Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, January 3, 2025

AI Summary. The authors present a model in which a dominant coalition's coercive power is nonlinear in the share of inputs it controls, so modest reductions in dependence can sharply cut that power. They estimate that the share of Russian financial imports controlled by the American Coalition fell from 94% to 84%, roughly halving its financial power over Russia.

Christopher Clayton, Matteo Maggiori and Jesse Schreger National Bureau of Economic Research
Date Posted:

.@chris_d_clayton, @m_maggiori, and @JSchrege warn that U.S. financial “hegemony” may be limited by nonlinearity. “Small reductions in American control of the international financial system come with significant reductions in American power.”

Do small cuts in dependence sharply reduce a coalition's coercive power?

Core argument: The share of Russian financial imports controlled by the American Coalition held at a stable 94% before 2014 and fell to 84% afterward as Russia fragmented from the global financial architecture.

We show that power is nonlinear in the share of inputs controlled by the hegemon. These nonlinearities are important. To illustrate this point in the data, we focus on the economic security policies Russia instituted after its invasion of Crimea in 2014. Russian leaders anticipated the possibility of future financial coercion by the American Coalition as they further invaded Ukraine in 2022. Anticipating the possibility of future sanctions, Russia actively reduced its financial dependence on the American Coalition. Figure 8 shows that the share of Russian financial imports controlled by the American Coalition was a stable 94% before 2014 and subsequently dropped to 84% as Russia started to fragment from the global financial architecture. As a consequence, [the model implies that] the American Coalition’s financial power over Russia was approximately halved. This large loss in power is in part responsible for the muted effect of the financial sanctions that the American Coalition imposed after 2022 since Russia, via its ex-ante policies, had already prepared some alternatives

Takeaways by Macro Roundup® AI

  1. The share of Russian financial imports controlled by the American Coalition held at a stable 94% before 2014 and fell to 84% afterward as Russia fragmented from the global financial architecture.
  2. The authors' model implies that this drop in controlled input share approximately halved the American Coalition's financial power over Russia, since power is nonlinear in the share of inputs the hegemon controls.
  3. The authors argue that Russia's economic security policies after its 2014 invasion of Crimea, which prepared some financial alternatives, are in part responsible for the muted effect of the sanctions imposed after 2022.

Related Articles:

  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.
  • Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves — Gold accounts for about 10% of aggregate official foreign exchange reserves, roughly its level in the early 2000s. International Monetary Fund country data indicate most added official gold holdings came from a few central banks, with over half of reported accumulation from China and Russia and about a quarter from several emerging markets.
  • Power and Financial Interdependence — US-China financial interdependence creates what has been called a "balance of financial terror," in which the US relies on other countries' costs of not financing its current account deficit as assurance that financing continues. Chinese policymakers worry that dollar holdings expose China to financial sanctions, while the US has feared Chinese sales of Treasuries could threaten its financial stability.

AI Summary. The author argues US tariffs will function as more than a negotiating tool, since China's export-driven economic model and domestic employment goals make it unlikely to meet US demands, leaving lasting higher tariffs as the probable outcome. That tariff revenue could help finance tax cuts and industrial subsidies, though tariffs cannot replace the income tax.

Joseph Wang Fed Guy Blog
Date Posted:

.@FedGuy12 forecasts “enormous market volatility” as markets price in potential FX interventions and permanent tariffs, which “may return as a larger source of government revenue.”

Are higher tariffs likely to last rather than serve as leverage?

Core argument: Jamieson Greer, appointed as Trump's top trade advisor, recommended in congressional testimony much higher tariffs on China as a means to revitalize U.S. manufacturing.

Tariffs are likely to be used for more than a negotiation tool as the Administration’s goals push against immovable foreign interests. In addition to aggressive rhetoric on Chinese trade, Trump has appointed Jamieson Greer as his top trade advisor. Greer’s recent testimony before Congress recommends much higher tariffs on China as a means to revitalize U.S. manufacturing. The Chinese are unlikely to meet Trump’s demands, as their economic model is export driven with a political goal of creating domestic employment. The end result is likely permanently higher tariffs, which would provide needed revenue to finance anticipated tax cuts and industrial subsidies. Trump has recently floated replacing income taxes with tariffs and repeatedly touted the large revenues raised from tariffs during his first term. Tariffs cannot replace the income tax, but history suggests they could return as a larger source of government revenue. A permanent tariff wall and potential FX interventions suggest enormous market volatility. The market appears skeptical of Trump’s desire for radical change, but it has a long history of misunderstanding Trump.

