Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, November 18, 2024

AI Summary. The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.

David Neumark and Jyotsana Kala National Bureau of Economic Research
Date Posted:

Reviewing the impact of minimum wage increases on employment over 2009 – 2019, @NeumarkEcon finds strong negative employment effects on low-skilled black workers and little impact on low-skilled white workers.

Do higher minimum wages reduce employment for low-skill Black workers?

Core argument: The authors find job loss effects from higher minimum wages are much more evident for blacks and not very detectable for whites, with the estimated minimum wage effect negative for every low-skill black group considered.

We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites. The overall estimated minimum wage effect for blacks is negative for every low skill group we consider. For the overall effects, these include: teens; high school dropouts; under 30, high school dropouts; under 30, with at most a high school education; and under 25, with at most a high school education. In general, when we consider low education (high school dropouts), or combinations of low education (up to at most a high school education) and being young, there is clear evidence of adverse effects of minimum wages on black employment – and more so for males. In addition, when we look at [employment] elasticities [in Figure 14], the race differences are more pronounced, because for every group we consider the employment rate is lower for blacks.

Takeaways by Macro Roundup® AI

  1. The authors find job loss effects from higher minimum wages are much more evident for blacks and not very detectable for whites, with the estimated minimum wage effect negative for every low-skill black group considered.
  2. Adverse minimum wage effects on black employment are evident for high school dropouts and for young workers with at most a high school education, and more so for males, across groups including teens, those under 30, and those under 25.
  3. Race differences are more pronounced in employment elasticities because the employment rate is lower for blacks in every group the authors consider.

Related Articles:

  • What’s Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects — Earlier research using pairs of neighboring counties straddling state borders found no relationship between minimum wages and U.S. restaurant employment, but the authors show that result reverses when local economic areas are instead defined as multi-state commuting zones. Under that definition, they estimate an employment elasticity of −0.305 four years after a minimum wage change.
  • The U.S. Low-Wage Structure: A McWage Comparison — Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
  • Who Paid Los Angeles’ Minimum Wage? A Side-by-Side Minimum Wage Experiment in Los Angeles County — A study of minimum wage increases in Los Angeles County finds restaurants in high-income areas raised prices by 5.9 percentage points more than those in areas under the state wage, while restaurants in low-income neighborhoods did not significantly raise prices but changed menus more often and closed at higher rates.

AI Summary. Market expectations for the Federal Reserve's interest-rate path have shifted, with the expected endpoint moving from about 2.8% to 3.8%. The author argues that enacting the campaign agenda—larger deficits from tax cuts, tariffs on all imports, a weaker currency, mass deportations, and pressure on central-bank independence—would produce a substantially larger inflation shock.

John Ellis and Lawrence Summers Harvard University
Date Posted:

.@LHSummers expects a terminal FFR above the 3.8% the market currently reflects. He argues if the Trump administration’s “policies are implemented in the way they have been talked about, it’s going to be more inflationary than what we saw before.”

Would enacting the campaign economic agenda produce a larger inflation shock?

Core argument: Market expectations for the Federal Reserve's rate path have shifted to a cut to 3.8% from 2.8% two months ago, against a current level around 5%.

Two months ago, people thought the Fed was on a path to cutting interest rates to 2.8% from their current level around 5. Now people think, now the markets think, the Fed's going to cut interest rates to 3.8%. If President Trump does what he said he would do during his campaign, the inflation shock administered to the economy would be substantially larger than anything that happened at the beginning of the last administration. He's vowed huge deficit increases through continuation of his tax cuts and new tax cuts. He has trashed the idea of the independence of the central bank. He said that we should want to have a less highly valued currency, which means less valuable money, higher prices. And that's just on the demand side. The more important part is he's talked about a big tariff on every good that we import, which means higher import prices, also means higher prices for everything that competes with imports. If you're talking about sending millions of people out of the country who are here now, that's a prescription for large-scale labor shortages. And we've seen in the past what that does to inflation.

Takeaways by Macro Roundup® AI

  1. Market expectations for the Federal Reserve's rate path have shifted to a cut to 3.8% from 2.8% two months ago, against a current level around 5%.
  2. If Trump enacts his campaign pledges, the resulting inflation shock would be substantially larger than anything at the start of the prior administration, given deficit increases from continued and new tax cuts, dismissal of central bank independence, and a call for a less valuable currency.
  3. Tariffs on every imported good are the more important inflationary channel, raising import prices and prices of goods competing with imports, while sending millions of people out of the country is a prescription for large-scale labor shortages.

