Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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 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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, December 11, 2024

AI Summary. The authors find persistent performance differences among angel investors are consistent with better-performing angels having broader access to investment opportunities: top angels are less likely to invest in tight-knit clusters and are more likely to be connected to startup board members and founders before their first investment.

Johan Karlsen, Katja Kisseleva, Aksel Mjøs and David Robinson National Bureau of Economic Research
Date Posted:
Is Database:
Database

Angel investments in Norway from 2004-18 had highly skewed results: ⅓ were a total loss, the top 1% returned 50X invested capital, and the average investment returned 2X. Top angels tended to be connected to board members and founders before investing.

Do better-performing angel investors owe their success to broader deal access?

Core argument: Persistent performance differences among angel investors stem partly from better access to investment opportunities, such that top angels would outperform even if they allocated their investments randomly, the authors find evidence consistent with this explanation.

Persistent individual differences are critical for understanding this market. One explanation for these persistent differences is that some angel investors have better access to investments than others, such that, even if they were to allocate their investments randomly, they would do better. We find evidence consistent with this explanation. Top angels are less likely than worse-performing angels to invest in tight-knit clusters. This runs counter to the idea that a small group of angels has privileged access to high-quality deals from which others are potentially excluded. We find that angels who later go on to become top angels in our sample are likelier to be connected to board members and founders of startups before they make their first investment. The greater breadth of top angels’ co-investor base and their startup network allow us to deduce that some of the unexplained component of their performance derives from their larger pools from which to draw investment opportunities.

Takeaways by Macro Roundup® AI

  1. Persistent performance differences among angel investors stem partly from better access to investment opportunities, such that top angels would outperform even if they allocated their investments randomly, the authors find evidence consistent with this explanation.
  2. Top angel investors are less likely than worse-performing angels to invest in tight-knit clusters, which runs counter to the idea that a small group of angels holds privileged access to high-quality deals excluding others.
  3. Angels who later become top performers are likelier to be connected to startup board members and founders before making their first investment, and their broader co-investor and startup networks provide larger pools of investment opportunities.

Related Articles:

  • Risk-Adjusting the Returns to Venture Capital — The authors estimate that venture capital investments in start-ups earn substantial positive risk-adjusted returns while venture capital funds' risk-adjusted returns are near zero. The systematic part of these payoffs resembles the negatively skewed returns from selling index put options; including those in the pricing model turns fund returns negative.
  • The Power Law Review: Chasing Unicorns — The median venture-capital fund underperformed the S&P 500 over roughly four decades, while the top 5% of funds returned nearly 3x the index, reflecting how a small number of deals account for most returns. Venture-backed companies made up nearly half of U.S. nonfinancial initial public offerings over a comparable period.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. More than 20% of new venture investments on the Carta platform were down rounds, in which startups raise capital at reduced valuations, one of the highest quarterly shares since at least 2019. Venture-backed valuations have undergone a reset after reaching all-time highs, and the average interval between priced rounds has lengthened.

Ashley Neville and Kevin Dowd Carta
Date Posted:

.@cartainc finds that venture valuations have undergone a reset in the last two years: between Q2 2022 and Q3 2024, 18% of new venture investments were “down rounds,” up from 10% between 2019 and Q1 2022.

Are startup valuations still resetting downward in private markets?

Core argument: More than 20% of new venture investments on Carta in Q3 2024 were down rounds, the fourth-highest quarterly total dating back to at least the start of 2019.

More than 20% of all new venture investments on Carta in Q3 were down rounds, the fourth-highest quarterly total dating back to at least the start of 2019. Startups are still grappling with the realities of the widespread valuation reset that began in mid-2022. During 2021 and early 2022, venture-backed valuations soared to all-time highs after nearly a decade of steady growth. It was rare to see any startup raise new capital at a reduced valuation. But as valuations have undergone a reset in the past two-plus years, some companies have found it difficult to raise capital at the lofty valuations they once attained. Given how the average time interval between priced rounds has also increased in the past two years, many of the companies that raised capital in Q3 were doing so for the first time since valuations began to decline.