Takeaways by Macro Roundup® AI

  1. Jamieson Greer, appointed as Trump's top trade advisor, recommended in congressional testimony much higher tariffs on China as a means to revitalize U.S. manufacturing.
  2. China is unlikely to meet Trump's demands because its economic model is export driven with a political goal of creating domestic employment, a standoff that points toward permanently higher tariffs.
  3. Tariff revenue could help finance anticipated tax cuts and industrial subsidies, and while tariffs cannot replace the income tax as Trump has floated, history suggests they could return as a larger source of government revenue.

Related Articles:

  • 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.
  • Tariffs and Exchange Rates (and Stephen Miran) — The author argues that a universal tariff would prompt enough dollar appreciation to make US exports more expensive abroad, reducing trade flows in both directions while leaving the trade deficit roughly unchanged. Attempting to offset the export drag through deregulation would shift production away from import-competing goods, again leaving a similar trade deficit.
  • How Tariffs Can Help America — Tariffs raise the price of imported goods, transferring income from net importers to net exporters and taxing consumers to subsidize domestic producers. The author argues that tariffs on final goods would redirect U.S. demand toward domestic production, raising GDP, employment, and wages while lowering debt.

AI Summary. Chinese AI company DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100x cheaper than Meta's Llama 3, with performance comparable to Claude 3.5 Sonnet and interface access costing 12x less than Anthropic's. The author argues US chip export controls backfired by spurring leaner engineering, and that the gap between open-source and closed-source models is narrowing rapidly.

Azeem Azhar Exponential View
Date Posted:

Chinese company DeepSeek’s new AI model rivals Claude 3.5 Sonnet but cost just $5.6M to train—100x cheaper than Meta’s Llama 3. Given chip export controls, the team “delivered this superb model through ingenuity rather than brute force.” @azeem

Have US chip export controls spurred cheaper Chinese AI models?

Core argument: DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100 times cheaper than Meta's Llama 3, while performing about as well as Claude 3.5 Sonnet, and its API costs 12 times less than Anthropic's.

DeepSeek, a Chinese AI company, released its Version 3 large language model. It performs about as well as Claude 3.5 Sonnet. The breakthrough is how cheap it was to train. At roughly $5.6m to train, DeepSeek v3 was about a hundred times cheaper than Meta’s Llama 3 and probably a similar magnitude cheaper than Claude. DeepSeek’s API costs 12 times less than Anthropics. Biden’s chip export controls have notionally hampered the team. But necessity is the mother of invention, and they delivered this superb model through ingenuity rather than brute force. The ramifications: As was reasonably likely, the export controls have backfired. The gap between open source (like DeepSeek) and closed source (like OpenAI) is narrowing rapidly. It calls into question efforts to constrain open-source AI development. China now has several world-class teams building AI systems, including Qwen, Kling (in video), Apollo (in self-driving) and, of course, Bytedance. The crucial significance of DeepSeek’s cheaper training methods lies in the path it opens up for wider adoption and innovation—particularly outside established tech hubs. If cutting-edge LLMs can be built on smaller budgets, then Western efforts to control or slow AI development may prove futile. Constraints breed ingenuity; ironically, export controls appear to have spurred Chinese AI teams to engineer leaner, more efficient solutions.

Takeaways by Macro Roundup® AI

  1. DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100 times cheaper than Meta's Llama 3, while performing about as well as Claude 3.5 Sonnet, and its API costs 12 times less than Anthropic's.
  2. Biden's chip export controls appear to have backfired, spurring Chinese AI teams to engineer leaner, more efficient solutions through ingenuity rather than brute force.
  3. China has several world-class AI teams, including Qwen, Kling in video, Apollo in self-driving and Bytedance, and the gap between open-source and closed-source models is narrowing rapidly.

Related Articles:

  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.
  • Are We on the Brink of an AI Investment Arms Race? — Spending on AI chips and data centers was a bit below $100bn in 2023, around 0.4% of US GDP, and the broader set of companies exposed to AI-related investment has not yet seen a major jump in sales. The authors argue the underlying dynamics point to a spending surge large enough to shape the business cycle.
  • The Global AI Talent Tracker 2.0 — The United States remains the leading destination for the world's most elite AI talent and hosts 60% of top AI institutions. China's share of top AI researchers working domestically rose from 29% in 2019 to 47% in 2022, and India retained one-fifth of its top AI researchers in 2022 versus nearly none in 2019.

AI Summary. China's state-backed planemaker Comac has its subsidised C919 single-aisle jet flying domestic routes with Air China, China Eastern and China Southern, and is expanding to a route between Shanghai and Hong Kong. Aviation consultancy IBA projects Comac can lift output from one to 11 aircraft a month, delivering almost 2,000 C919s by 2040.