Related Articles:

  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.
  • How Will Trumponomics Work Out? — With US federal debt at 100% of GDP and primary deficits projected near 3%, the measures under consideration would add 1–2 points, implying a sustained 4–5% primary deficit and rapid debt growth. Stabilizing the debt ratio would require an adjustment worth 16–20% of the federal budget.

AI Summary. Annual spending by major US utilities to produce and deliver electricity rose 12% over two decades to $320bn in inflation-adjusted terms, driven mainly by capital investment in infrastructure, which more than doubled. Capital spending on the distribution system that delivers power to end users increased 160%, or $31.4bn.

Lori Aniti Energy Information Administration
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US utilities annual spending increased 12% in real terms between 2003 and 2023 according to FERC data. Between 2022 and 2023, capex rose 11% y/y on electrical transmission and 14% on distribution.

What has driven the increase in US utility spending over two decades?

Core argument: Annual spending by major U.S. utilities to produce and deliver electricity rose 12% from $287 billion in 2003 to $320 billion in 2023 in real 2023 dollars, according to financial reports filed with the Federal Energy Regulatory Commission.

Annual spending by major utilities to produce and deliver electricity increased 12% from $287B in 2003 to $320B in 2023 as measured in real 2023 dollars, according to financial reports to the Federal Energy Regulatory Commission (FERC). Capital investment in electric infrastructure mostly drove the increase, more than doubling over the period as aging generation and delivery infrastructure were replaced or upgraded to resist fire and storm damage. Spending on electricity transmission systems nearly tripled from 2003 to 2023, increasing to $27.7B. More recently, capital investment in the transmission of electricity increased $2.7B (11%) in 2023 from 2022. Capital spending on the distribution system, responsible for delivering electricity to end users, was the main driver of electricity spending increases over the last two decades. Capital investment in distribution infrastructure increased by $31.4B, or 160%, from 2003 to 2023. More than one-fifth of this increase occurred between 2022 and 2023.

Takeaways by Macro Roundup® AI

  1. Annual spending by major U.S. utilities to produce and deliver electricity rose 12% from $287 billion in 2003 to $320 billion in 2023 in real 2023 dollars, according to financial reports filed with the Federal Energy Regulatory Commission.
  2. Capital investment in distribution infrastructure, which delivers electricity to end users, increased $31.4 billion, or 160%, from 2003 to 2023 and was the main driver of the rise in electricity spending over those two decades.
  3. Spending on electricity transmission systems nearly tripled from 2003 to 2023, reaching $27.7 billion, with capital investment in transmission rising $2.7 billion, or 11%, in 2023 from 2022.

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.
  • 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.
  • World’s Largest Transformer Maker Warns of Supply Crunch — Hitachi Energy, the world's largest transformer maker, says the industry is overwhelmed and cannot keep pace with demand for grid equipment, with utilities that have not pre-reserved units now facing waits of three to four years versus six to eight months previously. Demand has been strained partly by data centres running generative artificial intelligence.

AI Summary. A New Zealand nuclear fusion start-up says it created and contained a plasma cloud at about 300,000 degrees Celsius for 20 seconds in under two years for less than $10mn, using a design that levitates a superconducting magnet inside the plasma rather than outside the chamber.

Malcolm Moore Financial Times
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A New Zealand-based startup claims to have created a 300,000°C plasma cloud for 20 seconds using an “inside-out” tokamak, which contains superheated plasma using a high-temperature superconducting magnet inside the reactor.

Can an inside-out reactor design speed up fusion development at lower cost?

Core argument: OpenStar, a New Zealand start-up, says it created and contained a plasma cloud at around 300,000°C for 20 seconds in its first experimental reactor, achieved in under two years and for less than $10mn.

A small start-up in New Zealand claims it has created plasma, the first step towards nuclear fusion, in under two years and for less than $10mn after experimenting with an unconventional reactor design. OpenStar, founded by chief executive Ratu Mataira in 2021 in his Wellington apartment, said on Tuesday that it had created and contained a plasma cloud at around 300,000 degrees Celsius for 20 seconds in its first experimental reactor. While much higher plasma temperatures are required to achieve nuclear fusion, OpenStar’s test stands apart for its unconventional reactor design, which the company said could be faster to scale and commercialise. Mataira said OpenStar’s breakthrough had been to turn the tokamak design “inside out”. Instead of magnets outside the chamber, OpenStar levitates a high-temperature superconducting magnet inside the superheated plasma, which is then kept within the magnet’s north-to-south field lines. This allows the plasma, which is so hot it would destroy any material it touches, to be contained inside a vacuum chamber.