Takeaways by Macro Roundup® AI

  1. More than 20% of new venture investments on Carta in Q3 2024 were down rounds, the fourth-highest quarterly total dating back to at least the start of 2019.
  2. The average interval between priced rounds has lengthened over the past two years, so many companies raising capital in Q3 2024 were doing so for the first time since valuations began falling, according to Carta.

Related Articles:

  • AI Investments Are Booming, but Venture-Firm Profits Are at a Historic Low — 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.
  • Start-Up Failures Rise 60% As Founders Face Hangover From Boom Years — Data from private-company services provider Carta show start-up shutdowns rising sharply, with 254 venture-backed clients going bust in a single quarter and the failure rate more than 7x the level when tracking began. Carta also reports a steep drop in the share of companies able to raise new funding within two years of their last round.
  • 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. Foreign-held assets in Mexico, including foreign direct investment, have declined relative to Mexico's GDP, with new foreign direct investment falling to a 10-year low despite attention to nearshoring. Reinvested earnings now make up most inflows, and manufacturing absorbed nearly half of total foreign direct investment.

Enrique Martínez García, Manuel Sánchez and Luis Torres Federal Reserve Bank of Dallas
Date Posted:

A @DallasFed analysis finds that foreign investment in Mexico has declined as a % of GDP since 2022. The impact of “nearshoring” on Mexico’s economy has been limited, as “large-scale foreign capital relocation has yet to materialize.”

Has nearshoring attention translated into new foreign investment in Mexico?

Core argument: Mexico's new FDI has fallen to a 10-year low since 2022, and international investment position data show foreign-held assets including FDI relative to GDP have declined over the same period.

Despite the increased attention to nearshoring, foreign-held assets (including FDI) relative to Mexico’s GDP have declined since 2022, international investment position data show. While new FDI surged immediately following the pandemic-era recession, new FDI since 2022 has declined to a 10-year low. Foreign capital inflows from company parent accounts and non-FDI portfolio investments have also been limited. Reinvested earnings now account for most FDI inflows, reflecting a shift toward building additional capacity from own resources. The manufacturing sector absorbed nearly half of total FDI between early 2022 and mid-2024, with key contributions from the transportation equipment, food processing and metals industries. The U.S. remains Mexico’s largest source of FDI.

Takeaways by Macro Roundup® AI

  1. Mexico's new FDI has fallen to a 10-year low since 2022, and international investment position data show foreign-held assets including FDI relative to GDP have declined over the same period.
  2. Reinvested earnings account for most of Mexico's FDI inflows, reflecting a shift toward building additional capacity from own resources, while inflows from company parent accounts and non-FDI portfolio investments have been limited.
  3. Manufacturing absorbed nearly half of Mexico's total FDI between early 2022 and mid-2024, with key contributions from transportation equipment, food processing and metals, and the U.S. remains Mexico's largest source of FDI.

Related Articles:

  • Mexico Gets Cold Feet Over New Chinese EV Plant After Trump Win — Chinese electric-vehicle maker BYD is finalizing plans for a factory in Mexico, but Mexican officials worry the plant would signal to the incoming US administration that Mexico is a backdoor for Chinese companies selling into the United States. Mexico shipped nearly 2.6m vehicles to the US last year.
  • Mexico Wants to Curb Chinese Imports With Help From U.S. Companies — Mexico is asking major foreign manufacturers operating in the country—including U.S. carmakers, semiconductor firms, and aerospace and electronics companies—to identify Chinese products and parts that could be made locally, aiming to reduce reliance on imports from China, Malaysia, Vietnam, and Taiwan. China accounts for 20% of Mexico's total imports, according to Mexican government data.
  • Mexico’s Investment Boom — Mexico's export boom is largely genuine rather than a channel for tariff avoidance, since much of the growth comes from industries like motor vehicles where China has little presence in the North American market. Mexican manufacturing output has risen 5% since 2018, with computer output up nearly 25% and appliance and electrical equipment output up 15%.

AI Summary. South Korea is the leading foreign investor in new US greenfield facilities, led by auto and electronics manufacturers including Hyundai, Kia, LG and Samsung, with $21bn in commitments in the most recent year. The investment has landed in smaller cities such as Kokomo, Indiana, Savannah, Georgia and Auburn, Alabama, rather than the coastal metropolitan areas where Korean-Americans have traditionally settled.

