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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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 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, December 2, 2024

AI Summary. The authors present a framework in which temporary disruptions like banking crises and excessive debt, along with structural factors like demographic decline and rising inequality, can push natural interest rates below zero, and argue that a negative natural rate combined with interest rates stuck at zero is necessary for a liquidity trap.

Gauti Eggertsson and Sergey Egiev National Bureau of Economic Research
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.@GautiEggertsson and @SEgiev note the difficulty of achieving negative nominal rates and argue that big downturns have resulted from a negative natural real rate – driven either by a crisis or secular stagnation – combined with stubbornly low inflation.

What causes liquidity traps in major economic downturns?

Core argument: The paper argues that a negative natural interest rate and the zero lower bound are both necessary conditions for a liquidity trap, applying a single framework to the U.S. Great Depression, the U.S. Great Recession, and Japan's Long Recession.

This paper presents a unified framework to explain three major economic downturns: the U.S. Great Depression, the U.S. Great Recession, and Japan’s Long Recession. Temporary economic disruptions, such as banking crises and excessive debt accumulation, can drive natural interest rates into negative territory in the short term. At the same time, structural factors, including demographic decline and rising inequality, can depress natural interest rates over short and long horizons. A negative natural interest rate and the zero lower bound (ZLB) are necessary conditions for a liquidity trap. Credible monetary policy can counteract the adverse effects of short-run liquidity traps. Diminished monetary policy credibility or persistent negative natural rates may necessitate fiscal interventions. The framework sheds light on the macroeconomic challenges of low-interest-rate environments and underscores the central importance of policy regimes.

Takeaways by Macro Roundup® AI

  1. The paper argues that a negative natural interest rate and the zero lower bound are both necessary conditions for a liquidity trap, applying a single framework to the U.S. Great Depression, the U.S. Great Recession, and Japan's Long Recession.
  2. Temporary disruptions such as banking crises and excessive debt accumulation can push natural interest rates negative in the short run, while structural factors including demographic decline and rising inequality can depress them over short and long horizons.
  3. Credible monetary policy can counteract short-run liquidity traps, but diminished monetary policy credibility or persistent negative natural rates may necessitate fiscal intervention, according to the framework.

Related Articles:

  • Liquidity Traps, Gobal and Local (Somewhat Wonkish) — Europe's weak domestic demand, reflected in core inflation of 0.6%, is exported globally through large current account surpluses, while low inflation interacting with the zero lower bound on interest rates keeps policy from reaching equilibrium. Liquidity traps can persist locally despite international capital mobility when domestic demand stays weak.
  • The Puzzling Persistence of Financial Crisis — Financial crises are costly, with average declines of 5.5% of real GDP and median fiscal costs of 16% of real GDP to resolve distressed banks. The authors identify four categories of causal factors: politically motivated risk subsidies such as government support for housing credit, shifts in investor risk preferences, investor learning, and fraud.
  • Frying Pans and Fiscal Policy — The US economy remained significantly depressed for roughly a decade after the financial crisis, a lost decade the author argues could have been avoided with different policies. The evidence offered is the post-Covid recovery, in which major federal spending programs helped the economy regain lost ground in just over three years.

AI Summary. Long-running U.S. tests show population average reading scores moved from 255 to 256 out of 500 and math from 266 to 271, despite educational attainment rising more than three years. The author argues that if added schooling has not raised productivity, measured total factor productivity growth has been understated, shrinking the apparent "Great Stagnation" by about a third.

Maxwell Tabarrok Maximum Progress
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.@MTabarrok argues that “zero improvement in the population average score” in math and reading since the 1970s implies that growth accounting has overestimated growth in human capital, understating 2023 TFP relative to its post-1973 trend by up to ⅓.

Has productivity growth been understated because added schooling didn't raise skills?

Core argument: Average U.S. reading scores moved from 255 out of 500 in 1971 to 256 in 2023 and math scores from 266 to 271, essentially zero improvement despite educational attainment rising 3+ years since the 1970s.

Math and reading scores on tests that have been surveyed over longer periods also show essentially zero improvement in the population average scores. The average score on the reading test in 1971 was 255 out of 500, in 2023 it was 256 and math scores went from 266 to 271. Educational attainment has risen by 3+ years since 1970s but population level reading and math scores have barely changed, and scores within educational attainment groups have fallen. As more people are pushed through lowered standards to a high school diploma, the wage premium to this degree has fallen, suggesting that much of its value was in the differentiating signal rather than skill gains. If this story is true, and more education hasn’t been raising productivity, then all the GDP growth we thought was due to more skilled workers is actually coming from somewhere else. That means we’ve been undercounting TFP, and technological progress for decades. If we take the SF Fed TFP data and remove the adjustments they make for gains in human capital (based mostly on rising educational attainment), we get something that looks like this. The Great Stagnation is shrunk by about a third!

