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


Wednesday, October 16, 2024

AI Summary. Analysis of returns on invested capital by industry from 1963 to 2023 finds that variation in value creation within industries exceeds variation across industries, with every industry containing both value-creating and value-destroying companies. Adjusting returns for intangible investment pulls the highest and lowest results toward the middle, narrowing the distribution.

Michael Mauboussin and Dan Callahan Morgan Stanley
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.@mjmauboussin reviews ROIC from 1963-2023 including adjustment for intangibles, and finds that “the variance within industries is greater than the variance across industries. The industry is important but does not dictate a firm’s destiny.”

Does value creation vary more within industries than across them?

Core argument: Return on invested capital varies more within industries than across them over 1963–2023, underscoring that industry is important but does not dictate a firm's destiny.

Industries that create value in the aggregate nonetheless have companies that have neutral and negative [return on invested capital (ROIC) vs. weighted average cost of capital (WACC)] spreads. And industries that destroy value in the aggregate still have companies that create value. Exhibit 40 shows ROIC by industry from 1963 to 2023. There are a couple of important takeaways. First, the variance within industries is greater than the variance across industries. This underscores that the industry is important but does not dictate a firm’s destiny. All industries have companies that create and destroy value. The second takeaway is that adjusting ROIC for intangibles tends to pull the very high and very low ROICs toward the middle. The median and average ROICs are similar for both the traditional and adjusted calculations, but the distribution has less variance following the modifications.

Takeaways by Macro Roundup® AI

  1. Return on invested capital varies more within industries than across them over 1963–2023, underscoring that industry is important but does not dictate a firm's destiny.
  2. Every industry contains both value-creating and value-destroying companies: industries that create value in aggregate include firms with neutral and negative ROIC-versus-WACC spreads, and industries that destroy value in aggregate still contain value creators.
  3. Adjusting ROIC for intangibles pulls very high and very low ROICs toward the middle, leaving median and average ROICs similar to the traditional calculation but reducing the variance of the distribution.

Related Articles:

  • Valuation Multiples — Valuation multiples have become less able to capture a business's underlying economics as corporate investment has shifted from tangible assets like factories to intangible assets and how those are recorded in financial statements. Adjusting Microsoft's reported $72.4bn net income for intangible investment raises it 14.7% to $83bn and cuts its price-to-earnings ratio from 34.9 to 30.5.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. The authors estimate the modeled tariff proposals would raise $1.2tn–$4.4tn over 10 years, or 0.3–1.2% of average GDP, with foreign retaliation cutting that revenue by 12–26%. They project consumer prices initially rise 1.2–5.1%, equal to $1,900–$7,600 of lost disposable income per household, with real GDP contracting 0.5–1.4% in the medium term.

Ernie Tedeschi Yale University
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.@ernietedeschi analyzes Trump’s proposed tariffs, both with and without retaliation, and projects $1.2-$4.4T in revenue over 10 years, a 0.5-1.4% decline in real GDP, and a $1.9-7.6k decline in average real disposable income per household.

How much revenue do tariffs raise, and at what cost?

Core argument: The modeled tariff proposals raise $1.2 trillion–$4.4 trillion over 10 years under conventional assumptions, equal to 0.3–1.2% of average GDP, with foreign retaliation cutting US tariff revenue by 12–26% relative to the same proposal without retaliation.

The tariff proposals modeled raise between $1.2 to $4.4 trillion over 10 years under conventional assumptions or 0.3 to 1.2% of average GDP. When other countries retaliate against US tariffs, that lowers US tariff revenue relative to the same proposal under a no-retaliation scenario by 12-26%. Tariffs also initially raise the level of consumer prices by 1.2 to 5.1%. This represents between a tenth and a third of the price level increase experienced over 2020-2023. The loss in average disposable income from these price increases would be the equivalent of $1,900 to $7,600 per household in 2023 dollars. Most of this analysis assumes conventional assumption of fixed US aggregate economic activity, we also present some partial estimates of dynamic effects on the size of the US economy from the various tariff proposals. In the medium term, real US GDP contracts by between -0.5 to -1.4%.