Takeaways by Macro Roundup® AI

  1. OpenStar, a New Zealand start-up, says it created and contained a plasma cloud at around 300,000°C for 20 seconds in its first experimental reactor, achieved in under two years and for less than $10mn.
  2. OpenStar's reactor turns the tokamak design "inside out," levitating a high-temperature superconducting magnet inside the plasma and containing the plasma within the magnet's north-to-south field lines in a vacuum chamber.
  3. Much higher plasma temperatures than OpenStar's 300,000°C are required to achieve nuclear fusion, though the company says its unconventional design could be faster to scale and commercialise.

Related Articles:

  • WHAM! Nuclear Fusion Experiment Hits New Record for Magnet Strength — A nuclear fusion experiment at the University of Wisconsin-Madison set a record for the strongest steady magnetic field confining a plasma, reaching 17 tesla — more than twice the field strength used by high-resolution MRI brain scanners. The high-temperature superconducting magnets were built by startup Commonwealth Fusion Systems.
  • US Scientists Repeat Fusion Power Breakthrough — Scientists at the Lawrence Livermore National Laboratory achieved net energy gain in a fusion reaction for a second time, with preliminary results indicating the experiment produced a higher energy output than the first ignition.
  • China Outspends the U.S. on Fusion in the Race for Energy’s Holy Grail — Scientists familiar with China's fusion facilities estimate that at its current pace of spending and development, China will surpass U.S. and European magnetic fusion capabilities within three or four years. Much U.S. fusion spending goes to legacy programs, while China's roughly $1.5bn is largely directed at building systems that would compete with leading private U.S. fusion firms.

AI Summary. China appears to be exporting close to $1tn more than it imports, with the trend upward, and other countries are unlikely to passively accept Chinese surpluses on that scale. The "China shock" of the 2000s showed that a large import surge inflicts unacceptable damage on affected workers and communities.

Paul Krugman New York Times
Date Posted:

.@paulkrugman argues “Serious trade conflict is coming as China tries to export its policy failures.” He cautions the Trump administration against “across the board” tariffs and warns of potential large-scale cronyism in their application.

Will other countries accept trade surpluses approaching $1 trillion?

Core argument: China appears to be exporting close to $1 trillion more than it imports, with the trend rising, as it offsets weak domestic consumption by running huge trade surpluses to keep its economy humming.

What do you do if you have lots of capacity but your consumers can’t or won’t buy what you make? You try to export the problem, keeping the economy humming by running huge trade surpluses. And I mean huge. Tellingly, China seems to be playing games with its trade numbers in an attempt to make its surpluses look smaller than they really are. But China appears to be exporting close to $1 trillion more than it imports, and the trend is upward. Hence the coming trade war. The rest of the world won’t passively accept Chinese surpluses on that scale. The “China shock” of the 2000s taught us that whatever the (real) virtues of free trade, a huge import surge does unacceptable damage to workers and communities in its path. Furthermore, China is an autocracy that doesn’t share democratic values. Allowing it to dominate strategically crucial industries is an unacceptable risk.

Takeaways by Macro Roundup® AI

  1. China appears to be exporting close to $1 trillion more than it imports, with the trend rising, as it offsets weak domestic consumption by running huge trade surpluses to keep its economy humming.
  2. China seems to be playing games with its trade statistics in an attempt to make its surpluses look smaller than they actually are.
  3. The "China shock" of the 2000s taught that a huge import surge does unacceptable damage to workers and communities in its path, and letting an autocracy that does not share democratic values dominate strategically crucial industries is an unacceptable risk.

Related Articles:

  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — 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.
  • EU to Impose Tariffs Up to 45% on Chinese Electric Vehicles — The European Union voted to impose tariffs of up to 45% on electric vehicles made in China, lasting five years, with China vowing to protect its companies. Chinese-made electric cars rose from around 3% to more than 20% of EU electric vehicle sales over three years, with Chinese brands accounting for about 8%.
  • 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. Air freight groups and airlines are rerouting planes to capture elevated freight rates out of China, driven by demand for cheap goods from Chinese ecommerce groups and greater use of air freight amid Red Sea disruption. Average spot rates from Asia to the US rose 49% year-over-year to $5.46/kg.

Chan Ho-him, Oliver Telling, and Philip Georgiadis Financial Times
Date Posted:

The spot air freight rate from Asia to the US has surged 49% since October 2023, as Chinese e-commerce groups respond to US consumers’ appetite for cheap goods via duty-free direct-to-consumer shipments.

