Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences 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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, March 25, 2025

AI Summary. The authors argue that incumbent firms with wage-setting power over researchers engage in "defensive hiring" to deter potential entrants' innovation, which helps explain why US research and development spending has risen while total factor productivity growth has declined. They find research labor supply is inelastic and that incumbent R&D spending is negatively correlated with creative destruction and sectoral productivity growth.

Jesús Fernández-Villaverde, Yang Yu and Francesco Zanetti National Bureau of Economic Research
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Between 1975 and 2015, an increasingly inelastic supply of specialized talent encouraged incumbents to “overhire to deter entrant innovation.” A pro-innovation policy would tax incumbents and subsidize entrants. Jesús Fernández-Villaverde @AEIecon

Does hiring researchers to deter rivals explain rising R&D with slowing productivity?

Core argument: Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction, a mechanism the authors argue helps explain the simultaneous rise in US R&D spending and decline in total factor productivity growth over recent decades.

Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction [replacement of old firms and technologies by new ones]. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades, despite rising R&D spending and researcher employment in the US over the past two decades. Defensive hiring by incumbent firms internalizes the effect of hiring researchers on competitors’ innovation probabilities. In monopsonistic markets with an inelastic supply of researchers, incumbents overhire to deter entrant innovation and preserve market dominance. Ideas getting harder to find amplifies this mechanism. Empirical evidence supports this theory, showing that the elasticity of research labor supply is low and has declined since the mid-1990s. Incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents’ lifespans, effects that are stronger in industries with inelastic researcher supply. The government can subsidize new entrants and tax incumbents to promote technological growth and correct market distortions.

Takeaways by Macro Roundup® AI

  1. Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction, a mechanism the authors argue helps explain the simultaneous rise in US R&D spending and decline in total factor productivity growth over recent decades.
  2. In monopsonistic markets with inelastic researcher supply, incumbents overhire researchers to deter entrant innovation and preserve market dominance, internalizing the effect of their hiring on competitors' innovation probabilities, with ideas getting harder to find amplifying the mechanism.
  3. The elasticity of research labor supply is low and has declined since the mid-1990s, and incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents' lifespans, more strongly where researcher supply is inelastic.

Related Articles:

  • Are Ideas Getting Harder to Find? — The authors estimate U.S. research productivity has fallen by a factor of 41 since the 1930s, averaging declines above 5% per year across sectors. Sustaining constant growth in output per person requires doubling research effort every 13 years, challenging growth models that assume constant research productivity.
  • Something Is Getting Harder But It’s Not Finding Ideas — The number of researchers in the US economy has grown to 23x its 1930 level while the economy's growth rate has been constant or declining, contradicting the assumption that constant research input yields a constant growth rate. Bloom et al. explain this divergence by assuming ideas get harder to find as more are discovered.
  • Self-Selection and the Diminishing Returns of Research — The authors argue much of research's declining productivity is a transitional composition effect: the share of the labor force in research has tripled since the 1960s, and if researchers are positively selected on ability, that expansion lowered their average ability. Separating transitional from permanent diminishing returns nearly doubles predicted long-run per capita income growth.

AI Summary. The U.S. foreign-born population reached 53.3m, or 15.8% of the population, the highest level in American history, exceeding the shares recorded in 1890 (14.8%) and 1910 (14.7%) during the "Great Wave" of immigration. A four-year increase of 8.3m is larger than that of any four-year period in American history and exceeds the 7.9m increase over the prior 12 years.

Steven Camarota and Karen Zeigler Center for Immigration Studies
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The US foreign-born population rose by 8.3mm between 2021–2025 per Census Bureau data—the largest 4-year gain on record. The total reached 53.3mm, or 15.8% of the population, surpassing the prior peak of 14.8% set in 1890.

Has the foreign-born share of the US population reached a record high?

Core argument: The U.S. foreign-born population rose by 8.3 million from January 2021 to January 2025, a larger four-year increase than any other four-year period in American history and larger than the 7.9 million increase over the prior 12 years.

The numerical increase of 8.3 million in the last four years is larger than in any four-year period in American history. The 8.3 million increase in the four years from January 2021 to January 2025 is also larger than the 7.9 million increase in the 12 years prior. At 53.3 million and 15.8 percent of the population, the foreign-born population is higher now than at any time in American history. The number of immigrants has increased more than five-fold since 1970, and nearly three-fold since 1990, and by more than two-thirds since 2000. As a share of the population, even in 1890 (14.8%) and 1910 (14.7%) during what is often called the “Great Wave” of immigration, the foreign-born were a smaller share of the population than they are today.