Takeaways by Macro Roundup® AI

  1. Average U.S. reading scores moved from 255 out of 500 in 1971 to 256 in 2023 and math scores from 266 to 271, essentially zero improvement despite educational attainment rising 3+ years since the 1970s.
  2. Scores within educational attainment groups have fallen, and the wage premium to a high school diploma has declined as more people are pushed through lowered standards, suggesting much of the diploma's value was differentiating signal rather than skill gains.
  3. Removing the SF Fed's human capital adjustments, based mostly on rising educational attainment, from its total factor productivity data shrinks the Great Stagnation by about a third, implying TFP and technological progress have been undercounted for decades.

Related Articles:

  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.
  • 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.
  • Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts — The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.

AI Summary. A world of widespread tariffs would also shrink international capital flows, and because the US trade deficit is the counterpart of large capital inflows, reduced capital mobility would narrow that deficit. The author argues this would occur largely by reducing overall investment in the US economy.

Paul Krugman Stone Center on Socio-Economic Inequality
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.@paulkrugman offers a novel mechanism by which Trump’s tariffs may reduce US trade deficits. “A tariff-ridden world would also be a world with greatly reduced capital flows,” and “net capital flows are the counterpart of imbalances in physical trade”.

Do tariffs shrink the trade deficit by reducing investment in the US?

Core argument: A tariff-ridden world would also greatly reduce global capital flows, and because the U.S. trade deficit is the counterpart of large capital inflows, reduced capital mobility would squeeze the deficit largely by cutting overall investment in the U.S. economy.

My main new argument here is that a tariff-ridden world would also be a world with greatly reduced capital flows; since the U.S. trade deficit is the counterpart of large capital inflows, a global reduction in capital mobility would also squeeze our trade deficit, although it would largely do so by reducing overall investment in the U.S. economy. The amount by which the exchange rate must appreciate to accommodate a given inflow of capital depends on how many goods are tradable. If only a small part of production can be exported and a small part of consumption imported, you’d need a very, very strong dollar to produce the kind of trade deficits America currently has. And because what goes up must eventually come down, a U.S. economy with limited trade would be unable to attract foreign investment at current rates. To the extent that [trade deficit reduction due to tariffs] succeeds, it will be for bad, economically destructive reasons: damaging the world trading system will also greatly damage international capital markets.

Takeaways by Macro Roundup® AI

  1. A tariff-ridden world would also greatly reduce global capital flows, and because the U.S. trade deficit is the counterpart of large capital inflows, reduced capital mobility would squeeze the deficit largely by cutting overall investment in the U.S. economy.
  2. The dollar appreciation needed to accommodate a given capital inflow depends on how much of production is tradable: if only a small share of output can be exported and of consumption imported, a very strong dollar would be required to generate America's current trade deficits.
  3. Any reduction in the U.S. trade deficit achieved through tariffs would come for economically destructive reasons, since damaging the world trading system would also greatly damage international capital markets.

Related Articles:

  • The End of Privilege: A Reexamination of the Net Foreign Asset Position of the United States — The authors document that the U.S. net foreign asset position fell by 60 percentage points of U.S. gross domestic product between 2007 and 2021, even as U.S. current account deficits narrowed. They attribute this to a boom in the market valuation of U.S. corporations' non-financial assets, which mechanically raised the value of large foreign equity holdings in U.S. firms.
  • 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.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.

AI Summary. Goldman Sachs and JP Morgan estimate net immigration to the US will fall to roughly 750,000 a year, down from a peak of 3.3m in 2023 and an average of 919,000 a year in the 2010s, while Evercore ISI projects net immigration will turn negative, with outflows exceeding inflows by 600,000 by 2028.

Paul Kiernan Wall Street Journal
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Deportations from the interior of the US peaked in 2009 at 243,000. Restrictions on immigration and deportations at scale could have a major labor market impact in segments like construction and hospitality with large numbers of foreign-born workers.

How much will tighter immigration policy reduce net immigration?