Are airlines rerouting planes to capture rising air freight rates from China?

Core argument: The average October spot rate for air freight from Asia to the US rose 49% from a year earlier to $5.46 a kilogram, while Asia-to-Europe rates rose 25%, according to market analytics firm Xeneta.

Air freight groups and airlines, which only recently cut flights to China amid weak tourist demand, are scrambling to reroute planes and cash in on elevated freight rates out of the country ahead of Black Friday and the Christmas shopping season. Strong growth in demand for cheap online goods from Chinese ecommerce groups and the rising use of air freight amid disruption in the Red Sea are threatening to overwhelm the already strained rapid delivery market before Christmas, causing air freight rates to jump. The freight rate for flying goods from Asia to the US has surged, with the average spot price in October up 49% from a year ago to $5.46 a kilogram, according to market analytics firm Xeneta. Rates from Asia to Europe rose 25% over the same period. The jump in air freight demand comes as China-founded ecommerce groups respond to western consumers’ appetite for cheap goods. Many of their shipments are sent direct to consumers by air, taking advantage of import duty exemptions on shipments below a certain price.

Takeaways by Macro Roundup® AI

  1. The average October spot rate for air freight from Asia to the US rose 49% from a year earlier to $5.46 a kilogram, while Asia-to-Europe rates rose 25%, according to market analytics firm Xeneta.
  2. Air freight groups and airlines, which recently cut China flights amid weak tourist demand, are rerouting planes to capture elevated freight rates out of China ahead of Black Friday and the Christmas shopping season.
  3. Demand for cheap online goods from China-founded ecommerce groups, plus greater use of air freight amid Red Sea disruption, threatens to overwhelm the strained rapid delivery market before Christmas, with many shipments flown direct to consumers under import duty exemptions below a certain price.

Related Articles:

  • China Nears Record $1 Trillion Trade Surplus as Trump Returns — China's goods trade surplus reached a record $785bn in the first 10 months of a year, up almost 16% from the prior year, and Bloomberg calculates it would approach $1tn if it keeps widening at the same pace. Foreign direct investment liabilities fell over nine months, which would mark the first annual net outflow since 1990 if sustained.
  • The Dangerous Myth of Deglobalization — China's manufacturing surplus rose by about 1 percentage point of global GDP over a four-year span and is far larger than those of Germany and Japan. China's $800bn goods trade surplus depends on the large U.S. trade deficit, which is still indirectly financed by China through the large offshore dollar stockpiles held by Chinese exporters.
  • The Surprising Resilience of Globalization: An Examination of Claims of Economic Fragmentation — China's exports have grown faster than its own economy, rising by about 3 percentage points as a share of its GDP, with a nearly $1tn surge over four years. Measured against the GDP of its trading partners, China's manufactured-goods surplus has increased by about three-quarters of a percentage point of world GDP to a record high.

AI Summary. An across-the-board tariff would shift American workers and capital toward producing goods currently imported more cheaply, lowering productivity, wages, and returns on capital while reducing output in industries where the US is more efficient. Because half of US imports are component parts used by domestic producers, tariffs would also raise production costs and reduce competitiveness.

Phil Gramm and Donald Boudreaux Wall Street Journal
Date Posted:

Phil Gramm and Donald Boudreaux argue that across-the-board tariffs would lower US productivity and the return on capital by channeling US capital and workers away from goods and services where we have a comparable advantage. @AEIecon

Do across-the-board tariffs lower productivity, wages, and competitiveness?

Core argument: Half of U.S. imports are component parts used by American producers, so an across-the-board tariff would raise domestic production costs and reduce U.S. competitiveness at home and abroad, the author argues.

An across-the-board tariff would stimulate U.S. production of goods that we now import more cheaply. To produce these goods at home, American workers and capital would be drawn away from producing other goods and services that we produce more efficiently. Productivity, wages and the return on capital would fall as we produce things at home that we could buy more cheaply abroad. This would simultaneously reduce production in industries for which our labor productivity and capital returns are higher. Moreover, because half of our imports are component parts used by U.S. producers, tariffs would further increase our production costs and reduce our competitiveness at home and abroad.

Takeaways by Macro Roundup® AI

  1. Half of U.S. imports are component parts used by American producers, so an across-the-board tariff would raise domestic production costs and reduce U.S. competitiveness at home and abroad, the author argues.
  2. An across-the-board tariff would stimulate U.S. production of goods now imported more cheaply, drawing American workers and capital away from goods and services the U.S. produces more efficiently.
  3. Productivity, wages and the return on capital would fall as the U.S. produces domestically what it could buy more cheaply abroad, cutting output in industries where U.S. labor productivity and capital returns are higher.