Amanda Chu Financial Times
Date Posted:

Korean firms made $21B of commitments to greenfield projects in the United States last year making Korea the leading foreign investor in greenfield facilities in the United States. Alongside the investment small ‘Koreatowns’ have been springing up.

Is South Korean manufacturing investment creating Koreatowns in smaller American cities?

Core argument: South Korea has become the leading foreign investor in US greenfield facilities, with commitments totalling $21bn last year, the highest level in more than a decade.

Korea has become the leading foreign investor in greenfield facilities in the US, led by its auto and electronics manufacturers such as Hyundai, Kia, LG and Samsung, with commitments totalling $21bn last year, the highest level in more than a decade. But the towns that have benefited are far from the large coastal metropolitan centres where Korean-Americans have traditionally immigrated. In cities like Kokomo, and Savannah in Georgia, and Auburn in Alabama, Korean-Americans have brought their customs and cultures to unexpected corners of the country.

Takeaways by Macro Roundup® AI

  1. South Korea has become the leading foreign investor in US greenfield facilities, with commitments totalling $21bn last year, the highest level in more than a decade.
  2. Korean auto and electronics manufacturers including Hyundai, Kia, LG and Samsung have led the greenfield investment push into the United States.
  3. Kokomo, Savannah in Georgia and Auburn in Alabama lie far from the large coastal metropolitan centres where Korean-Americans have traditionally immigrated, yet Korean-Americans have brought their customs and cultures to these towns.

Related Articles:

  • 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.
  • A US Industrial Renaissance Has Started — US legislation supporting semiconductors, clean energy, and infrastructure has triggered an industrial renaissance in artificial intelligence and energy, and US manufacturing capacity is now growing after declining for decades.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.

AI Summary. US math scores on the international Trends in Mathematics and Science Study fell 18 points for fourth graders and 27 points for eighth graders, on a scale where about 30 points equates to a year of learning. Declines were concentrated among the lowest-performing students, with fourth-grade scores above the 75th percentile barely moving.

Nat Malkus American Enterprise Institute
Date Posted:

Young Americans’ test scores have dropped significantly since 2011, with the lowest-performing students showing the steepest declines. @natmalkus notes that this trend pre-dates the pandemic.

Are falling US math scores concentrated among the lowest-performing students?

Core argument: US math scores on the 2023 Trends in Mathematics and Science Study fell 18 points for fourth graders and 27 points for eighth graders versus 2019, on a scale where 30 points roughly equates to a year of learning.

2023 scores from the Trends in Mathematics and Science Study (TIMSS)—an international assessment measuring fourth and eighth graders in math and science—offers a fresh look at the academic performance of US and international students. The results are grim. The pandemic harmed student achievement. Between 2019 and 2023, US math scores cratered, dropping by 18pp for fourth graders and a whopping 27pp for eighth graders—huge declines on a scale where 30 points roughly equates to a year of learning. In science, declines weren’t statistically significant but were in the same direction. The lowest performing students were hit hardest. Looking beneath the averages reveals how students across percentiles fared in both grades and subjects, and the patterns—though not all statistically significant—are consistent and compelling. In fourth-grade math, the scores of students below the 50th percentile dropped precipitously while the 75th and 90th percentile hardly moved at all.

Takeaways by Macro Roundup® AI

  1. US math scores on the 2023 Trends in Mathematics and Science Study fell 18 points for fourth graders and 27 points for eighth graders versus 2019, on a scale where 30 points roughly equates to a year of learning.
  2. US science declines on TIMSS between 2019 and 2023 were not statistically significant but moved in the same direction as the math drops.
  3. In fourth-grade math on TIMSS, scores for students below the 50th percentile dropped precipitously while the 75th and 90th percentiles hardly moved, part of a consistent pattern across grades and subjects that is not always statistically significant.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • The Latest Chronic Absenteeism Numbers — Chronic absenteeism—students missing 10% or more of the school year—rose from 15% of K–12 students before the pandemic to 28%, then eased to 26% in the first full post-pandemic school year. Data from eight states show continued declines, including New Mexico's drop from 40% to 33%, but rates remain well above pre-pandemic levels.
  • Students Are Making a ‘Surprising’ Rebound From Pandemic Closures. But Some May Never Catch Up — An analysis of standardized test data led by Stanford and Harvard researchers finds elementary and middle-school students have regained about a third of pandemic learning losses in math and a quarter in reading. Because poorer districts lost more ground initially, the typical poor district remains nearly half a grade level behind, versus about a fifth for rich districts.