Core argument: Goldman Sachs and JP Morgan both estimate U.S. net immigration will fall to roughly 750,000 a year, the rate during Trump's first presidency, down from a 2023 peak of 3.3 million and a 2010s average of 919,000.

There is little recent precedent for the expected labor-force impact of Trump’s immigration plans. Removals of immigrants from the interior of the country (as opposed to at the border) peaked at 243,000 in 2009, at the depths of the 2007-09 recession, and averaged 126,000 a year over the following decade, when the job market was generally weaker than now. Goldman Sachs and JP Morgan both estimate that net immigration—the difference between people entering the country and people leaving—will fall back to the annual rate during Trump’s first presidency of around 750,000 from a peak of 3.3 million in 2023 and an average of 919,000 a year in the 2010s. By contrast, Evercore ISI projects net immigration will actually be negative, with outflows exceeding inflows by 100,000 in 2025, rising to 600,000 in 2028.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs and JP Morgan both estimate U.S. net immigration will fall to roughly 750,000 a year, the rate during Trump's first presidency, down from a 2023 peak of 3.3 million and a 2010s average of 919,000.
  2. Evercore ISI projects U.S. net immigration will turn negative, with outflows exceeding inflows by 100,000 in 2025 and rising to 600,000 in 2028.
  3. Removals of immigrants from the U.S. interior peaked at 243,000 in 2009, at the depths of the 2007-09 recession, and averaged 126,000 a year over the following decade, when the job market was generally weaker than now.

Related Articles:

  • Immigration Surge Has Slowed: Updated Estimates of Net International Migration — The authors estimate that net international migration to the US was close to 3.5m in one year — about 200,000 above the Congressional Budget Office's estimate, driven largely by higher undocumented entries — and project roughly 2.9m the following year, about 400,000 below the Congressional Budget Office's projection.
  • Immigration and the Macroeconomy After 2024 — 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.
  • 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. New tariffs on China and autos are projected to trim US growth by an average of 0.2 percentage points through higher consumer prices and trade-war uncertainty weighing on business investment. Absent further escalation, tax cuts, lighter regulation, and improved business confidence are projected to add an average of 0.3 percentage points the following year.

Jan Hatzius, Dominic Wilson, Joseph Briggs, et al. Goldman Sachs
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Jan Hatzius forecasts 2.5% growth in 2025, with a net 0.2pp drag from tariffs, offset by a net boost of 0.3pp from regulatory changes and improved “animal spirits.”

Do tax cuts and deregulation outweigh the growth drag from tariffs?

Core argument: The baseline outlook projects new policies to create a net drag on US GDP growth averaging 0.2pp in 2025, with effects that are small and largely offsetting.

The effects from the new policies on US GDP are small and largely offsetting under our baseline outlook. The new administration is likely to announce the China and auto tariffs relatively soon after the January 20 inauguration, which could also fuel uncertainty about broader tariff measures among businesses and market participants. These tariffs would result in a modest hit to real disposable personal income via higher consumer prices, and the broader uncertainty of how much further the trade war might escalate is likely to weigh on business investment. The result is a net drag averaging 0.2pp in 2025. Assuming that the trade war does not escalate further, we expect the positive impulses from tax cuts, a friendlier regulatory environment, and improved “animal spirits” among businesses to dominate in 2026, with a net boost to growth averaging 0.3pp.

Takeaways by Macro Roundup® AI

  1. The baseline outlook projects new policies to create a net drag on US GDP growth averaging 0.2pp in 2025, with effects that are small and largely offsetting.
  2. China and auto tariffs are expected relatively soon after the January 20 inauguration, modestly trimming real disposable personal income via higher consumer prices, while uncertainty over further trade-war escalation is likely to weigh on business investment.
  3. Assuming no further trade-war escalation, tax cuts, a friendlier regulatory environment, and improved "animal spirits" among businesses are expected to dominate in 2026, boosting growth by an average of 0.3pp.

Related Articles:

  • 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.
  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.
  • 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.

AI Summary. Yields on 30-year Chinese government bonds have fallen from 4% in late 2020 to 2.21% as China cuts interest rates and investors move into safe assets, while Japan's long-term yields have risen above China's to 2.27%. Chinese core inflation, excluding fuel and food, was 0.2% annually versus 2.3% in Japan.

Arjun Neil Alim and Ian Smith Financial Times
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China’s long-term bond yields have fallen to 2.21% from 4% in late 2020, and are for the first time, marginally below Japan’s.