Chan Ho-him Financial Times
Date Posted:

China is challenging the Boeing-Airbus duopoly for single-aisle aircraft with Comac’s heavily-subsidized C919. The jet is gaining domestic market share and seeking certifications to expand globally.

Can China's subsidised jetmaker challenge the Boeing-Airbus duopoly?

Core argument: Comac had delivered 16 of its heavily subsidised C919 single-aisle jets to Chinese airlines as of December, with Air China, China Eastern and China Southern flying the aircraft on domestic routes following its 2023 maiden commercial flight.

Comac’s heavily subsidised C919, which made its maiden commercial flight in 2023, is already flown on domestic routes by China’s three big state-owned carriers: Air China, China Eastern Airlines and China Southern Airlines. From this month, China Eastern will fly the C919 between Hong Kong and Shanghai, its first regular commercial route outside China’s mainland. The world will need 42,430 new aircraft over the next two decades, roughly 80% of which will be single-aisle aircraft, according to an Airbus forecast in 2024. Aviation consultancy IBA predicts that Comac can raise its output of C919s — 16 of which have been delivered to Chinese airlines as of December — from one to 11 a month by 2040, by which time it can deliver almost 2,000 units of the aircraft.

Takeaways by Macro Roundup® AI

  1. Comac had delivered 16 of its heavily subsidised C919 single-aisle jets to Chinese airlines as of December, with Air China, China Eastern and China Southern flying the aircraft on domestic routes following its 2023 maiden commercial flight.
  2. Aviation consultancy IBA predicts Comac can raise C919 output from one to 11 aircraft a month by 2040 and deliver almost 2,000 units by that year.
  3. Airbus forecast in 2024 that the world will need 42,430 new aircraft over the next two decades, roughly 80% of them single-aisle.

Related Articles:

  • Boeing Battles Brain Drain As Engineers Chase the Allure of Space — The average tenure of a Boeing engineer has fallen from 16.4 years to 12.6 years, according to data from the union representing 12,000 Boeing engineers, with tenure shortening in almost every age bracket. Analysts, recruiters and union officials describe this "brain drain" as a drag on operations that could make launching a new plane harder.
  • Crises at Boeing and Intel Are a National Emergency — Intel and Boeing, once benchmarks for high-quality, demanding manufacturing, declined because of their own mistakes rather than cheap foreign competition. Because leading U.S. tech firms' software and devices depend on advanced semiconductors fabricated under contract, especially by Taiwan Semiconductor Manufacturing Co., Chinese subjugation of Taiwan could leave the U.S. tech sector at Beijing's mercy.
  • China’s Stunning 2024 Export Growth — Chinese export volumes are up 13% year-over-year while import volumes are up only 2%, a gap that with exports at about 20% of GDP implies a net exports contribution to Chinese growth of close to 2% of GDP. Falling Chinese export prices mean export volumes are growing much faster than the dollar value of exports.

AI Summary. The US government blocked Nippon Steel's $14.1bn takeover of US Steel, a victory for the United Steelworkers union's leadership, which opposed the deal even as some rank-and-file members backed it. The decision leaves US Steel potentially needing to restart a sale process, and it could struggle to find a buyer for the entire company.

Josh Wingrove and Joe Deaux Bloomberg
Date Posted:

Biden formally blocked Nippon’s purchase of US Steel; US Steel dropped to $30.80 a share, well under the $55 tender offer.

Does blocking a foreign steel takeover leave the target without buyers?

Core argument: President Biden blocked Nippon Steel's $14.1 billion takeover of US Steel, delivering a victory to United Steelworkers President David McCall and union leadership, who opposed the deal even as some rank-and-file members backed it.

Biden’s announcement was a massive victory for United Steelworkers President David McCall and his union’s leadership, who have been vocally opposed to the deal, even as some rank-and-file labor members spoke out in favor of it. Biden’s order raises difficult questions about the next steps for US Steel, which may have to restart the sale process, and could struggle to find a buyer for the entire company. Cleveland-Cliffs Inc., based in neighboring Ohio, pursued US Steel before Nippon Steel won the bidding, but it has since bought a Canadian producer and waffled on whether it would still want all or some of US Steel.

Takeaways by Macro Roundup® AI

  1. President Biden blocked Nippon Steel's $14.1 billion takeover of US Steel, delivering a victory to United Steelworkers President David McCall and union leadership, who opposed the deal even as some rank-and-file members backed it.
  2. Biden's order raises questions about US Steel's next steps, as the company may have to restart the sale process and could struggle to find a buyer for the entire company.
  3. Ohio-based Cleveland-Cliffs pursued US Steel before Nippon Steel won the bidding, but has since bought a Canadian producer and waffled on whether it still wants all or some of US Steel.