Takeaways by Macro Roundup® AI

  1. The modeled tariff proposals raise $1.2 trillion–$4.4 trillion over 10 years under conventional assumptions, equal to 0.3–1.2% of average GDP, with foreign retaliation cutting US tariff revenue by 12–26% relative to the same proposal without retaliation.
  2. The tariffs initially raise consumer price levels by 1.2–5.1%, between a tenth and a third of the price level increase experienced over 2020–2023, costing average disposable income the equivalent of $1,900–$7,600 per household in 2023 dollars.
  3. Partial estimates of dynamic effects, departing from the assumption of fixed US aggregate economic activity, show real US GDP contracting by 0.5–1.4% in the medium term under the tariff proposals.

Related Articles:

  • 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.
  • He Helped Trump Remake Global Trade. His Work Isn’t Done — A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.
  • Only Trump Can Make America European — A European-style welfare state with government spending at 45% of GDP cannot be financed by taxing the rich alone and would require a large consumption tax, which Republican opposition has long blocked. Proposed tariffs of 10% on all imports and 60% on China are a regressive consumption tax that could open the door to a later value-added tax.

AI Summary. Projected net migration ranges from 3.7mm under a high-immigration policy scenario to negative 740,000 under a low-immigration scenario, implying four-year growth in the working-age civilian population of anywhere from 5mm to 15mm people. The authors project the resulting gap in annual US economic growth at roughly half a percentage point, or about $130bn.

Wendy Edelberg, Cecilia Esterline, Stan Veuger and Tara Watson Niskanen Center
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.@WendyEdelberg, @stanveuger, and @CecEsterline estimate that the four-year growth in the total civilian non-institutionalized population over age 16 could range from 5mm to 15mm, depending on the impact of the election on immigration.

How much does immigration policy change US economic growth?

Core argument: Net migration in 2025 is projected at 3.7mm under a Harris, high scenario versus negative 740,000 under a Trump, low scenario, with different consequences for the U.S. economy.

In our Harris, high scenario net migration is 3.7mm in 2025, whereas in the Trump, low scenario net migration is negative 740,000. Each of these scenarios for net immigration flows has different consequences for the U.S. economy. The cumulative growth in the total civilian non-institutionalized population over age 16 (CNIP) over four years, including both U.S.-born and foreign-born people, could be as little as 5mm people or as many as 15mm people depending on the scenario. For comparison, continuation of average CNIP growth between January 2000 and January 2024 would suggest a four-year gain of 9mm people. We project a gap in 2025 GDP growth between the Trump, low, and Harris, high scenarios of roughly half a percentage point from differences in immigration policy (meaning that GDP in 2025 would be lower in the Trump immigration scenario than in the Harris scenario by around $130B).

Takeaways by Macro Roundup® AI

  1. Net migration in 2025 is projected at 3.7mm under a Harris, high scenario versus negative 740,000 under a Trump, low scenario, with different consequences for the U.S. economy.
  2. A roughly half-percentage-point gap in 2025 GDP growth is projected between the Trump, low, and Harris, high immigration scenarios, leaving 2025 GDP about $130B lower under the Trump scenario.
  3. Cumulative four-year growth in the U.S. civilian non-institutionalized population over age 16 could range from 5mm to 15mm people depending on the scenario, against 9mm implied by average growth from January 2000 to January 2024.

Related Articles:

  • How Immigration Remade the U.S. Labor Force — The Congressional Budget Office estimates more than 9m people have migrated on net to the U.S. in recent years, nearly matching the prior decade's total and lifting population growth to almost 1.2% a year. Fewer than 30% are lawful permanent residents; without immigration, growth would be 0.2%.
  • U.S. Immigrant Population in 2023 Saw Largest Increase In More Than 20 Years — The U.S. immigrant population rose by about 1.6m to a record 47.8m, the largest single-year increase since 2000, according to a Pew Research Center analysis of U.S. Census Bureau data. Immigrants made up 14.3% of the total U.S. population, up from 4.7% in 1970 but below the 1890 record of 14.8%.
  • 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. U.S. electricity demand grew 4.4% from 2011 to 2023 but is projected to rise 25% by 2035 under current stated policies, an increase of nearly 1,000 terawatt-hours. Electric vehicles account for nearly 60% of that projected growth, followed by industry, while data centres tied to artificial intelligence contribute a modest share.

IEA Staff International Energy Agency
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Between 2011-23 electrical demand in the US increased by just 4.4%; @IEA forecasts that electrical demand will rise by 25% between 2023-35, with 60% of the growth driven by the uptake of EVs.