Is China's bond market taking on Japan's deflationary character?

Core argument: The yield on 30-year Chinese government bonds has fallen from 4% in late 2020 to 2.21%, as Beijing cuts interest rates to boost a flagging economy and Chinese investors move into haven assets.

A rally in 30-year Chinese government bonds has pushed their yield down from 4% in late 2020 to 2.21% on Friday, as Beijing cuts interest rates to boost its flagging economy and Chinese investors pile into haven assets. Japan’s long-term bond yields, which for years were stuck below 1%, have risen above China’s to 2.27%, as Tokyo normalises monetary policy after decades of deflation. Core inflation in China, excluding fuel and food, was running at an annual rate of 0.2% in October. In Japan, core inflation hit a six-month high of 2.3%, strengthening the case for further rate rises.

Takeaways by Macro Roundup® AI

  1. The yield on 30-year Chinese government bonds has fallen from 4% in late 2020 to 2.21%, as Beijing cuts interest rates to boost a flagging economy and Chinese investors move into haven assets.
  2. Japan's long-term bond yields, stuck below 1% for years, have risen above China's to 2.27% as Tokyo normalises monetary policy after decades of deflation.
  3. Chinese core inflation excluding fuel and food ran at an annual 0.2% in October, while Japan's core inflation hit a six-month high of 2.3%, strengthening the case for further Japanese rate rises.

Related Articles:

  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
  • Why Xi Jinping Changed His Mind on China’s Fiscal Stimulus — China reported third-quarter GDP growth of 4.6%, below its official 5% annual target, amid unstable property prices and local governments unable to pay bills. Economists say structural challenges including high government debt, demographic decline, youth unemployment, and trade tensions risk a deflationary spiral like Japan's after its 1990s property bust.
  • What Will It Take for China’s GDP to Grow at 4–5 Percent Over the Next Decade? — China accounts for 18% of global GDP, 13% of global consumption, and 31% of global manufacturing. The author estimates that if China grew 4–5% annually for a decade while keeping manufacturing's role in its economy, its share of global manufacturing would reach 36–39%, requiring the rest of the world to let manufacturing's share of its output fall by 0.5–1.0pp.

AI Summary. Gangs mixing fentanyl with the horse tranquilliser xylazine is believed to postpone withdrawal symptoms so users take fewer hits, and to be one factor behind a shift from injecting to smoking fentanyl, which tends to reduce lethality. Analysis of state-level data finds the states furthest into declines in fentanyl mortality are those where xylazine has circulated longest.

John Burn-Murdoch Financial Times
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Fentanyl deaths are 20% under their pre-pandemic peak. @jburnmurdoch highlights evidence that cutting fentanyl with the horse tranquillizer xylazine may be driving the decline.

Are drug mixtures behind falling fentanyl overdose deaths?

Core argument: Gangs mixing fentanyl with the horse tranquilliser xylazine is believed to postpone withdrawal symptoms in some users, leading them to take fewer hits and reducing the risk of a deadly overdose.

In recent years, gangs have begun mixing fentanyl with the horse tranquilliser xylazine, whose properties alter the fentanyl high. This is believed to postpone withdrawal symptoms in some cases, meaning users take fewer hits, reducing the risk of a deadly overdose. Xylazine is also thought to be one factor behind the shift among users from injecting to smoking fentanyl, which tends to reduce its lethality. This is also another perfect fit for the east-west pattern. According to my analysis of state-level data on drug supply and deaths, the states that are furthest into their declines in fentanyl mortality are those where xylazine has been circulating for the longest.

Takeaways by Macro Roundup® AI

  1. Gangs mixing fentanyl with the horse tranquilliser xylazine is believed to postpone withdrawal symptoms in some users, leading them to take fewer hits and reducing the risk of a deadly overdose.
  2. Analysis of state-level drug supply and mortality data finds that the states furthest into their declines in fentanyl deaths are those where xylazine has circulated the longest, fitting an east-west pattern.
  3. Xylazine is thought to be one factor behind users shifting from injecting fentanyl to smoking it, a change that tends to reduce the drug's lethality.