Thursday, December 12, 2024

AI Summary. An analysis of government data finds the recent U.S. immigration surge is the largest on record, with net migration averaging 2.4m people a year from 2021 to 2023 and the foreign-born share of the population reaching 15.2% in 2023, up from 13.6% in 2020. About 60% of immigrants arriving since 2021 entered without legal authorization.

David Leonhardt New York Times
Date Posted:
Is Database:
Database
Is Important:
Important

A NYT analysis finds the net inflow of 8mm immigrants since 2021, 60% of whom were illegal, was the largest in US history. The foreign-born percentage of the population is now at a new high of 15.2%, above the previous record of 14.8% in the 1890’s.

How large is the recent U.S. immigration surge historically?

Core argument: Annual U.S. net migration averaged 2.4 million people from 2021 to 2023, according to the Congressional Budget Office, a faster pace of arrivals than any other period on record, including the peak Ellis Island years.

The immigration surge of the past few years has been the largest in U.S. history, surpassing the great immigration boom of the late 1800s and early 1900s, according to a New York Times analysis of government data. Annual net migration — the number of people coming to the country minus the number leaving — averaged 2.4 million people from 2021 to 2023, according to the Congressional Budget Office. Total net migration during the Biden administration is likely to exceed eight million people. That’s a faster pace of arrivals than during any other period on record, including the peak years of Ellis Island traffic, when millions of Europeans came to the United States. Even after taking into account today’s larger U.S. population, the recent surge is the most rapid since at least 1850. About 60% of immigrants who have entered the country since 2021 have done so without legal authorization, according to a Goldman Sachs report based on government data. The combined increases of legal and illegal immigration have caused the share of the U.S. population born in another country to reach a new high, 15.2% in 2023, up from 13.6% in 2020. The previous high was 14.8%, in 1890.

Takeaways by Macro Roundup® AI

  1. Annual U.S. net migration averaged 2.4 million people from 2021 to 2023, according to the Congressional Budget Office, a faster pace of arrivals than any other period on record, including the peak Ellis Island years.
  2. The foreign-born share of the U.S. population reached 15.2% in 2023, up from 13.6% in 2020 and above the previous high of 14.8% set in 1890.
  3. About 60% of immigrants entering the United States since 2021 did so without legal authorization, according to a Goldman Sachs report based on government data, and total net migration during the Biden administration is likely to exceed eight million people.

Related Articles:

  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • Immigrants Are Becoming U.S. Citizens at Fastest Clip in Years — U.S. Citizenship and Immigration Services processed naturalization applications in an average of 4.9 months over the first nine months of the current fiscal year, down from 11.5 months in fiscal 2021 and roughly in line with 2013–2014 speeds. About 3.3m immigrants have become citizens under the Biden administration, and 9m green card holders are currently eligible to naturalize.
  • 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. Using military personnel records and annual workplace climate surveys, the authors estimate that integrating a female officer into previously all-male combat companies causes a decline in men's perceptions of workplace conditions beyond issues that disproportionately affect women. They suggest a woman in a position of authority may generate broader negative reactions among men.

Kyle Greenberg, Melanie Wasserman, and E. Anna Weber National Bureau of Economic Research
Date Posted:

West Point professor Kyle Greenberg et al. find that the integration of women into the U.S. military had negligible effects on men’s performance, but worsened men’s perceptions of workplace quality in units with at least one female officer.

How does adding a female officer affect men's workplace perceptions?

Core argument: Beginning in 2017, roughly 5%–10% of about 400 U.S. combat companies received their first cohort of women each year, leaving 137 companies unintegrated as of 2023 as a never-treated comparison group.