What will drive projected growth in US electricity demand?

Core argument: U.S. electricity demand rose 4.4% from 2011 to 2023, but the Stated Policies Scenario projects a 25% increase from 2023 to 2035, an addition of nearly 1,000 TWh.

Electricity demand in the United States increased by just 4.4% from 2011 to 2023, but it rises by 25% from 2023 to 2035 in the [Stated Policies Scenario], up by nearly 1,000 TWh. The uptake of EVs accounts for nearly 60% of electricity demand growth to 2035. Industry is the next largest driver of demand growth, with the use of electricity expanding in many sub-sectors. Despite efficiency gains, use of electricity in buildings also rises, some of which reflects rapidly expanding demand for data centres. While there is some uncertainty about the rate of growth for data centres linked to artificial intelligence, we currently project that the potential impact on overall US electricity demand growth by 2035 is modest relative to other sectors, with a set of low-emissions options available to meet this demand.

Takeaways by Macro Roundup® AI

  1. U.S. electricity demand rose 4.4% from 2011 to 2023, but the Stated Policies Scenario projects a 25% increase from 2023 to 2035, an addition of nearly 1,000 TWh.
  2. EV uptake accounts for nearly 60% of projected U.S. electricity demand growth to 2035, with industry the next largest driver as electricity use expands across many sub-sectors.
  3. The potential impact of AI-linked data centres on overall U.S. electricity demand growth by 2035 is projected to be modest relative to other sectors, with a set of low-emissions options available to meet that demand.

Related Articles:

  • Electricity Grids and Secure Energy Transitions — Under a scenario based on announced government pledges, global electricity demand is projected to grow 2.7% per year, more than doubling from just under 25,000 terawatt-hours to nearly 54,000 terawatt-hours by 2050. Hydrogen production via electrolysis and electric vehicles account for more than half of that projected growth.
  • 2023 Long-Term Reliability Assessment — North American grid reliability assessments project electricity capacity deficits over the next decade in areas where generator retirements are expected before replacement resources are in service to meet rising demand. Ten-year peak demand and energy growth forecasts are higher than at any point in the past decade, contributing to lower reserve margins.
  • 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.

AI Summary. The International Energy Agency projects home air conditioning will require an extra 697 terawatt hours of electricity by 2030 — more than 3x the added demand from computer data centres — with electric vehicles needing an extra 854 terawatt hours. The agency attributes the rise to higher incomes in the developing world and higher temperatures from climate change.

Malcolm Moore Financial Times
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An @IEA global analysis finds air conditioning will require an additional 697 terawatt hours of electricity by 2030, 3x the forecast growth from new data centers.

What will drive growth in global electricity demand?

Core argument: The IEA projects home air conditioning will require an extra 697 TWh of electricity by 2030, more than three times the additional demand from computer data centres, while electric vehicles would require an extra 854 TWh.

Researchers at the International Energy Agency said a combination of rising incomes in the developing world and higher temperatures from climate change meant that power used for home air conditioning units would rise by an amount greater than the entire Middle East’s electricity use today. The prediction came as the IEA revised up its forecasts for electricity demand forecasting that usage in 2035 would be 6% higher than anticipated last year. The report said air conditioning would need an extra 697 terawatt hours of electricity by 2030, more than three times the extra demand from computer data centres. Electric vehicles, meanwhile, would require an extra 854 TWh, the IEA said. Fatih Birol, the head of the IEA, said “Just to put it in context, in the US and Japan, 90% of households have air conditioning but it is 5% of households in Nigeria, 15% in Indonesia, and less than 20% in India.”

Takeaways by Macro Roundup® AI

  1. The IEA projects home air conditioning will require an extra 697 TWh of electricity by 2030, more than three times the additional demand from computer data centres, while electric vehicles would require an extra 854 TWh.
  2. The IEA revised up its electricity demand forecasts, projecting 2035 usage 6% higher than previously anticipated, and attributed the rise in air conditioning power use to rising incomes in the developing world and higher temperatures from climate change.
  3. IEA head Fatih Birol said 90% of households in the US and Japan have air conditioning, compared with 5% in Nigeria, 15% in Indonesia and less than 20% in India.