Related Articles:

  • U.S. Overdose Deaths Decline for First Time Since 2018 — U.S. overdose deaths fell about 3% to roughly 107,500, the first annual decline in five years, according to preliminary Centers for Disease Control and Prevention estimates. Deaths involving synthetic opioids, a category largely fueled by fentanyl, fell 2% to about 74,700 and accounted for 7 of every 10 overdose deaths.
  • Importing the Opioid Crisis? International Trade and Fentanyl Overdoses — A study using U.S. mortality and import data finds a positive state-level association between imports per resident and drug overdose death rates, driven by fentanyl and accounting for an estimated 15,000–20,000 deaths per year. The authors estimate that 10% higher imports per resident is associated with an 8.1% higher fentanyl death rate.
  • The Rise in American Pain: The Importance of the Great Recession — The authors find that the rise in reported pain among Americans was almost entirely concentrated in the 2007–2010 recession period rather than following a smooth upward trend, with the disproportionate increase among the less educated also occurring primarily then. The authors state they find this jump difficult to explain.

Tuesday, December 3, 2024

AI Summary. A randomized experiment giving 1,000 low-income Americans $1,000 monthly tax-free for three years, against controls receiving $50 monthly, found no effects on political participation, engagement, policy preferences, trust in government, polarization, or support for democracy. The authors argue this contrasts with prior findings that government transfers mobilize recipients, suggesting citizens' attribution of responsibility to the state drives those effects.

David Broockman, Elizabeth Rhodes, Alexander Bartik, et al. National Bureau of Economic Research
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An experiment in which a non-profit gave low-income Americans a tax-free $1k/month for 3 years showed little effect on political engagement, conservatism, or trust in democratic governance, but some increased belief in the value of work. @AlexBartik

Does giving low-income Americans cash change their political attitudes and behavior?

Core argument: A randomized field experiment giving 1,000 low-income Americans $1,000 per month tax-free for three years, against 2,000 control participants receiving $50 monthly, found no effects on political participation or engagement, ruling out effects the size of the observational turnout–income association.

A non-profit gifted 1,000 low-income Americans $1,000 per month for three years tax-free, and 2,000 control participants $50 monthly. Contrary to resource models of participation, we find no effects on political participation or engagement and rule out effects equivalent to the observational association between turnout and income. Political preferences largely do not change, with the estimates again distinguishable from the observational relationship that economic conservatism increases with income. Dispositions such as trust in government, polarization, and support for democracy also do not change. We do find effects consistent with mood misattribution: affect towards one's own racial group, other racial groups, and some politicians slightly improves. There is also some evidence that treated participants saw work as more important for individuals, society, or even as a requirement for accessing government programs. The contrast between our null findings and the mobilizing effects of government transfers found in prior studies reinforces the importance of citizens’ attribution of responsibility towards the state for generating the mobilizing effects of those transfers.

Takeaways by Macro Roundup® AI

  1. A randomized field experiment giving 1,000 low-income Americans $1,000 per month tax-free for three years, against 2,000 control participants receiving $50 monthly, found no effects on political participation or engagement, ruling out effects the size of the observational turnout–income association.
  2. Political preferences largely did not change in the cash transfer experiment, with estimates distinguishable from the observational relationship that economic conservatism rises with income, and trust in government, polarization, and support for democracy also unchanged.
  3. The researchers find effects consistent with mood misattribution, with slightly improved affect toward one's own and other racial groups and some politicians, plus some evidence treated participants viewed work as more important for individuals, society, or as a requirement for accessing government programs.

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.
  • The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States — In a randomized experiment giving 1,000 individuals $1,000 per month, the authors estimate spending rose in most categories, most for housing, food, and car expenses, along with increased housing moves. Debt rose steadily to $1,600 higher by the study's end, and estimated net worth effects turned to roughly -$2,800.
  • The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States — In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.

AI Summary. The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.

Andrew McAfee The Geek Way
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There are only 13 EU-based firms less than 50 years old with a market cap of > $10B, with a combined market cap of $400B. The comparable US cohort is worth $30T, 70x that of its EU equivalent. @amcafee

Has Europe produced any large companies from scratch in fifty years?

Core argument: The Draghi report states that no EU company with a market capitalization above €100bn has been founded from scratch in the past 50 years, while all six US companies valued above €1tn were created in that period.

Of all the [hard-hitting statistics] in the Draghi report, though, the ones that most startled me were in this sentence: “there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.” How many arriviste European companies are worth at least $10B (I’m switching from euros to dollars here)? We found 13 EU arrivistes worth at least $10B. The total market cap of this continental treize is about $400B. The US has a large and variegated population of valuable young from-scratch companies. The EU simply doesn’t. The American population of arrivistes worth at least $10B is collectively worth almost $30 trillion dollars — more than 70 times as much as its EU equivalent.