Takeaways by Macro Roundup® AI

  1. The U.S. foreign-born population rose by 8.3 million from January 2021 to January 2025, a larger four-year increase than any other four-year period in American history and larger than the 7.9 million increase over the prior 12 years.
  2. At 53.3 million people and 15.8 percent of the U.S. population, the foreign-born population stands higher in both number and share than at any time in American history.
  3. The foreign-born share of 15.8 percent exceeds the 14.8 percent of 1890 and 14.7 percent of 1910 during the "Great Wave" of immigration, with the number of immigrants up more than five-fold since 1970 and nearly three-fold since 1990.

Related Articles:

  • Recent Immigration Surge Has Been Largest in U.S. History — 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.
  • The Demographic Outlook: 2025 to 2055 — The Congressional Budget Office projects the U.S. population will grow from 350m to 372m over three decades, an average of 0.2% per year, less than a quarter of the 0.9% average annual rate from 1975 to 2024. Deaths are projected to exceed births beginning in 2033, with net immigration more than accounting for population growth thereafter.
  • 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. The authors of an Institute for New Economic Thinking paper estimate that wealth gains among the top 10% of US households were large enough to explain the rise in total consumer spending above its longer-term trend, sustaining their spending even as their inflation-adjusted incomes shrank.

Jonnelle Marte Bloomberg
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Americans earning over $250k/year now represent ~50% of US consumer spending, up from ~33% in the 1990s, supported in part by stock market gains. Recent equity market declines may have a disproportionate impact on spending relative to previous selloffs.

Does spending by the wealthiest households now drive the economy?

Core argument: Americans earning more than $250,000 a year account for half of all US consumer spending, up from about one-third in the 1990s, according to a Moody's Analytics analysis.

The increase in wealth experienced by the top 10% of households from 2020 to 2023 was almost without precedent, according to a paper published in May by the Institute for New Economic Thinking, enabling this cohort of “super rich” to keep spending even as their real incomes shrunk when adjusted for inflation. Gains among the wealthy were large enough to explain the rise in total consumer spending above its longer-term trend, according to the authors, economists Thomas Ferguson and Servaas Storm. A recent analysis by Moody’s Analytics found that Americans earning more than $250,000 a year now account for half of all US consumer spending, up from about one-third in the 1990s.

Takeaways by Macro Roundup® AI

  1. Americans earning more than $250,000 a year account for half of all US consumer spending, up from about one-third in the 1990s, according to a Moody's Analytics analysis.
  2. Economists Thomas Ferguson and Servaas Storm argue that wealth gains among the wealthy were large enough to explain the rise in total consumer spending above its longer-term trend.
  3. The wealth increase for the top 10% of households from 2020 to 2023 was almost without precedent, according to a May paper from the Institute for New Economic Thinking, letting them keep spending as their inflation-adjusted incomes shrank.

Related Articles:

  • The U.S. Economy Depends More Than Ever on Rich People — Moody's Analytics estimates the top 10% of earners account for 49.7% of all U.S. consumer spending, a record in data going back to 1989, up from about 36% three decades ago, with their spending alone equal to almost one-third of gross domestic product.
  • Consumer Sentiment Deteriorating Rapidly — University of Michigan survey data show consumer sentiment declining for households earning both above and below $100,000, with job-loss worries at levels typically seen in recessions and a record-high share of consumers saying business conditions are worsening. Income expectations are falling while inflation expectations are rising rapidly.
  • The American Dream Is Not a Coin Flip, and Wages Have Not Stagnated — Using an alternative cost-of-living adjustment, the typical 40-year-old's pre-tax family income rose 52% between 1979 and 2019, or 73% adjusting for family size, versus 15% under the methods behind widely cited mobility estimates. Absolute mobility is down 20 percentage points since 1979 but stood at 72% in 2023.

AI Summary. Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.

William Langley and Haohsiang Ko Financial Times
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China is facing its own “China Shock,” losing at least 7.4mm jobs in labor-intensive manufacturing industries between 2011 and 2023, due to automation and migration to lower-wage manufacturing hubs like Vietnam and Indonesia.

Are industrial upgrading and automation eliminating China's low-skilled manufacturing jobs?

Core argument: Academics at Changzhou University, Yancheng Teachers University and Henan University found average employment across 12 labour-intensive Chinese manufacturing industries shrank roughly 14%, nearly 4mn roles, between 2011 and 2019, with textile jobs down 40%.