Related Articles:

  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • The Future of Cooling — Over half of the world's 1.6bn air conditioners are in just two countries, China with 570m units and the United States with 375m, and nearly 70% of all units globally are in residential buildings. Household ownership ranges from about 4% in India and under 10% in Europe to over 90% in the United States and Japan.
  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.

AI Summary. The US produces roughly 13mm barrels per day of crude oil and 3bn cubic metres per day of natural gas, making it the world's largest producer of both. Its need for foreign crude began declining in 2008, and it became a net energy exporter in 2019, recording a net energy surplus of about $65bn last year.

Simon Rabinovitch and Henry Curr The Economist
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Fracking has been a key driver of making the US the world’s largest oil and natural gas producer. Last year the US had a net energy surplus of $65B. @S_Rabinovitch @currhenry

Has America's shale boom turned it into a net energy exporter?

Core argument: The United States produces roughly 13mm barrels per day of crude oil and 3bn cubic metres per day of natural gas, making it the world's biggest producer of both.

America produces some 13mm barrels per day of crude oil and 3bn cubic metres per day of natural gas, making it the world’s biggest producer of both. The economic effects have been far-reaching. Most obviously it has changed America’s trading relationship with the world. Long a major importer of oil, America’s need for foreign crude started to decline in 2008—just when its oil-shale fields really took off. By 2019 it was, for the first time in more than half a century, exporting more energy than it imported (although it produces more than it consumes domestically, it still imports vast quantities of oil because it needs some varieties only produced overseas). Last year America recorded a net energy surplus of about $65bn.

Takeaways by Macro Roundup® AI

  1. The United States produces roughly 13mm barrels per day of crude oil and 3bn cubic metres per day of natural gas, making it the world's biggest producer of both.
  2. America's need for foreign crude began declining in 2008, just as its oil-shale fields took off, and by 2019 the country exported more energy than it imported for the first time in more than half a century.
  3. The United States recorded a net energy surplus of about $65bn, while still importing vast quantities of oil because it needs some varieties produced only overseas.

Related Articles:

  • U.S. Energy Production Exceeded Consumption By Record Amount In 2023 — U.S. energy production rose 4% to nearly 103 quadrillion British thermal units while consumption fell 1% to 94, leaving production exceeding consumption by 9 quadrillion British thermal units, the widest gap in records dating to 1949. Dry natural gas, crude oil, natural gas plant liquids, and renewables all reached record output.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • United States Produces More Crude Oil Than Any Country, Ever — The United States has produced more crude oil than any nation at any time for six consecutive years, averaging 12.9m barrels per day in 2023 and surpassing the prior record of 12.3m barrels per day. Output fell to 5.0m barrels per day in 2008 before rising as producers applied hydraulic fracturing and horizontal drilling.

AI Summary. Officials and advisers say China's near-term policy goal is not to massively stimulate demand but to head off a brewing financial crisis and stabilize the economy around a growth target of about 5%. Reports reaching Beijing describe a liquidity crunch in which cash-strapped local governments struggle to pay civil servants and contractors.

Lingling Wei Wall Street Journal
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.@Lingling_Wei reports that the recent fiscal expansion in China is an effort to manage an ongoing local government liquidity crunch and stabilize the stock market, not an attempt to rebalance the economy.

Is China's stimulus aimed at financial risks rather than boosting demand?

Core argument: Officials and advisers say Xi Jinping's near-term aim is to fend off a brewing financial crisis — "derisking" in official lingo — rather than massively stimulate demand, while stabilizing the economy and hitting the 5%-or-so growth target.

For Xi, officials and advisers say, the near-term goal isn’t to massively stimulate demand but to fend off a brewing financial crisis—or “derisking,” in official lingo—thereby helping to stabilize the overall economy and achieve the 5%-or-so growth target for this year. The benchmark of mainland-traded stocks, the CSI 300 Index, was headed for an unprecedented fourth straight year of losses. What’s more, reports were flowing into the power center in Beijing of a festering liquidity crisis across China. In particular, financially strained local governments have been struggling to pay civil servants as well as state-owned and private contractors. “There is a severe shortage of cash among local governments,” said one of the people familiar with the situation. “Something has to be done to avoid a full-blown crisis.”