Takeaways by Macro Roundup® AI

  1. The Draghi report states that no EU company with a market capitalization above €100bn has been founded from scratch in the past 50 years, while all six US companies valued above €1tn were created in that period.
  2. Thirteen EU companies built from scratch worth at least $10bn have a combined market capitalization of roughly $400bn.
  3. US from-scratch companies worth at least $10bn are collectively valued at almost $30tn, more than 70 times their EU counterparts.

Related Articles:

  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
  • Draghi is Trying To Save Europe From Itself — Real disposable income per head has grown almost twice as much in the US as in the European Union since 2000, with the EU trailing the US and China in the digital revolution and only four of the world's top 50 tech companies European. If average productivity growth since 2015 persists, EU output would merely stay constant until 2050.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. US labour productivity has grown by 30% since the 2008-09 financial crisis, more than three times the pace in the Eurozone and the UK, and the US accounts for 83% of venture capital funding across G7 economies over the past decade. Eurozone output is projected by the International Monetary Fund to expand by 0.8% this year.

Valentina Romei, William Crofton, and Colby Smith Financial Times
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Draghi noted that excluding the tech sector, “EU productivity growth over the past 20 years would be broadly at par with the US.” The US dominates global R&D, and per data from Preqin accounts for 83% of VC funding in G7 economies over the past decade.

Why is US productivity growth outpacing other advanced economies?

Core argument: US labour productivity has grown 30% since the 2008–09 financial crisis, more than three times the pace of the Eurozone and the UK, a gap visible for a decade.

US labour productivity has grown by 30% since the 2008-09 financial crisis, more than three times the pace in the Eurozone and the UK. That productivity gap, visible for a decade, is reshaping the hierarchy of the global economy. Economic growth in the Eurozone has been a third of the US’s since the pandemic, and output is set to expand by just 0.8% this year, according to the IMF. Similarly, the economies of Japan and the UK have grown only by 3% over the past five years. In fact, in productivity growth, the US is rapidly outstripping almost all advanced economies. According to data by Preqin, the US accounts for 83% of the amount of VC funding in G7 economies over the past decade. The country also attracted 14.6% of the world’s overall greenfield foreign direct investment in the first 10 months of 2024, according to fDi Markets data — a record high. Germany, by contrast, registered its lowest share of global FDI in 18 years.

Takeaways by Macro Roundup® AI

  1. US labour productivity has grown 30% since the 2008–09 financial crisis, more than three times the pace of the Eurozone and the UK, a gap visible for a decade.
  2. Eurozone growth since the pandemic has been a third of the US rate, with output set to expand 0.8% this year according to the IMF, while Japan and the UK have grown only 3% over five years.
  3. The US accounted for 83% of venture capital funding across G7 economies over the past decade, according to Preqin, and drew a record 14.6% of global greenfield foreign direct investment in the first 10 months of 2024, according to fDi Markets, while Germany registered its lowest share in 18 years.

Related Articles:

  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Danish drugmakers' real output has risen 47% over the past year and 167% cumulatively since late 2019, driven largely by foreign demand for GLP-1 weight-loss drugs, especially in the United States. Danish corporate income tax receipts are running about 50% above pre-pandemic levels, and Denmark posted a budget surplus worth 3.3% of GDP, the highest in the European Union.

Joseph Politano Apricitas Economics
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Since 2021 Danish GDP has grown 3.6%, but excluding Novo Nordisk’s GLP-1 drugs Ozempic and Wegovy growth would have been flat. Danish corporate income tax receipts are up 50% from pre-Covid levels. @JosephPolitano

How are weight-loss drug exports transforming Denmark's output and public finances?

Core argument: Real output of Danish drugmakers rose 47% over the last year and 167% cumulatively since late 2019, with total real manufacturing output growing more in the last four years than in the prior 20.

The real output of Danish drugmakers has increased by 47% over the last year and has cumulatively risen by 167% since late 2019. That growth broke Danish industry out from a long period of relative stagnation, with total real manufacturing output growing by more in the last four years than it did during the prior 20. Most of that pharmaceutical production boom has gone towards meeting foreign demand for GLP-1 drugs, especially in the United States. Real Danish goods exports have increased by roughly 37% over the last four years, easily dwarfing the comparatively tepid growth in imports and thus netting Denmark a large increase in its trade surplus. Danish corporate income tax receipts are highly elevated as a result of the GLP-1 boom, now running at about 110B Kroner annualized, a 50% jump from pre-COVID levels. That helped propel Denmark to a budget surplus worth 3.3% of GDP last year, the highest in the EU, while driving national debt-to-GDP to the lowest level since the late 70s.

