S. broadband networks as recently as the past week and more companies were being notified of breaches, while investigators remain unclear about what the hackers sought to do.

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