Related Articles:

  • “No Inventions; No Innovations,” A History of US Steel — US Steel lagged in adopting steelmaking technology, only moving into minimills through an acquisition and a new Alabama plant, with minimills now making about 25% of its domestic output. Rival minimill producer Nucor passed US Steel in output and is now the largest US steel producer.
  • Chinese Overcapacity is Crushing the Global Steel Industry — China produces about 1bn tonnes of steel a year, as much as the rest of the world combined, and its exports reached 90m tonnes in 2023, up 35% from the prior year. With Chinese mills selling abroad cheaply, foreign steelmakers' profits have fallen and some are seeking anti-dumping duties.
  • Global Robot Density in Factories Doubled in Seven Years — Global factory robot density reached a record 162 robots per 10,000 manufacturing employees, more than double the level of seven years earlier. The European Union averages 219 units per 10,000 employees, North America 197, and Asia 182, with Korea, Singapore, mainland China and Japan among the ten most automated economies.

AI Summary. Median inflation-adjusted wages for full-time workers ages 35–44 rose 16% from $58,522 to $67,652 between 2000 and 2024, and wealth of people in their thirties rose 66% from $62,000 to $103,000 between 1989 and 2022. Even so, the Institute for Family Studies projects 1/3 of today's young adults will never marry, versus under 1/5 in earlier cohorts.

Rachel Wolfe Wall Street Journal
Date Posted:

Despite earning more than their parents did at comparable points in their lifecycles, American 30-somethings are falling behind in milestones of adulthood. @kearney_melissa notes “expectations are so much higher today.”

Are young adults skipping marriage and children despite rising wages and wealth?

Core argument: The Institute for Family Studies projects that one-third of today's young adults will never marry, compared with less than one-fifth of those born in previous decades.

Median wages for full-time workers ages 35 to 44 are up 16% between 2000 and 2024, from $58,522 to $67,652 adjusted for inflation, according to the Labor Department. The overall wealth of 30-somethings, too, rose 66% between 1989 and 2022, according to the St. Louis Federal Reserve, from $62,000 to $103,000. 1/3 of today’s young adults will never marry, projects the Institute for Family Studies, compared to less than a 1/5 of those born in previous decades. The share of childless adults under 50 who say they are unlikely to ever have kids, meanwhile, rose 10 percentage points between 2018 and 2023, from 37% to 47%, according to Pew Research Center. “We’re moving from later to never,” says Richard Reeves. He notes that the longer people take to launch into a more conventional adulthood, the less likely they are to do it at all. Nearly 9% of those aged 30 to 40 still live with their parents, according to Pardue’s analysis of Census data, up from nearly 6% in 1990.

Takeaways by Macro Roundup® AI

  1. The Institute for Family Studies projects that one-third of today's young adults will never marry, compared with less than one-fifth of those born in previous decades.
  2. Median inflation-adjusted wages for full-time workers ages 35 to 44 rose 16% between 2000 and 2024, from $58,522 to $67,652, according to the Labor Department, while St. Louis Federal Reserve data show 30-somethings' wealth rose 66% from $62,000 to $103,000 between 1989 and 2022.
  3. The share of childless adults under 50 who say they are unlikely to ever have children rose 10 percentage points between 2018 and 2023, from 37% to 47%, according to Pew Research Center.

Related Articles:

  • Young Adults in the U.S. Are Reaching Key Life Milestones Later Than in the Past — Pew Research Center analysis of Census Bureau data finds 21-year-olds in the US are less likely than their counterparts four decades earlier to have a full-time job, be financially independent, live on their own, be married, or have a child. Among 21-year-olds, 39% worked full time versus 64% four decades earlier, and a quarter were financially independent versus 42%.
  • Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans — Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.
  • 1 in 3: A Record Share of Young Adults Will Never Marry — The share of Americans who have ever married is at historic lows at ages 35 and 45, with about 60% of 35-year-old men ever-married compared with 90% in 1980. The author projects that one-third of men and women reaching age 45 by 2050 will never have married.

AI Summary. In both the US and UK, the lowest earners have seen the fastest wage growth and aggregate inequality has not increased, as low-skilled workers gained and middle-skilled workers lost from the hollowing out of the middle of the jobs distribution. The author argues middle earners face both resentment and precarity.

John Burn-Murdoch Financial Times
Date Posted:

Overall US income inequality has been flat since 1994, but the ratio of the top 1% vs. the median has grown, while the median vs. the bottom 10% has declined. @jburnmurdoch suggests this yields a “dangerous cocktail” of “resentment and precarity.”