Takeaways by Macro Roundup® AI

  1. Real output of Danish drugmakers rose 47% over the last year and 167% cumulatively since late 2019, with total real manufacturing output growing more in the last four years than in the prior 20.
  2. Most of Denmark's pharmaceutical production boom served foreign demand for GLP-1 drugs, especially in the United States, with real Danish goods exports up roughly 37% over four years against tepid import growth and a large rise in the trade surplus.

Related Articles:

  • Today’s Most Important Technology — The share of patients taking semaglutide for weight control rather than type 2 diabetes rose from under 10% in 2019 to 41.7%. Obesity and overweight, affecting 1 in 8 people worldwide, cost the global economy $2tn — nearly 70 cents on the dollar from premature mortality and lost productivity — an impact projected to double by 2035 absent intervention.
  • We May Have Passed Peak Obesity — Newly released data show the US adult obesity rate fell by about two percentage points between 2020 and 2023, with the steepest decline among college graduates. The author argues the new generation of diabetes and weight-loss drugs is highly likely behind the reversal, as one in eight US adults have used them.
  • The Year of Ozempic — GLP-1 medications act on receptors in the gut, liver, muscles, and brain, and studies report they reduce heart attacks and strokes, slow kidney disease progression, and shrink liver fat deposits. Users have also reported diminished cravings for alcohol, tobacco, gambling, and other compulsive behaviors, though anecdotal reports outpace clinical studies.

AI Summary. The U.S. produces 60% more oil per day with 40% fewer workers than a decade ago, with annual productivity gains roughly 7x those of the average U.S. business. In the Permian, the break-even oil price has fallen to $40 a barrel from over $90, and AI tools that predict the most productive drilling locations should push it lower.

Avi Salzman Barrons
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The breakeven price per barrel in the Permian Basin has fallen from $90 in 2012 to $40. AI tools could generate a further drop, helping the industry reach its “holy grail” a recovery rate of over 10%.

Is AI raising oil industry productivity and lowering break-even prices?

Core argument: U.S. oil output per day rose 60% over the past decade with 40% fewer workers, and the industry's annual productivity gains were roughly seven times those of the average U.S. business and outpaced online retailers.

Over the past decade, the U.S. pumped out 60% more oil a day with 40% fewer workers. The industry’s annual productivity gains in that stretch outpaced even those of online retailers, and are roughly seven times as large as those of the average U.S. business. In the Permian [the largest oil-producing region in the U.S.], the “break-even” price for oil producers has fallen to $40 a barrel from over $90 in 2012, according to S&P Global Commodity Insights. AI should take that number even lower, boosting oil company margins and cash flow. Knowing where to frack can be an enormous advantage. The AI tools that Chevron has developed can predict which sections of the subsurface will yield the most oil, and which rock types will prove tricky to drill. Historically, oil companies have pulled out only about 10% of the recoverable oil in the sections of the Permian where they drill, a fraction of the recovery rate for conventional wells. Getting above that 10% level is considered the “holy grail” of Permian drilling.

Takeaways by Macro Roundup® AI

  1. U.S. oil output per day rose 60% over the past decade with 40% fewer workers, and the industry's annual productivity gains were roughly seven times those of the average U.S. business and outpaced online retailers.
  2. The break-even price for Permian oil producers has fallen to $40 a barrel from over $90 in 2012, according to S&P Global Commodity Insights, and AI should push that number lower, boosting oil company margins and cash flow.
  3. Oil companies have historically recovered only about 10% of the recoverable oil in the Permian sections they drill, while Chevron's AI tools can predict which subsurface sections will yield the most oil and which rock types will prove tricky to drill.

Related Articles:

  • Oil Was Written Off. Now It’s the Most Productive US Industry — US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.
  • 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.

AI Summary. The Inflation Reduction Act has directed billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding. Congressional observers and former Trump administration energy officials say there likely is not enough support in Congress to repeal the law, as Republican lawmakers favor reviewing it rather than full repeal.

Scott Patterson Wall Street Journal
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Biden’s Inflation Reduction Act passed without a single GOP vote, but the lion’s share of the act’s spending is in Republican congressional districts, complicating repeal. Critics may target scaling back federal clean energy tax credits.