In each year beginning in 2017, approximately 5% to 10% of the roughly 400 combat companies affected by the policy change received their first cohort of women. As of 2023, 137 companies had yet to be integrated, comprising a large never-treated group. Using administrative personnel records [that include] individual-level metrics of retention, promotions, demotions, criminal charges, physical fitness scores, and medical conditions, we estimate the causal effect of the introduction of female colleagues on men’s job performance, [and] disciplinary infractions. We measure men’s perceptions of company performance and cohesion, confidence in leadership, beliefs about the inclusivity of the workplace, and perceptions of leader responses to harassment and discrimination using responses to the DOD’s annual Defense Organizational Climate Survey (DEOCS). The integration of a female officer causes adecline in men’s perceptions of workplace issues beyond those that disproportionately affect women, suggesting that the presence of a woman in a position of authority may generate broader negative reactions among men.

Takeaways by Macro Roundup® AI

  1. Beginning in 2017, roughly 5%–10% of about 400 U.S. combat companies received their first cohort of women each year, leaving 137 companies unintegrated as of 2023 as a never-treated comparison group.
  2. The integration of a female officer causes a decline in men's perceptions of workplace issues beyond those that disproportionately affect women, suggesting that a woman in a position of authority may generate broader negative reactions among men.
  3. The study draws on administrative personnel records covering retention, promotions, demotions, criminal charges, physical fitness scores, and medical conditions, alongside the Defense Organizational Climate Survey, to measure effects on men's performance, discipline, and perceptions.

Related Articles:

  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • 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.
  • Women’s Evolving Careers Helped Shrink the Gender Pay Gap — The share of women in their late 20s working in the four highest-paying broad occupation groups rose from about 30% to 55%, while the share in professional occupations rose from about 19% to 26%. Women early in their careers shifted away from predominantly administrative work toward better-paying occupations.

AI Summary. The authors argue the Federal Reserve will deliver fewer rate cuts than markets expect because household spending remains strong and the economy continues to perform well. They see a risk that lower rates overheat the economy, with strong job and wage growth lifting housing demand and prices and pushing inflation back above the Federal Reserve's 2% target.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues that the pace of rate cuts expected by the market is unlikely to prevail, as it could exacerbate a rebound in housing prices that “would push inflation back up, away from the Fed’s 2% target.” #ratecuts

Will a strong economy mean fewer rate cuts than markets expect?

Core argument: The authors expect fewer Federal Reserve rate cuts than the market anticipates, arguing the economy will continue to be fine and that strong household spending suggests no need for cuts.

The market thinks the Fed needs to cut rates significantly and soon. We disagree. We think we’ll get fewer cuts because the economy will just continue to be fine. Another point to consider: Should the Fed even be cutting rates at all? If you look at consumption, there seems to be no need to do so because we still have strong spending coming from households. Here’s the issue, though: If the risk in 2022 was that inflation was going to choke the economy to a standstill, the risk today is that lower rates begin to overheat the economy again, and we see continued strong job and wage growth, the key drivers of housing demand. As previously discussed, a rebound in housing prices (Exhibit 40) would push inflation back up, away from the Fed’s 2% target.

Takeaways by Macro Roundup® AI

  1. The authors expect fewer Federal Reserve rate cuts than the market anticipates, arguing the economy will continue to be fine and that strong household spending suggests no need for cuts.
  2. The authors frame the current risk as lower rates overheating the economy, in contrast to the 2022 risk that inflation would choke the economy to a standstill.
  3. The authors argue that a rebound in housing prices, supported by strong job and wage growth as the key drivers of housing demand, would push inflation back up away from the Fed's 2% target.

Related Articles:

  • Housing Is the Sleeper Issue of the 2024 Campaign — Average home prices rose from $303,600 to $422,600 and mortgage rates from 2.8% to 6.5%, doubling the average new buyer's monthly payment to $2,671 from $1,247. Housing and rental affordability indexes have been pushed to 30-year lows, and lifetime payments on an average home rise to $961,560 from $448,920.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.

AI Summary. America's technology advantage may owe less to institutions, culture, and policy than to the historical accident that the world's major technology hubs happen to be located in the United States and stay there through self-reinforcing clustering. Geographic proximity lets venture capitalists better judge which risks are worth taking.