Takeaways by Macro Roundup® AI

  1. Officials and advisers say Xi Jinping's near-term aim is to fend off a brewing financial crisis — "derisking" in official lingo — rather than massively stimulate demand, while stabilizing the economy and hitting the 5%-or-so growth target.
  2. The CSI 300 Index of mainland-traded stocks was headed for an unprecedented fourth straight year of losses, as reports of a festering liquidity crisis across China flowed into Beijing.
  3. Financially strained Chinese local governments have struggled to pay civil servants and state-owned and private contractors, with one person familiar with the situation citing a severe cash shortage and saying something must be done to avoid a full-blown crisis.

Related Articles:

  • China’s Youth Unemployment Hits New High as Fresh Graduates Flood Market — China's unemployment rate for 16-24 year olds, excluding students, rose to 18.8% from 17.1% the prior month, the highest since the country reintroduced the revised data series. The jobless rate for 25-29 year olds, excluding college students, also rose, to 6.9% from 6.5%.
  • Communist Party Priorities Complicate Plans to Revive China’s Economy — China's leadership objects to Western-style consumption-driven growth, viewing it as wasteful and at odds with the goal of making China a world-leading industrial and technological power, according to people familiar with decision-making in Beijing. Chinese officials also emphasized avoiding a current-account deficit, which would signal greater dependence on the outside world.
  • China Economy Memo: Tempest in a Teapot or Crisis A-Brewing? — The authors argue China is heading into a protracted debt crisis in which about 40% of local government financing vehicles default, hitting regional banks most exposed to such lending. They estimate total losses for these creditors at roughly $5tn, or about 30% of China's GDP.

Thursday, October 17, 2024

AI Summary. Using US administrative tax data on pass-through business owners, who account for over 50% of US business net income, the authors find little evidence of inordinate risk, high startup costs, or non-pecuniary motives in self-employment, and steeper average income growth than comparable paid employees.

Anmol Bhandari, Tobey Kass, Thomas May, Ellen McGrattan and Evan Schulz National Bureau of Economic Research
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Using 2000-15 IRS data on 108mm self-employed Americans, Anmol Bhandari and team find the self-employed “have significantly higher average income and steeper, more persistent income growth profiles” than paid-employed peers with similar characteristics.

Does self-employment involve outsized risk and lower pay than paid employment?

Core argument: Pass-through business owners—sole proprietors, partners, and S corporation owners—account for over 50% of all US business net income, and the authors assemble a longitudinal database of them from US administrative tax data.

We use US administrative tax data to assemble a novel longitudinal database of pass-through business owners—one that is suitable for analyzing patterns of income growth and determinants of entrepreneurial choice for a large population of self-employed individuals. Collectively, pass-through owners, including sole proprietors, partners, and S corporation owners, account for over 50% of all business net income in the United States and have been central to studies of entrepreneurship. Once we include all dollars earned in self-employment, we do not find strong evidence of inordinate risk, high startup costs, or non-pecuniary motives, and, on average, we find the self-employed have much steeper income growth profiles than paid-employed peers with the same characteristics. Overall, education and skill levels are similar for self-and paid-employed, but there are notable differences in their primary industries. We find that more than half of the self-employed population are in construction, professional services, health care, and other services, which is a considerably higher fraction than for the paid-employed.

Takeaways by Macro Roundup® AI

  1. Pass-through business owners—sole proprietors, partners, and S corporation owners—account for over 50% of all US business net income, and the authors assemble a longitudinal database of them from US administrative tax data.
  2. Counting all dollars earned in self-employment, the authors find no strong evidence of inordinate risk, high startup costs, or non-pecuniary motives, and find the self-employed average much steeper income growth profiles than paid-employed peers with the same characteristics.
  3. More than half of the self-employed population works in construction, professional services, health care, and other services, a considerably higher fraction than for the paid-employed, while education and skill levels are similar across the two groups.

Related Articles:

  • Stock Market Wealth and Entrepreneurship — The authors estimate a causal effect of stock market wealth on business entry, comparing investors with similar portfolios but different returns from idiosyncratic holdings. Effects are concentrated among moderate-wealth owners with returns of 25% or above and in strong stock market years, consistent with gains lifting individuals past a wealth threshold for starting a firm.
  • Immigrant Entrepreneurship: New Estimates and a Research Agenda — Immigrants account for about a quarter of new employer businesses in the United States, and firms with immigrant owners are more likely to hold patents and hold more patents per employee. This higher propensity toward innovation is only partly explained by differences in owners' education levels and fields of study.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

AI Summary. 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, versus 23% elsewhere, meaning students are typically worse off than not attending college. The gap reflects higher tuition and slightly lower alumni earnings, but engineering, computer science, nursing, and economics majors there beat national averages.