Analysis of 12 labour-intensive manufacturing industries between 2011 and 2019 by academics at Changzhou University, Yancheng Teachers University and Henan University found that average employment shrank by roughly 14%, or nearly 4mn roles, between 2011 and 2019. Roles in the textile industry shrank 40% over the period. An FT analysis of the same 12 sectors between 2019 and 2023 found a further decline of 3.4mn jobs. Dorien Emmers and Scott Rozelle argued in last year that the rapid upgrading of Chinese industry, as well as its “massive push to automate” was further reducing demand for [lower skilled] labourers, to the point that their wages had started to decline. “When too many unskilled workers are squeezed out of upgraded industries, their wages tend to stagnate or fall, curtailing demand and hampering growth. This eventually leads to serious social problems, such as higher rates of unemployment and increased crime and social unrest. Nations with socially polarised work forces also suffer from political instability.”

Takeaways by Macro Roundup® AI

  1. Academics at Changzhou University, Yancheng Teachers University and Henan University found average employment across 12 labour-intensive Chinese manufacturing industries shrank roughly 14%, nearly 4mn roles, between 2011 and 2019, with textile jobs down 40%.
  2. An FT analysis of the same 12 labour-intensive sectors found a further decline of 3.4mn jobs between 2019 and 2023.
  3. Dorien Emmers and Scott Rozelle argued that China's rapid industrial upgrading and "massive push to automate" is reducing demand for lower-skilled labourers to the point that their wages have started to decline, which they said curtails demand and hampers growth.

Related Articles:

  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • Xi Jinping Calls for Quality Jobs for Youth Instead of ‘Bitterness’ — China's leadership has ordered that providing "high-quality full employment" be an economic priority, with youth unemployment running at nearly three times the overall rate. Unemployment among 16-24 year-olds, excluding students, stood at 14.7% against an urban unemployment rate of 5%.

AI Summary. The proposed "Mar-a-Lago Accord," which would have foreign central banks swap US Treasury bills for 100-year bonds paying no interest, is unworkable because repeated tariff threats across many objectives have drained their credibility as leverage. Overusing tariffs and financial sanctions would push foreign countries out of dollars and accelerate the loss of dollar dominance.

Jeffrey Frankel Econbrowser
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Citing the coercive nature of the theorized “Mar-a-Lago Accord” @JFrankelEcon argues “If the US persists in over-using tariffs and financial sanctions, it will incentivize foreign countries to move out of dollars altogether.”

Can tariff threats force foreign central banks into century bonds?

Core argument: The proposed Mar-a-Lago Accord, which would swap foreign central banks' Treasury bills for 100-year bonds paying no interest for 100 years, stands no chance of acceptance by those central banks and other investors.

The Mar-a-Lago Accord about which people are talking, regarding the dollar, doesn’t stand a chance. Why would the world’s central banks and other investors accept 100-year bonds — which would pay no interest for 100 years — in place of good old Treasury bills? Presumably, Trump would threaten tariffs against their countries. But he has waved this weapon in the air so often, in the names of so many objectives, with so many postponements and reversals, that it would not retain much credibility if used to force purchases of US treasury securities. If the US persists in over-using tariffs and financial sanctions, it will incentivize foreign countries to move out of dollars altogether, accelerating the loss of dollar dominance. The rest of the proposal is to force foreign countries to accept the inferior treasury bonds by brandishing US military and geopolitical power. The situation is perhaps reminiscent of the 1960s when Germany, wanting to preserve the Bretton Woods system, willingly paid the foreign exchange costs of stationing American soldiers in Germany.

Takeaways by Macro Roundup® AI

  1. The proposed Mar-a-Lago Accord, which would swap foreign central banks' Treasury bills for 100-year bonds paying no interest for 100 years, stands no chance of acceptance by those central banks and other investors.
  2. Trump's tariff threat has been brandished so often, for so many objectives, and with so many postponements and reversals that it would carry little credibility as a tool to force purchases of US Treasury securities.
  3. Continued over-use of tariffs and financial sanctions by the US would incentivize foreign countries to move out of dollars altogether, accelerating the loss of dollar dominance.

Related Articles:

  • What Is the Mar-a-Lago Accord? — The proposed Mar-a-Lago Accord would have the US offer allies security guarantees and market access in exchange for their intervening to weaken the dollar, expanding US manufacturing, and swapping existing US government debt for new 100-year Treasury bonds. Questions remain about the transition costs, inflation from higher US wage costs, and allies' incentives to participate.
  • 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.
  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.

AI Summary. NATO's collective defense spending averaged 1.72% of GDP over roughly two and a half decades, below the alliance's agreed 2% threshold, leaving a cumulative shortfall the authors estimate at over $2tn that was not invested in force structure, modernization, and readiness. The authors argue closing the gap requires years of sustained investment beyond current commitments.