Paul Krugman Krugman Wonks Out
Date Posted:
Is Database:
Database

.@paulkrugman argues that the productivity gap between the EU and the US is largely driven by technology and finance hubs, which, regardless of their origin, persist based on positive spillovers created by the concentration of talent.

Does geographic clustering explain America's technology advantage?

Core argument: The author argues America's technology advantage may owe less to institutions, culture, and policy than to the historical accident that the world's major tech hubs happen to sit in the United States and persist there for Marshallian reasons.

Industrial clusters often reflect natural advantages that have long since ceased to be relevant, like New York’s position as the terminus of shipping via the Erie Canal. Indeed, they often reflect sheer accident: Seattle is what it is because Bill Gates grew up there. Stanford University played an important role in Silicon Valley’s rise, but it’s unclear whether it would have become what it is if two guys named Hewlett and Packard hadn’t started a business in a garage. What I’m suggesting is that America’s tech advantage may bear considerable resemblance to Britain’s banking advantage. That is, it may have less to do with institutions, culture, and policy than the fact that for historical reasons the world’s major technology hubs happen to be in the United States, and remain there for the usual Marshallian reasons. Venture capitalists are ready to take risks on U.S. tech because geographical proximity makes them better able to judge which risks are worth taking — that is, the mysteries of the trade are no mysteries but are, as it were, in the air.

Takeaways by Macro Roundup® AI

  1. The author argues America's technology advantage may owe less to institutions, culture, and policy than to the historical accident that the world's major tech hubs happen to sit in the United States and persist there for Marshallian reasons.
  2. Industrial clusters often reflect natural advantages that have ceased to matter, such as New York's position as the Erie Canal's shipping terminus, or sheer accident, such as Seattle's status stemming from Bill Gates having grown up there.
  3. Venture capitalists are ready to take risks on U.S. technology because geographical proximity makes them better able to judge which risks are worth taking, the trade's mysteries being, as it were, in the air.

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.
  • The Effect of High-Tech Clusters on the Productivity of Top Inventors — The authors estimate that inventor productivity rises with local high-tech cluster size, with an elasticity of patent output to cluster size of 0.0662; a 49.2% shrinkage of Rochester's cluster is associated with a 20.6% productivity drop for other local inventors. They estimate that spreading inventors uniformly across US cities would cut patent output by 11.07%.
  • 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.

AI Summary. European members of NATO are discussing raising their defence spending target from 2% of GDP to 2.5% in the short term and 3% by 2030, according to people involved in the preliminary talks. Such an increase would strain national budgets and has raised misgivings in many capitals.

Henry Foy, John Paul Rathbone, Guy Chazan and Amy Kazmin Financial Times
Date Posted:

Nato’s European members have started talks to raise the spending target to 3% by 2030. Currently, 23 of the 32 members are hitting the 2% target.

Are European NATO members considering higher defence spending targets?

Core argument: NATO's European members are discussing raising the defence spending target from 2% of GDP to 2.5% in the short term and 3% by 2030, four people involved in the preliminary talks told the Financial Times.

The confidential talks, which began during a meeting of alliance foreign ministers last week and could yet fail to reach full agreement, envisage a short-term pledge to hit 2.5% and, by 2030, a target of 3%, three of the people said. The new commitments would be formally agreed at next year’s summit in the Netherlands. Four people involved in the preliminary talks told the Financial Times they were discussing the steep rise from 2% of GDP, a move that would put intense pressure on already strained national budgets and that has raised misgivings in many capitals.

Takeaways by Macro Roundup® AI

  1. NATO's European members are discussing raising the defence spending target from 2% of GDP to 2.5% in the short term and 3% by 2030, four people involved in the preliminary talks told the Financial Times.
  2. The confidential talks began at a meeting of NATO foreign ministers and may yet fail to reach full agreement, with any new commitments to be formally agreed at next year's summit in the Netherlands.
  3. The proposed rise to 3% of GDP would put intense pressure on already strained national budgets and has raised misgivings in many capitals.