Preston Cooper American Enterprise Institute
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On average, 35% of degrees at liberal arts colleges have a negative ROI vs. 23% for all other colleges. Engineering, computer science, nursing, and economics degrees have the highest ROI. @PrestonCooper93 @AEIecon

Do liberal arts colleges deliver a worse return on investment?

Core argument: 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, compared with 23% at other schools; students in negative-ROI programs are typically worse off for having enrolled than if they had not attended college.

On average, liberal arts colleges are a worse bet than other schools. 35% of bachelor’s degree programs at liberal arts colleges have a negative ROI, compared to just 23% at other schools. When a degree program has a negative ROI, students are typically worse off for having enrolled, relative to not attending college at all. Liberal arts’ colleges underperformance is largely due to their higher tuition, along with slightly lower earnings for alumni. Even though liberal arts colleges tend to have lower financial returns than average, that is not true for the highest-ROI majors. If you study engineering, computer science, nursing, or economics at a liberal arts college, you’re likely to do even better than the national average for that major.

Takeaways by Macro Roundup® AI

  1. 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, compared with 23% at other schools; students in negative-ROI programs are typically worse off for having enrolled than if they had not attended college.
  2. Liberal arts colleges' weaker returns stem largely from their higher tuition, along with slightly lower earnings for their alumni.
  3. Students who study engineering, computer science, nursing, or economics at a liberal arts college are likely to do better than the national average for that major.

Related Articles:

  • Marginal Returns to Public Universities — Using admission-score cutoffs across all 35 Texas public universities, the author estimates that marginally admitted students complete an additional year of four-year education, are 12 percentage points more likely to earn a bachelor's degree, and earn 5–10% more than marginally rejected peers, with gains driven by students who otherwise would not attend a four-year school.
  • Talent Disrupted: Underemployment, College Graduates, and the Way Forward — A study classifying college graduates as underemployed when their occupation does not typically require a bachelor's degree finds that of every 100 graduates with a terminal bachelor's degree, 48 hold college-level jobs one year after graduation and 55 do at both five and 10 years. Graduates who start underemployed largely remain so.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.

AI Summary. US nonfarm business sector productivity has grown at about 1.6% a year in the recent period, the same compound annual rate recorded over two earlier multi-year stretches. On this view there is nothing unusual happening with productivity, and no basis for assuming the latest growth rate will persist.

Matt Klein The Overshoot
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Fed Governor Christopher Waller notes that nonfarm business output per hour worked is on its pre-pandemic trend, undermining the argument that high productivity growth supports wage growth of 4% without driving up inflation. @M_C_Klein

Is recent US productivity growth any faster than in past decades?

Core argument: U.S. nonfarm business sector productivity grew at a 1.6% yearly rate from 2019Q4 through 2024Q2, exactly matching the compound average yearly growth rates over 2004Q1–2019Q4 and 1984Q1–1996Q4.

[Waller] emphasized that the recent pace of gains looks much less impressive after you realize that output per hour worked was the same in 2023Q2 as it was in 2020Q2. From 2019Q4 through 2024Q2, U.S. nonfarm business sector productivity has grown at a yearly rate of just 1.6%. That happens to be exactly the same as the compound average yearly growth rate from 2004Q1-2019Q4, which in turn is exactly the same as the 1984Q1-1996Q4 average yearly growth rate. From this perspective, there is nothing special happening with productivity, and therefore no reason to assume that the most recent growth rate should be expected to continue.

Takeaways by Macro Roundup® AI

  1. U.S. nonfarm business sector productivity grew at a 1.6% yearly rate from 2019Q4 through 2024Q2, exactly matching the compound average yearly growth rates over 2004Q1–2019Q4 and 1984Q1–1996Q4.
  2. Waller emphasized that output per hour worked was the same in 2023Q2 as in 2020Q2, making recent gains look much less impressive.
  3. Waller argued that nothing special is happening with productivity, leaving no reason to assume the most recent growth rate will continue.