Why does inequality feel worse when it hasn't risen?

Core argument: Since the late 1990s, the lowest earners have seen the fastest wage growth in both the US and UK, and aggregate inequality has not increased.

Since the late 1990s, the lowest earners have seen the fastest wage growth in both the US and UK. In both countries, low-skilled workers have benefited (and middle-skilled workers suffered) from the hollowing out of the middle of the jobs distribution as well as a tight labour market more generally. So we have seen no increase in aggregate inequality. The story for the lowest-paid is unambiguously good but for the bulk of people who sit somewhere in the middle, it could be argued that the two divergent trends combine for a decidedly uncomfortable situation. If the middle class looks upwards, the rich are pulling further away. A top-tier life feels further out of reach than ever. But look down, and the floor is coming up fast. This simultaneous rise of resentment and precarity is a dangerous cocktail, and could certainly have fed into recent political undercurrents.

Takeaways by Macro Roundup® AI

  1. Since the late 1990s, the lowest earners have seen the fastest wage growth in both the US and UK, and aggregate inequality has not increased.
  2. Low-skilled workers in the US and UK have benefited, and middle-skilled workers suffered, from the hollowing out of the middle of the jobs distribution and a tighter labour market.
  3. Middle earners face the rich pulling further away above them while the floor rises beneath them, a combination of resentment and precarity that the article argues could have fed into recent political undercurrents.

Related Articles:

Monday, January 6, 2025

AI Summary. The authors estimate that a hypothetical low-income family with children receives $68,686 in government support at an income of $11,000 but only $22,709 at $65,000, while its tax liability rises from $842 to $12,835. The lost assistance plus higher taxes fully offsets the $54,000 income gain.

Elias Ilin and Alvaro Sanchez Federal Reserve Bank of Atlanta
Date Posted:
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A single parent with one child in Washington DC, earning $11K, receives $68K of government benefits net of taxes for a total after-tax income of $79K. A counterpart, earning $65K, receives $10K of government benefits net of taxes for an after-tax income of $75K. This structure creates little, if any, financial incentive for a low-income parent to work.

Do lost benefits and higher taxes erase income gains for low-income families?

Core argument: The authors estimate that a hypothetical family earning $11,000 is eligible for $68,686 in government support, falling to roughly a third of that ($22,709) at an income of $65,000.

The structure of the United States social safety net features the phaseout of public assistance as household income increases, which functions as an effective marginal tax on wage gains and is commonly referred to as a “benefits cliff.” This presents a disincentive for some low-income workers, especially those with children, to accept higher-paying jobs or promotions. Workforce development programs focused on helping low-income workers must contend with the challenges that benefits cliffs present to the career advancement of their clients. Overall, we estimate that at an income of $11,000, our hypothetical family is eligible for $68,686 in government support. At an income of $65,000, the family can expect to receive roughly a third of that assistance ($22,709). The family’s overall tax liability also increases, growing from $842 to $12,835. This loss of public assistance combined with an increase in taxes fully offsets a $54,000 income gain.

Takeaways by Macro Roundup® AI

  1. The authors estimate that a hypothetical family earning $11,000 is eligible for $68,686 in government support, falling to roughly a third of that ($22,709) at an income of $65,000.
  2. The same family's tax liability rises from $842 to $12,835 as income grows from $11,000 to $65,000, and the combined loss of public assistance and higher taxes fully offsets the $54,000 income gain.
  3. The phaseout of public assistance as household income rises functions as an effective marginal tax on wage gains, presenting a disincentive for some low-income workers, especially those with children, to accept higher-paying jobs or promotions.

Related Articles:

  • “Compensate the Losers?” Economic Policy and Partisan Realignment in the US — The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.
  • Calomiris on Gramm Ekelund and Early on Income Distribution — Transfer benefits phase out so quickly that the effective marginal tax rate in the lowest three income quintiles approaches 100%, meaning an extra dollar earned can cost roughly a dollar of benefits. Hours worked in the lower quintiles have plummeted, though the authors stop short of asserting a causal link.

AI Summary. The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.

David Deming, Christopher Ong, and Lawrence Summers National Bureau of Economic Research
Date Posted:
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Citing 25% growth in the STEM share of jobs and 50% drop in retail share since 2010, @ProfDavidDeming and @LHSummers suggest “AI could be a general-purpose technology on the scale of prior disruptive innovations” like steam power and electricity.

Is today's labor market less disruptive than in past technological eras?