Related Articles:

  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — 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.
  • China Arms Itself For Potential Trade War With Donald Trump — China has built legal tools to retaliate against US companies in a trade conflict, including an anti-foreign sanctions law, an "unreliable entity list" for foreign firms it deems to have undermined its national interests, and an expanded export control law. The export law lets Beijing leverage its dominance in supplying resources such as rare earths and lithium.
  • How Will Trumponomics Work Out? — With US federal debt at 100% of GDP and primary deficits projected near 3%, the measures under consideration would add 1–2 points, implying a sustained 4–5% primary deficit and rapid debt growth. Stabilizing the debt ratio would require an adjustment worth 16–20% of the federal budget.

Tuesday, November 19, 2024

AI Summary. Counties where government transfer programs such as Social Security, Medicare, Medicaid, and unemployment insurance make up at least a quarter of personal income gave Trump 63% of the vote, while counties where transfers account for less than 15% gave Harris 56%. Transfers supplied 18% of total US personal income.

Sarah Eckardt, Connor O'Brien, and Ben Glasner Agglomerations
Date Posted:

Trump won 63% of the vote in counties where transfer payments made up >25% of personal income in 2022. In counties where transfers were <15%, Harris won 56%. On average, transfers made up 18% of personal income in 2022. @BenGlasner @cojobrien

Do places more reliant on government transfers vote differently?

Core argument: Trump received 63% of the vote in counties significantly reliant on government transfers, where residents draw at least 25% of personal income from programs such as Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.

Places that rely more on government transfers tended to vote for Trump, while less reliant places tended to vote for Harris. (Transfers include programs like Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.) As of 2022, 18% of total personal income in the United States came from government transfers. Trump received 63% of the vote among significantly reliant counties, whose residents receive at least a quarter of their personal income from transfers. Harris received 56% of the vote among minimally reliant counties, where less than 15% of total personal income is from transfers.

Takeaways by Macro Roundup® AI

  1. Trump received 63% of the vote in counties significantly reliant on government transfers, where residents draw at least 25% of personal income from programs such as Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.
  2. Harris received 56% of the vote in minimally reliant counties, where government transfers account for less than 15% of total personal income.
  3. Government transfers accounted for 18% of total personal income in the United States as of 2022.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • “Compensate the Losers?” Economic Policy and Partisan Realignment in the US — The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.

AI Summary. The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.

Ilyana Kuziemko, Nicolas Longuet-Marx and Suresh Naidu National Bureau of Economic Research
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.@ikuziemko et al. find that less-educated US voters have consistently favored “predistribution” policies such as protectionism and strong labor unions, while more-educated Democratic elites have reduced support for “predistribution” since the 1970s.

How does a party's shift away from predistribution explain educational realignment?

Core argument: The authors estimate that roughly half of the shift of less-educated Americans away from the Democratic Party since the 1970s can be explained by their changing views of the parties' economic policies.

We argue that the Democratic Party’s evolution on economic policy helps explain partisan realignment by education. We show that less-educated Americans differentially demand “predistribution” policies (e.g., a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions), while more-educated Americans differentially favor redistribution (taxes and transfers). This educational gradient in policy preferences has been largely unchanged since the 1940s. We then show the Democrats’ supply of predistribution has declined since the 1970s. We tie this decline to the rise of a self-described “New Democrat” party faction who court more educated voters and are explicitly skeptical of predistribution. Less-educated Americans began to leave the Democratic Party in the 1970s, after decades of serving as the party’s base. Roughly half of the total shift can be explained by their changing views of the parties’ economic policies. We also show that in the crucial transition period of the 1970s and 1980s, New Democrat-aligned candidates draw disproportionately from more-educated voters in both survey questions and actual Congressional elections.

Takeaways by Macro Roundup® AI

  1. The authors estimate that roughly half of the shift of less-educated Americans away from the Democratic Party since the 1970s can be explained by their changing views of the parties' economic policies.
  2. Less-educated Americans differentially demand predistribution policies such as a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions, while more-educated Americans differentially favor redistribution through taxes and transfers, a gradient largely unchanged since the 1940s.
  3. The authors tie the decline in Democrats' supply of predistribution since the 1970s to the rise of a self-described "New Democrat" faction skeptical of predistribution, whose aligned candidates drew disproportionately from more-educated voters in 1970s–1980s survey questions and Congressional elections.