Related Articles:

  • Can Europe Defend Itself Without America? — European members of NATO have increased defense spending by almost a third in real terms to $476bn, with 23 of NATO's 32 members meeting the alliance's target of spending 2% of GDP on defense, according to NATO. NATO's secretary-general argues the 2% target is insufficient, though tight budgets, high public debt, and competing priorities constrain further increases.
  • Brussels to Free Up Billions of Euros for Defence and Security From EU Budget — The European Union plans to give member states more flexibility to redirect cohesion funds — about €392bn aimed at reducing economic inequality between member countries — toward defence industries and military mobility projects such as reinforcing roads and bridges for tanks. The change would permit funding for weapons and ammunition production.
  • The US and Its Allies Face a $10 Trillion Reckoning in the Race to Rearm — World defense spending reached a record $2.2tn, and security officials say military budgets may need to reach Cold War levels of as high as 4% of economic output to deliver on NATO's plans. Bloomberg Economics calculates that US and Group of Seven allies hitting that level would mean over $10tn in additional commitments over a decade.

AI Summary. Dozens of unidentified drones have been reported over New Jersey military installations, power lines, and suburban neighborhoods, perplexing state and federal officials. The sightings resemble earlier drone swarms over Joint Base Langley-Eustis in Virginia that forced commanders to move sensitive aircraft and whose operators were never publicly identified.

Lara Seligman, Gordon Lubold and Andrew Tangel Wall Street Journal
Date Posted:

Drone swarms have been sighted over military installations in New Jersey, mirroring an episode in which drones swarmed over military bases in Virginia last December. The Pentagon “never publicly identified who was flying them or what they were doing.”

Are unidentified drones flying over military sites without accountability?

Core argument: Dozens of mysterious drones have appeared over New Jersey, with residents reporting sightings over military installations, power lines, and suburban neighborhoods, perplexing state and federal officials.

Dozens of mysterious drones have appeared in the skies over New Jersey in recent weeks, perplexing state and federal officials and agitating residents. The drones, which residents there have reported seeing over military installations, power lines, and suburban neighborhoods, appear eerily similar to a fleet that swarmed sensitive national security sites on Virginia’s eastern shoreline one year ago The drone incidents over New Jersey are the latest in a series of bizarre episodes involving large, unmanned aircraft flying freely over American soil near sensitive sites that have baffled investigators. Over two weeks last December, swarms of drones buzzed over Joint Base Langley-Eustis in Virginia, forcing commanders there to remove sensitive aircraft. Officials from the Pentagon to the White House brainstormed responses, but never publicly identified who was flying them or what they were doing.

Takeaways by Macro Roundup® AI

  1. Dozens of mysterious drones have appeared over New Jersey, with residents reporting sightings over military installations, power lines, and suburban neighborhoods, perplexing state and federal officials.
  2. The New Jersey drones appear similar to a fleet that swarmed sensitive national security sites on Virginia's eastern shoreline a year earlier.
  3. Drone swarms over Joint Base Langley-Eustis in Virginia persisted for two weeks, forcing commanders to remove sensitive aircraft, and officials never publicly identified who was flying them or what they were doing.

Related Articles:

  • Mystery Drones Swarmed a U.S. Military Base for 17 Days. The Pentagon Is Stumped — Unidentified drones flew over a U.S. military base for 17 days in a coordinated pattern of higher-altitude fixed-wing aircraft and smaller quadcopters below, leading U.S. officials to doubt hobbyists were responsible. Federal law bars the military from shooting down drones near domestic bases absent an imminent threat.
  • Defence Groups Bet Big On Drone-Destroying Laser Weapons — Major defense contractors including RTX, MBDA, and QinetiQ are investing heavily in high-energy laser weapons to destroy drones, a technology long regarded as science fiction. Britain's Ministry of Defence says its DragonFire laser will be deployed on Royal Navy ships five years ahead of schedule, firing at roughly £10 a shot.
  • Pentagon Plan to Buy Thousands of Drones Faces Looming Snags — The US Department of Defense aims to buy thousands of low-cost drones within as little as 18 months and up to 2,000 larger uncrewed jets, while one of its primary drone suppliers produced 38 aircraft last year. Booming commercial aerospace demand has left shortages of skilled labor, raw materials, and parts such as advanced electronics and fasteners.