Will Republican lawmakers repeal the climate law funding their own states?

Core argument: The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding, despite no House or Senate Republican voting for the Democratic package.

Donald Trump’s campaign-trail vow to end President Biden’s signature climate law is running into a cold reality: Too many Republican lawmakers want to keep it. The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects across the country, with Republican-led states getting the lion’s share of the funding. Even though not a single Republican in the House or Senate backed the Democratic package, today there likely isn’t enough support in Congress to pass a repeal, according to Capitol Hill watchers and former Trump administration officials who worked on energy policy. Rep. Buddy Carter (R, GA) said that while he thought the IRA was a bad idea, he doesn’t support full repeal. “We need to just look at it instead of taking a sledgehammer to it,” he said. “We need to dissect it carefully to see what might be in there that’s working.” Carter’s home state, Georgia, has among the highest number of clean-energy projects and jobs funded by the IRA.

Takeaways by Macro Roundup® AI

  1. The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding, despite no House or Senate Republican voting for the Democratic package.
  2. Capitol Hill watchers and former Trump administration energy-policy officials say Congress likely lacks enough support to pass a repeal of the Inflation Reduction Act, despite Donald Trump's campaign vow to end it.
  3. Rep. Buddy Carter (R, GA), whose state has among the highest number of clean-energy projects and jobs funded by the IRA, called the law a bad idea but opposes full repeal, urging lawmakers to "dissect it carefully" rather than take "a sledgehammer to it.".

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • Republican Districts Dominate US Clean Technology Investment Boom — A Financial Times analysis found that more than 80% of pledged investment in large-scale clean energy and semiconductor manufacturing is destined for Republican congressional districts. The analysis attributes this partly to those districts' available land and cheap labor, and to state-level tax breaks and subsidies in states such as Georgia and Ohio.
  • ‘Transformational Change’: Biden’s Industrial Policy Begins to Bear Fruit — Financial Times research identified more than 75 large-scale US manufacturing announcements following the passage of American semiconductor and clean-energy subsidy laws, with companies committing roughly $204bn to boost semiconductor and clean-tech production and promising at least 82,000 jobs. That is almost double the capital spending commitments made in those sectors two years earlier.

AI Summary. Proposed US tariff measures are projected to raise the average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930. Overall US trade would fall 11%, with China losing 83% of its sales to the US.

Shawn Donnan and Anna Wong Bloomberg
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Bloomberg projects average U.S. tariffs will triple from 2.6% in 2023 to 7.8% by 2026, driven by heavy levies on China and smaller hikes for other partners. This could shrink US trade in goods from 21% of the global total to 18%.

How much would proposed tariffs raise average rates and cut trade?

Core argument: The measures would raise the US average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930, though far short of the most extreme scenarios implied by Trump's threats.

In aggregate the measures would boost the US’s average tariff weighted using the 2023 import composition to 7.8% from 2.6% — the steepest increase since Congress passed the notorious Smoot-Hawley tariffs in 1930 and yet one far short of the most extreme scenarios possible based on Trump’s threats. Among US trade partners, the biggest losers would be China — which faces the steepest tariff hike — and Canada and Mexico, which have the greatest dependence on trade with the US. Overall US trade would drop by 11% and China would say goodbye to 83% of its sales to the US. Under what former staff still call the “Hassett algorithm” — named after former Council of Economic Advisers Chair Kevin Hassett, who oversaw the compilation of the initial tariff lists against China — levies targeted mainly parts and machinery to minimize the impact on inflation and GDP. They also focused on goods for which American buyers could find substitutes.

Takeaways by Macro Roundup® AI

  1. The measures would raise the US average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930, though far short of the most extreme scenarios implied by Trump's threats.
  2. Overall US trade would drop by 11%, with China losing 83% of its sales to the US and facing the steepest tariff hike, while Canada and Mexico, the most dependent on US trade, would also be among the biggest losers.
  3. Under what former staff call the "Hassett algorithm," named for former Council of Economic Advisers Chair Kevin Hassett, who oversaw the initial China tariff lists, levies targeted mainly parts, machinery and goods with available substitutes to minimize the impact on inflation and GDP.

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.
  • Can Trump Reduce the Trade Deficit? — A world of widespread tariffs would also shrink international capital flows, and because the US trade deficit is the counterpart of large capital inflows, reduced capital mobility would narrow that deficit. The author argues this would occur largely by reducing overall investment in the US economy.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.