Core argument: Measurements of US labor market structure back to 1880 show 1990–2017 as less disruptive than any prior period measured, not because today's job market is stable but because past changes were so profound.

We measure changes in the structure of the US labor market going back over a century. We find, perhaps surprisingly, that the years spanning 1990 to 2017 were less disruptive than any prior period we measure, going back to 1880. This comparative decline is not because the job market is stable today but rather because past changes were so profound. General-purpose technologies (GPTs) like steam power and electricity dramatically disrupted the twentieth-century labor market, but the changes took place over decades. We argue that AI could be a GPT on the scale of prior disruptive innovations, which means it is likely too early to assess its full impacts. Nonetheless, we present four indications that the pace of labor market change has accelerated recently, possibly due to technological change. First, the labor market is no longer polarizing. Second, employment growth has stalled in low-paid service jobs. Third, the share of employment in STEM jobs has increased by more than 50% since 2010, fueled by growth in software and computer-related occupations. Fourth, retail sales employment has declined by 25% in the last decade, likely because of technological improvements in online retail.

Takeaways by Macro Roundup® AI

  1. Measurements of US labor market structure back to 1880 show 1990–2017 as less disruptive than any prior period measured, not because today's job market is stable but because past changes were so profound.
  2. Four indications suggest labor market change has accelerated: polarization has ended, employment growth has stalled in low-paid service jobs, the STEM employment share has risen more than 50% since 2010, and retail sales employment has fallen 25% in a decade.
  3. The authors argue AI could be a general-purpose technology on the scale of steam power and electricity, whose labor market disruptions unfolded over decades, making it likely too early to assess AI's full impacts.

Related Articles:

  • Technological Disruption in the US Labor Market — The authors present four signs that US labor market change has accelerated, possibly from technology: polarization has ended as low- and middle-paid employment declined while highly paid work grew, low-paid service job growth stalled, the STEM employment share rose over 50%, and retail sales employment fell 25%. They argue artificial intelligence's effects will unfold over decades.
  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.

AI Summary. Research and development spending in U.S. manufacturing has been rising relative to output and hours worked while productivity has been flat, which suggests the ability of research and development to boost productivity growth has been declining.

Danial Lashkari and Jeremy Pearce Federal Reserve Bank of New York
Date Posted:
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A @NewYorkFed analysis finds over 2010 to 2022 the US manufacturing sector’s R&D expenditure as a % of gross output increased by 2.2%/year, but labor productivity fell 0.5%/year.

Is research and development losing its power to raise manufacturing productivity?

Core argument: R&D expenditure in U.S. manufacturing has been rising relative to both output and hours worked, with R&D intensity increasing since 1987.

R&D expenditure has been rising relative to output and to hours worked. The rise in R&D intensity has been ongoing since 1987, with some evidence of a slowdown in its growth when compared to overall employment in the sector. The fact that R&D intensity has been increasing while productivity is flat suggests that the ability of R&D to boost productivity growth has been declining.

Takeaways by Macro Roundup® AI

  1. R&D expenditure in U.S. manufacturing has been rising relative to both output and hours worked, with R&D intensity increasing since 1987.
  2. Rising R&D intensity alongside flat manufacturing productivity suggests that the ability of R&D spending to boost productivity growth has been declining.
  3. Some evidence points to a slowdown in the growth of R&D intensity when measured against overall employment in the manufacturing sector.

Related Articles:

  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.
  • The Industrial Renaissance: Digital Infrastructure, Energy Transition, and Power — An industrial renaissance is underway driven by industrial policies, which fall into three types: place-based policies aimed at low-income regions that may have lost manufacturing jobs, national security policies to ensure important technology and semiconductors are produced domestically, and green policies supporting the energy transition.
  • Global Robot Density in Factories Doubled in Seven Years — Global factory robot density reached a record 162 robots per 10,000 manufacturing employees, more than double the level of seven years earlier. The European Union averages 219 units per 10,000 employees, North America 197, and Asia 182, with Korea, Singapore, mainland China and Japan among the ten most automated economies.

AI Summary. The number of venture capital firms investing in US-headquartered companies fell to 6,175 from a peak of 8,315, with more than half of the $71bn raised by US venture firms going to just nine firms. The concentration has left start-ups such as SpaceX, OpenAI, Databricks and Stripe able to stay private far longer while thinning funding options for smaller companies.

George Hammond Financial Times
Date Posted:
Is Database:
Database

In 2024, over half of the $71B raised by VC firms went to just 9 firms. By the end of 2024, the number of active VCs had dropped 25% since peaking at 8,315 in 2021.

Is venture capital funding concentrating among a few large firms?