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AI Summary. Revised European Union fiscal rules shift the focus to multi-year structural plans and clearer debt-sustainability criteria, with France and Italy expected to cut their structural deficits in line with them. Fiscal consolidation in the four largest euro-area economies is forecast to continue, improving the structural balance by an average 0.35 percentage points a year.

Alexandre Stott and Filippo Taddei Goldman Sachs
Date Posted:

Fiscal consolidation in Europe is underway, with France, Italy, and Spain taking required steps under EU rules targeting deficits of no more than 3% of GDP.

Will revised European fiscal rules keep the largest euro-area economies consolidating?

Core argument: The EMU4 structural balance is forecast to improve by an average 0.35pp per annum through 2027, with faster consolidation in France, a constant pace in Spain and Italy, and a slight deceleration in Germany from 2026.

The [April 2024] European fiscal rules established a more transparent set of criteria to achieve debt sustainability. We expect both France and Italy, currently in Excessive Deficit Procedure (EDP), to reduce their structural deficit in line with the rules. The main innovation of the new fiscal framework is the shift in focus to multi-year planning through the medium-term fiscal structural plan (FSP). The biggest challenge in the Italian FSP is to achieve an average reduction of the debt-to-GDP ratio compliant with the rules. We expect the European Commission to scrutinise recent fiscal slippage in France but eventually to endorse the government’s intended speed of adjustment. Fiscal consolidation in the EMU4 will continue, in our forecast, for the next three years. The structural balance will improve by an average 0.35pp per annum until 2027 thanks to an acceleration in fiscal consolidation in France, a constant pace in Spain and Italy, and notwithstanding a slight deceleration from 2026 in Germany.

Takeaways by Macro Roundup® AI

  1. The EMU4 structural balance is forecast to improve by an average 0.35pp per annum through 2027, with faster consolidation in France, a constant pace in Spain and Italy, and a slight deceleration in Germany from 2026.
  2. France and Italy, both under the EU's Excessive Deficit Procedure, are expected to cut their structural deficits in line with the April 2024 European fiscal rules, whose main innovation is a shift to multi-year planning via medium-term fiscal structural plans.
  3. Italy's fiscal structural plan faces its biggest challenge in achieving an average reduction in the debt-to-GDP ratio compliant with the rules, while the European Commission is expected to scrutinise France's fiscal slippage but eventually endorse the government's intended speed of adjustment.

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AI Summary. Google has ordered six to seven small modular nuclear reactors totaling 500 megawatts from Kairos Power to supply low-carbon electricity to its data centres, with the first commercial reactor targeted to come online by 2030 and additional units by 2035. Kairos uses molten fluoride salt rather than water to cool its reactors.

Malcolm Moore Financial Times
Date Posted:

Google has ordered 6 to 7 small modular nuclear reactors from Kairos to provide electricity for its data centers. The reactors are cooled by molten fluoride salt as opposed to water and are the first new design approved in the US in 50 years.

Are tech companies turning to small modular reactors to power data centres?

Core argument: Google has ordered six to seven small modular nuclear reactors totaling 500MW from Kairos Power, becoming the first tech company to commission new nuclear power plants to supply low-carbon electricity to its data centres.

Google has ordered six to seven small modular nuclear reactors (SMRs) from Kairos Power, becoming the first tech company to commission new nuclear power plants to provide low-carbon electricity for its energy-hungry data centres. The tech company had placed an order for SMRs with a total capacity of 500 megawatts, helping Kairos, a seven-year-old start-up, to bring its first commercial reactor online by 2030 and additional reactors by 2035. Kairos, based in Alameda, California, has developed a reactor cooled by molten fluoride salt, rather than water. In December, it received a construction permit from the US Nuclear Regulatory Commission to build a 50MW demonstration reactor in Tennessee called Hermes.

Takeaways by Macro Roundup® AI

  1. Google has ordered six to seven small modular nuclear reactors totaling 500MW from Kairos Power, becoming the first tech company to commission new nuclear power plants to supply low-carbon electricity to its data centres.
  2. The Google order helps Kairos Power, a seven-year-old start-up based in Alameda, California, bring its first commercial reactor online by 2030, with additional reactors by 2035.
  3. Kairos Power has developed a reactor cooled by molten fluoride salt rather than water, and received a US Nuclear Regulatory Commission construction permit for a 50MW demonstration reactor in Tennessee called Hermes.

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