Related Articles:

  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.
  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • Americans Are More Reliant Than Ever on Government Aid — Research from the Economic Innovation Group finds that in 1970, fewer than 1% of US counties drew at least 25% of personal income from government safety-net and social programs, compared with 53% of counties by 2022, a shift the group associates with population aging.

AI Summary. Americans without a four-year college degree earn about $1m less over their lifetimes and live about eight years less than college graduates, and they have higher rates of obesity, divorce, out-of-wedlock births, and opioid deaths. Nearly a quarter report having no close friends, compared with 10% of college graduates.

David Brooks The Atlantic
Date Posted:

.@nytdavidbrooks argues that efforts to reward merit over social class in elite university admissions have resulted in “an American caste system” in which the winners feel less obligated to the losers, who in turn are reacting in a “populist backlash.”

How wide are the gaps between college graduates and nongraduates?

Core argument: The average high-school graduate will earn about $1 million less over a lifetime than the average four-year college graduate and lives about eight years less.

The average high-school graduate will earn about $1 million less over their lifetime than the average four-year college graduate. The average person without a four-year college degree lives about eight years less than the average four-year college grad. 35% of high-school graduates are obese, compared with 27% of four-year college grads. High-school grads are much less likely to get married, and women with high-school degrees are about twice as likely to divorce within 10 years of marrying as women with college degrees. Nearly 60% of births to women with a high-school degree or less happen out of wedlock; that’s roughly five times higher than the rate for women with at least a bachelor’s degree. The opioid death rate for those with a high-school degree is about 10 times higher than for those with at least a bachelor’s degree. The most significant gap may be social. According to an American Enterprise Institute study, nearly a quarter of people with a high-school degree or less say they have no close friends, whereas only 10% of those with college degrees or more say that.

Takeaways by Macro Roundup® AI

  1. The average high-school graduate will earn about $1 million less over a lifetime than the average four-year college graduate and lives about eight years less.
  2. The opioid death rate for those with a high-school degree is about 10 times that of those with at least a bachelor's degree, and 35% of high-school graduates are obese, compared with 27% of four-year college graduates.
  3. Nearly a quarter of people with a high-school degree or less say they have no close friends, compared with 10% of those with college degrees or more, according to an American Enterprise Institute study.

Related Articles:

  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.
  • The Marriage Paradox: Understanding And Remedying The Paradoxical Place Of Marriage In America — The U.S. marriage rate has fallen more than 60% since 1970, from 85.9 to 30.5 marriages per 1,000 unmarried Americans aged 15 and older, and the share of adults who are married has dropped from 72% to about 50%. Demographers project roughly one in three young adults may never marry.
  • Marriage Market Sorting in the U.S. — Using U.S. survey and census data, the authors find people are most selective on race in marriage markets, followed by education and age, and are more selective on the combination of income and skill than on either alone. They estimate that increased assortative matching accounts for about half of the rise in household income inequality between 1980 and 2020.

AI Summary. Estimates based on labor market tightness measures — job vacancies relative to unemployment and to all job searchers — imply excess demand peaked at a contribution of 0.75 to 1.15 percentage points to inflation, and has since declined to a contribution of 0.3 to 0.4 percentage point.

Regis Barnichon and Adam Shapiro Federal Reserve Bank of San Francisco
Date Posted:

A @sffed analysis finds that labor market tightness as measured by vacancy ratios was still contributing 0.3-0.4pp to inflation as of September 2024, down from 0.75pp in Q1 2024.

How much has cooling labor demand reduced inflation?

Core argument: Estimates based on the vacancies-to-unemployment (V-U) and vacancies-to-total-searchers (V-S) ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation.

We assess the impact of excess demand on inflation through the lens of the job vacancies to unemployment (V-U) ratio and the more comprehensive (V - S) [vacancies to total searchers]. [Our estimation uses] the San Francisco Fed’s cyclical core personal consumption expenditures inflation measure [which] includes only categories with prices highly responsive to the business cycle, [excluding] prices tend to be driven by supply-related factors. Figure 3 shows the contribution of labor market tightness as measured by the unemployment rate and the V-U and V-S ratios to excess inflation over 1995–2024. Our estimates using these two ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation. Both ratios have declined since their 2022 peak, [but] as of September 2024, both ratios implied that excess demand was still contributing between 0.3 to 0.4 percentage point to inflation.