Core argument: The number of VCs investing in US-headquartered companies fell to 6,175 in 2024 from a 2021 peak of 8,315, meaning more than 2,000 have fallen dormant, according to PitchBook.

The tally of VCs investing in US-headquartered companies dropped to 6,175 in 2024 — meaning more than 2,000 have fallen dormant since a peak of 8,315 in 2021, according to data provider PitchBook. The trend has concentrated power among a small group of mega-firms and has left smaller VCs in a fight for survival. It has also skewed the dynamics of the US venture market, enabling start-ups such as SpaceX, OpenAI, Databricks and Stripe to stay private for far longer, while thinning out funding options for smaller companies. More than half of the $71bn raised by US VCs in 2024 was pulled in by just nine firms, according to PitchBook. General Catalyst, Andreessen Horowitz, Iconiq Growth and Thrive Capital raised more than $25bn in 2024. “The time to return capital has elongated a lot across the industry over the last 25 years,” said an LP in a number of large US venture firms. “In the 1990s it probably took seven years to get your money back. Now it’s probably more like 10 years.” Some LPs have run out of patience. The $71bn raised by US firms in 2024 is a seven-year low and less than two-fifths the total haul in 2021.

Takeaways by Macro Roundup® AI

  1. The number of VCs investing in US-headquartered companies fell to 6,175 in 2024 from a 2021 peak of 8,315, meaning more than 2,000 have fallen dormant, according to PitchBook.
  2. More than half of the $71bn raised by US VC firms in 2024 went to just nine firms, with General Catalyst, Andreessen Horowitz, Iconiq Growth and Thrive Capital raising more than $25bn, according to PitchBook.
  3. The $71bn raised by US VCs in 2024 is a seven-year low and less than two-fifths of the 2021 total, and one limited partner said the time to return capital has stretched from about seven years in the 1990s to roughly 10.

Related Articles:

  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
  • 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.
  • High Interest Rates Crushed Startup Investment. Here Is What Could Revive It — U.S. venture funding for startups peaked above $300bn—more than double the prior year—before a series of steep interest-rate increases, the fastest in four decades, curbed appetite for risky startup bets and pushed funding down for a second straight year to $167bn.

AI Summary. Artificial intelligence is a general-purpose technology comparable to electricity, with potential to lift innovation and productivity. The authors argue the United States needs a national strategy spanning research and development, workforce skilling, AI infrastructure investment, and international partnerships to expand American AI exports, counter China's influence, and shape global standards.

Brad Smith Microsoft
Date Posted:

Microsoft President Brad Smith argues for a three-part US national AI strategy: investment, building AI workforce skills, and partnerships with allies. Microsoft is on track to invest $80B in the fiscal year ending June 2025.

Does America need a national strategy to lead in AI?

Core argument: Artificial intelligence is characterized as a General-Purpose Technology comparable to electricity, with broad potential for innovation and productivity.

Artificial intelligence represents a transformative General-Purpose Technology akin to electricity, offering immense potential for innovation and productivity. A robust national AI strategy focused on R&D, workforce skilling, and international partnerships is critical for the United States to maintain its global leadership. Collaboration among private and public sectors, investment in AI infrastructure, and fostering educational initiatives will drive economic growth and job creation. The U.S. must act swiftly to expand American AI exports, counter China's influence, and ensure trusted AI technologies shape global standards. By prioritizing teamwork across society, the U.S. can build a strong foundation for sustained prosperity in the AI era.

Takeaways by Macro Roundup® AI

  1. Artificial intelligence is characterized as a General-Purpose Technology comparable to electricity, with broad potential for innovation and productivity.
  2. A national AI strategy built on research and development, workforce skilling, and international partnerships is presented as critical to sustaining U.S. global leadership in artificial intelligence.
  3. The United States is urged to expand American AI exports, counter China's influence, and ensure trusted AI technologies shape global standards, with investment in AI infrastructure and educational initiatives supporting economic growth and job creation.

Related Articles:

  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • 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.
  • Three Mile Island’s Nuclear Plant to Reopen, Help Power Microsoft’s AI Centers — Constellation Energy will spend about $1.6bn to restart the undamaged reactor at Pennsylvania's Three Mile Island nuclear plant, which closed in 2019, and has signed a 20-year agreement to sell the power to Microsoft. The deal reflects the scale of round-the-clock carbon-free electricity sought for artificial intelligence data centers.

AI Summary. Hackers linked to China's military, a group dubbed Volt Typhoon, have embedded themselves in US infrastructure including a Hawaii water utility, a Houston port, and an oil-and-gas processing facility. American security officials believe the intrusions are aimed in part at disrupting Pacific military supply lines and impeding a US response to a future conflict with China.