Mackenzie Eaglen and Cole Spiller American Enterprise Institute
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Between 2000 and 2024, NATO’s defense spending averaged 1.72% of GDP, a cumulative $2T short of the 2% target, “funds that should have been invested…in force structure, modernization, and readiness but were instead deferred or cut.” @MEaglen

How large is NATO's cumulative defense spending shortfall?

Core argument: NATO's collective defense spending averaged 1.72% of GDP from 2000 to 2024, below the agreed 2% threshold, producing a cumulative alliance-wide defense spending deficit of more than $2 trillion.

From 2000 to 2024, NATO’s collective defense spending averaged just 1.72% of GDP, well below the agreed-upon 2% threshold. The result is a defense spending deficit totaling over $2 trillion across the alliance—funds that should have been invested under the 2% of GDP framework in force structure, modernization, and readiness but were instead deferred or cut. This deficit peaked in 2014, coinciding with Russia’s illegal annexation of Crimea, which prompted a renewed focus on defense investment. Closing this gap will take years of sustained investment beyond current commitments. As illustrated on the battlefield in Ukraine, modern warfare demands consistent investment in large-scale force generation, munitions stockpiles, and industrial capacity—all of which require a funding framework beyond a static percentage of GDP.

Takeaways by Macro Roundup® AI

  1. NATO's collective defense spending averaged 1.72% of GDP from 2000 to 2024, below the agreed 2% threshold, producing a cumulative alliance-wide defense spending deficit of more than $2 trillion.
  2. The NATO defense spending deficit peaked in 2014, coinciding with Russia's illegal annexation of Crimea, which prompted renewed focus on defense investment.
  3. Closing NATO's spending gap will require years of sustained investment beyond current commitments, and the war in Ukraine illustrates that large-scale force generation, munitions stockpiles, and industrial capacity need a funding framework beyond a static share of GDP.

Related Articles:

  • Germany’s Parliament Approves Friedrich Merz’s €1tn Spending Plan — Germany's parliament approved constitutional changes allowing up to €1tn for military and infrastructure spending, including unlimited borrowing for defense and a €500bn, 12-year fund to modernize hospitals, schools, roads and energy networks. The plan could revive Europe's largest economy and boost EU rearmament efforts.
  • German Army Struggles to Get Gen Z Recruits ‘Ready for War’ — Germany's armed forces commissioner warned the country is not moving closer to its target of 203,000 active troops by 2031, as the military slightly shrank amid high dropout rates, with a quarter of new recruits leaving within six months. Conscientious objector applications reached 2,998, up from 200 in 2021.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.

Wednesday, March 26, 2025

AI Summary. Analysis of US household income from 1967 to 2023 finds that higher unemployment and inflation reduce real household income, with these cyclical effects relatively uniform across the income distribution before the pandemic. The authors estimate real household income rises about 1/2 to 2/3 percentage point for each additional year an expansion continues, with larger gains at lower income percentiles.

Deepika Baskar Prabhakar and Robert Valletta Federal Reserve Bank of San Francisco
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A @SFFed analysis finds sustained economic expansions raise “real household income by about 1/2 to 2/3 of a percentage point each year that an expansion continues, with larger effects evident at lower income percentiles.”

How do unemployment, inflation, and expansion length affect household income?

Core argument: Using data for 1967–2023, the authors find real household income rises about 1/2 to 2/3 percentage point for each additional year an expansion continues, with larger effects at lower income percentiles.

We use data for the years 1967 to 2023, which include the pandemic period. We find that increases in unemployment and inflation reduce real household income. Prior to the pandemic, these cyclical effects were relatively uniform across the distribution of household incomes. The pandemic period was a substantial outlier, with income losses largely offset by historically large government transfers paid in the form of enhanced unemployment insurance (UI) benefits, especially for lower-income households. Figure 4 shows that real household income rises about 1/2 to 2/3 percentage point each year that an expansion continues, with larger effects evident at lower income percentiles. This suggests that household income is likely to continue growing across the board in the current expansion, even if unemployment and inflation are unchanged. The expansion before the pandemic lasted nearly 11 years. With the U.S. economy entering its fifth year of post-pandemic economic expansion, meaningful gains in real household income are likely if the expansion continues.