Takeaways by Macro Roundup® AI

  1. Estimates based on the vacancies-to-unemployment (V-U) and vacancies-to-total-searchers (V-S) ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation.
  2. As of September 2024, both the V-U and V-S ratios implied that excess demand was still contributing between 0.3 and 0.4 percentage point to inflation, down from the 2022 peak.
  3. The estimation uses the San Francisco Fed's cyclical core personal consumption expenditures inflation measure, which includes only categories with prices highly responsive to the business cycle and excludes prices driven by supply-related factors, over 1995–2024.

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  • Revisiting the Phillips and Beveridge Curves: Insights from the 2020s Inflation Surge — The authors identify a "Beveridge threshold" level of labor market tightness—the ratio of job vacancies to unemployed workers—below which the relationship between inflation and economic activity steepens and labor market adjustment occurs mainly through vacancies rather than unemployment. They estimate that during the post-pandemic inflation surge the unemployment rate fell as much as 1.08 percentage points below this threshold.
  • The U.S. Economy Is Not Slowing Down — U.S. household incomes have been rising at a 6% annualized rate for two years, with no sign of slowing, while measures of underlying inflation run about 1 to 1.5 percentage points faster on an annualized basis than before the pandemic. Productivity and employment also appear to be rising faster.

AI Summary. U.S. venture firms returned $26bn worth of shares to their investors in a year, the lowest amount since 2011, according to data provider PitchBook, and invested $60bn more than they collected — the largest such deficit in 26 years of PitchBook data. Investment remains high while acquisitions and initial public offerings are few.

Berber Jin Wall Street Journal
Date Posted:

In 2023, US venture firms paid $26B in profits to their investors, the lowest amount since 2011, while drawing $86B for new investments. The trend has continued in 2024, with high levels of investment and few acquisition deals or IPOs.

Are venture firms returning less cash to investors than they invest?

Core argument: U.S. venture firms returned $26 billion worth of shares to their investors last year, the lowest amount since 2011, according to PitchBook.

Last year, U.S. venture firms returned $26 billion worth of shares back to their investors, the lowest amount since 2011, according to the data provider PitchBook. Startup investors say 2024 has continued the trend, with high levels of investment and few acquisition deals or initial public offerings. “We’ve raised a lot of money, and we’ve given very little back,” Thomas Laffont, co-founder of investment firm Coatue Management, said at a recent conference. “We are bleeding cash as an industry.” Last year, U.S. venture firms invested $60 billion more than they collected, the highest such deficit in PitchBook’s 26 years of data. As a result, the investors that back VC firms, such as university endowments and pension funds, aren’t seeing the type of profits the industry has long delivered.

Takeaways by Macro Roundup® AI

  1. U.S. venture firms returned $26 billion worth of shares to their investors last year, the lowest amount since 2011, according to PitchBook.
  2. U.S. venture firms invested $60 billion more than they collected last year, the highest such deficit in PitchBook's 26 years of data.
  3. Startup investors say high investment levels alongside few acquisitions or initial public offerings have continued into 2024, leaving university endowments and pension funds that back venture firms without the profits the industry has long delivered.

Related Articles:

  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
  • Venture Capital Reckons With The End of ‘Megafund’ Era — Venture capital fundraising has slowed sharply, from $555bn at its peak to about a third of that the following year, leaving venture investors on course for their worst fundraising year since 2015. Firms holding large pre-downturn funds have been reluctant to back start-ups whose valuations were hit by higher interest rates.
  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.

AI Summary. Chinese technology groups including Alibaba, ByteDance and Meituan are expanding California offices to build artificial intelligence teams and recruit US talent, despite US export bans on the highest-end Nvidia AI chips. US-based entities owned by Chinese tech companies face no restrictions on accessing high-end AI chips through US data centres.

Eleanor Olcott Financial Times
Date Posted:

Alibaba, ByteDance, and Meituan are building AI teams in Silicon Valley to access US talent and circumvent export controls designed to slow Chinese AI development.

Are Chinese tech groups using US offices for AI talent and chips?

Core argument: Alibaba, ByteDance and Meituan have expanded their California offices to build AI teams and poach staff from rival US groups, seeking to make up ground in the race to profit from generative AI.