Dustin Volz, Aruna Viswanatha, Sarah Krouse, and Drew FitzGerald Wall Street Journal
Date Posted:

Chinese hackers have escalated from stealing data to infiltrating US infrastructure and telecom networks, aiming to disrupt supply lines and intelligence during potential conflicts, such as a Taiwan invasion. @WSJ

Have Chinese hackers shifted from corporate theft to targeting US infrastructure?

Core argument: Hackers tied to China's military, dubbed Volt Typhoon, have embedded themselves in U.S. infrastructure since at least 2019 and continue to do so, including at a Hawaii water utility, a Houston port, and an oil-and-gas processing facility.

The infrastructure attacks, which began at least as early as 2019 and are still taking place, hackers connected to China’s military embedded themselves in arenas that spies usually ignored, including a water utility in Hawaii, a port in Houston, and an oil-and-gas processing facility. American security officials said they believe the infrastructure intrusions—carried out by a group dubbed Volt Typhoon—are at least in part aimed at disrupting Pacific military supply lines and otherwise impeding America’s ability to respond to a future conflict with China, including over a potential invasion of Taiwan.

Takeaways by Macro Roundup® AI

  1. Hackers tied to China's military, dubbed Volt Typhoon, have embedded themselves in U.S. infrastructure since at least 2019 and continue to do so, including at a Hawaii water utility, a Houston port, and an oil-and-gas processing facility.
  2. American security officials said they believe the Volt Typhoon intrusions are aimed at least in part at disrupting Pacific military supply lines and impeding America's ability to respond to a future conflict with China, including over a potential invasion of Taiwan.

Related Articles:

  • Emerging Details of Chinese Hack Leave U.S. Officials Increasingly Concerned — U.S. intelligence and national security officials have told major telecommunications companies to find a permanent way to expel Chinese hackers from the deepest parts of the nation's communications networks. Critical parts of the system date to the late 1970s or early 1980s and are too old to upgrade with modern cybersecurity protections.
  • Volt Typhoon Targets US Critical Infrastructure with Living-Off-The-Land Techniques — Microsoft has identified stealthy intrusions by Volt Typhoon, a Chinese state-sponsored actor, against US critical infrastructure organizations spanning communications, manufacturing, utilities, transportation, maritime, government, information technology, and education. Microsoft assesses with moderate confidence that the campaign is developing capabilities that could disrupt critical communications infrastructure between the US and Asia during future crises.
  • Xi Jinping Says He Is Preparing China for War — China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.

AI Summary. Bipartisan legislation proposed in the US Congress, the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, would be the first major maritime law since 1936, aiming to revitalize shipbuilding and shipping over more than a decade while rebuilding the merchant marine. It calls for resources and White House-level involvement comparable to policies on energy, semiconductors, and aviation.

Daniel Michaels Wall Street Journal
Date Posted:

Rising tensions with China are driving proposed legislation to support the US commercial maritime sector, which has fallen to less than 1% of the global fleet, down from approximately 50% in 1945.

Can new legislation revive American shipbuilding and the merchant marine?

Core argument: The Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, introduced by Sens. Mark Kelly and Todd Young with two House members, would, if passed, be the first major U.S. maritime legislation since 1936.

A piece of legislation was recently introduced by Sens. Mark Kelly (D., Ariz.) and Todd Young (R., Ind.) and two House members [including Rep. Mike Waltz, whom Trump has nominated as his national security adviser] the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act. If passed, it would be the first major piece of maritime legislation since 1936. The SHIPS Act, as it is known, aims to revitalize shipbuilding and shipping over more than a decade while rebuilding the merchant marine. It calls for resources and White House-level involvement comparable to policies on energy, semiconductors and aviation.

Takeaways by Macro Roundup® AI

  1. The Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, introduced by Sens. Mark Kelly and Todd Young with two House members, would, if passed, be the first major U.S. maritime legislation since 1936.
  2. The SHIPS Act aims to revitalize U.S. shipbuilding and shipping over more than a decade while rebuilding the merchant marine.
  3. The SHIPS Act calls for resources and White House-level involvement comparable to U.S. policies on energy, semiconductors and aviation, and its House sponsors include Rep. Mike Waltz, Trump's nominee for national security adviser.

Related Articles:

  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.
  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.
  • The Hidden Threat to National Security Is Not Enough Workers — At Newport News Shipbuilding, half of welders now have less than four years' experience, down from an average of 20 years three decades ago, and inexperience reduces productivity and adds delays. Shipbuilding wages starting at $17 an hour no longer carry a premium over local retail and warehouse jobs paying up to $24.