China’s biggest technology groups are building artificial intelligence teams in Silicon Valley, seeking to hire top US talent despite Washington’s efforts to curb the country’s development of the cutting-edge technology. Alibaba, ByteDance and Meituan have been expanding their offices in California in recent months, seeking to poach staff from rival US groups who could help them make up ground in the race to profit from generative AI. The push comes despite US efforts to stymie their work. Chinese groups have been hit by a US ban on exports of the highest-end Nvidia AI chips, which are crucial for developing AI models. There are currently no restrictions on US-based entities related to or owned by Chinese tech companies accessing high-end AI chips through data centres located in the US. However, the Department of Commerce proposed introducing a rule in January that cloud providers have to verify the identity of users training AI models and report their activities.

Takeaways by Macro Roundup® AI

  1. Alibaba, ByteDance and Meituan have expanded their California offices to build AI teams and poach staff from rival US groups, seeking to make up ground in the race to profit from generative AI.
  2. US export bans on Nvidia's highest-end AI chips have hit Chinese technology groups, while US-based entities related to or owned by Chinese tech companies face no restrictions on accessing high-end chips through data centres located in the US.
  3. The US Department of Commerce proposed a rule requiring cloud providers to verify the identity of users training AI models and report their activities.

Related Articles:

  • The Global AI Talent Tracker 2.0 — The United States remains the leading destination for the world's most elite AI talent and hosts 60% of top AI institutions. China's share of top AI researchers working domestically rose from 29% in 2019 to 47% in 2022, and India retained one-fifth of its top AI researchers in 2022 versus nearly none in 2019.
  • Microsoft Asks Hundreds of China-Based AI Staff to Consider Relocating Amid U.S.-China Tensions — Microsoft has asked roughly 700 to 800 employees in its China-based cloud-computing and artificial intelligence operations, mostly Chinese-national engineers working on machine learning, to consider transferring to countries including the U.S., Ireland, Australia, and New Zealand amid escalating U.S.-China tensions.
  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.

AI Summary. China has passed the European Union to become the second-largest source of cumulative historical greenhouse gas emissions, behind the United States. Projections based on the International Energy Agency's "stated policies scenario," which tracks nations' current climate actions, show China may nearly catch up with the US.

Brad Plumer and Mira Rojanasakul New York Times
Date Posted:
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China’s cumulative carbon emissions since 1850 have outpaced Europe’s but are still 60% of the US’s level. China has been the world’s #1 carbon emitter since 2006.

Is China now the second-largest source of historical emissions?

Core argument: China has passed the European Union's 27 current member states to become the world's second-largest source of cumulative greenhouse gas emissions.

The United States has burned more fossil fuels than anywhere else in history. Europe has long ranked No. 2 in total historical greenhouse gas emissions. Until now. And projections show that China may nearly catch up with the United States. Data for carbon dioxide-equivalent emissions from 1850 to 2023 is from Jones et al (2024); data for 2024 from Carbon Brief; projected data for 2025 to 2100 is based on the International Energy Agency’s “stated policies scenario” tracking nations’ climate actions. European Union totals were calculated for the current 27 member countries. Lines show cumulative territorial CO2 emissions from fossil fuels, cement, land use, land use change and forestry.

Takeaways by Macro Roundup® AI

  1. China has passed the European Union's 27 current member states to become the world's second-largest source of cumulative greenhouse gas emissions.
  2. Projections based on the International Energy Agency's "stated policies scenario" show China may nearly catch up with the United States, which has burned more fossil fuels than anywhere else in history.
  3. The emissions series combines carbon dioxide-equivalent data from Jones et al (2024) for 1850–2023, Carbon Brief for 2024, and IEA-based projections for 2025–2100, covering fossil fuels, cement, and land use, land use change and forestry.

Related Articles:

  • Halfway Between Kyoto and 2050: Zero Carbon Is A Highly Unlikely Outcome — Fossil fuels' share of global primary energy fell only from about 86% to 82% over 25 years, while absolute fossil fuel consumption rose nearly 55%. Emission cuts in the EU (-23%) and US (-9%) were outweighed by China's 3.3x and India's 3x increases, with energy-sector carbon dioxide emissions up 54%.
  • Take the Under — Downward revisions to global population and GDP projections make climate change appear more tractable, the author argues, since the scenarios used to model emissions rely on socio-economic assumptions that are more extreme than real-world observations. With slower population and economic growth, even partial policy successes could bring emissions consistent with a 2C target within reach.
  • The Energy Transition Will Be Much Cheaper Than You Think — Economic models have overestimated adoption of carbon capture and storage while underestimating cost declines in solar panels and lithium batteries. Researchers modelling solar, wind, batteries and hydrogen electrolysers under "Wright's law" — where each doubling of production cuts unit costs by a fixed percentage — estimate emissions fall fast enough to meet the 1.5°C target at minimal cost.