Takeaways by Macro Roundup® AI

  1. Using data for 1967–2023, the authors find real household income rises about 1/2 to 2/3 percentage point for each additional year an expansion continues, with larger effects at lower income percentiles.
  2. Increases in unemployment and inflation reduce real household income, and prior to the pandemic these cyclical effects were relatively uniform across the distribution of household incomes.
  3. The pandemic period was a substantial outlier, with income losses largely offset by historically large government transfers paid as enhanced unemployment insurance benefits, especially for lower-income households.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • Why Is Prime-Age Labor Force Participation So High? — Labor force participation among 25-to-54-year-olds rose after the pandemic shock, with women's rate exceeding its pre-pandemic peak while men's returned to its pre-pandemic level but stayed below its historical high. The authors find this participation rise can ease wage and price pressures in hot labor markets, but appears to have ended.
  • The American Dream Is Not a Coin Flip, and Wages Have Not Stagnated — Using an alternative cost-of-living adjustment, the typical 40-year-old's pre-tax family income rose 52% between 1979 and 2019, or 73% adjusting for family size, versus 15% under the methods behind widely cited mobility estimates. Absolute mobility is down 20 percentage points since 1979 but stood at 72% in 2023.

AI Summary. In a pre-registered field experiment with 776 professionals at Procter & Gamble working on real product innovation challenges, individuals using AI matched the performance of two-person teams without AI. Professionals using AI also produced solutions balancing technical and commercial considerations regardless of their functional background.

Fabrizio Dell’Acqua, Charles Ayoubi, Hila Lifshitz, Raffaella Sadun, Ethan Mollick, et al. Harvard Business School Working Paper
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In a 776-person field experiment at P&G on real product innovation tasks, individuals using AI delivered solutions with higher average quality than teams without AI, and performed almost as well as teams using AI.

Can one professional using AI match a two-person team?

Core argument: In a pre-registered field experiment with 776 Procter & Gamble professionals working on real product innovation challenges, individuals using AI matched the performance of two-person teams working without AI.

We examine how artificial intelligence transforms the core pillars of collaboration—performance, expertise sharing, and social engagement—through a pre-registered field experiment with 776 professionals at Procter & Gamble. Working on real product innovation challenges, professionals were randomly assigned to work either with or without AI, and either individually or with another professional in new product development teams. Our findings reveal that AI significantly enhances performance: individuals with AI matched the performance of teams without AI, demonstrating that AI can effectively replicate certain benefits of human collaboration. Moreover, AI breaks down functional silos. Without AI, R&D professionals tended to suggest more technical solutions, while Commercial professionals leaned towards commercially-oriented proposals. Professionals using AI produced balanced solutions, regardless of their professional background. Our results suggest that AI adoption at scale in knowledge work reshapes not only performance but also how expertise and social connectivity manifest within teams, compelling organizations to rethink the very structure of collaborative work.

Takeaways by Macro Roundup® AI

  1. In a pre-registered field experiment with 776 Procter & Gamble professionals working on real product innovation challenges, individuals using AI matched the performance of two-person teams working without AI.
  2. Without AI, R&D professionals proposed more technical solutions and Commercial professionals more commercially oriented ones, while professionals using AI produced balanced solutions regardless of functional background.
  3. The authors argue that AI adoption at scale in knowledge work reshapes performance, expertise sharing, and social connectivity within teams, compelling organizations to rethink the structure of collaborative work.

Related Articles:

  • 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.
  • Technological Disruption in the Labor Market — 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.
  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.

AI Summary. The wealthiest 0.1% of US households hold a record 13.8% of total wealth in Federal Reserve data, up from 13%, while the bottom half hold about 2.5%. Households in the 90th to 99th percentiles are the group whose wealth share narrowed, falling 2.4 percentage points.

Alexandre Tanzi Bloomberg
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Federal Reserve data through Q4 2024 reports that the top 0.1%’s wealth share increased to 13.8% from 13% at the end of 2020 contrasted with the broadly affluent 90-99% whose wealth share declined 2.4pp to 36.4% over that period.

How is wealth distributed across American households?

Core argument: The top 0.1% of American households expanded their share of total wealth to a record 13.8% at year's end, up from 13% in the same period of 2020.

The top 0.1% expanded their share of total wealth to a record 13.8% at the year’s end, up from 13% in the same period of 2020. The bottom half’s share climbed to 2.7% in mid-2022, the highest in Fed data going back to 1989, before dropping back to 2.5%. The group that saw its wealth share narrow over the past four years is the affluent households that make up the 90th to 99th percentiles. These families saw a 2.4 percentage point decline in their share of the total.

Takeaways by Macro Roundup® AI

  1. The top 0.1% of American households expanded their share of total wealth to a record 13.8% at year's end, up from 13% in the same period of 2020.
  2. The bottom half of U.S. households holds 2.5% of national wealth, down from 2.7% in mid-2022, the highest share in Federal Reserve data going back to 1989.
  3. Affluent households in the 90th to 99th percentiles saw their share of total wealth decline 2.4 percentage points over the past four years.

Related Articles:

  • Social Security and Trends in Wealth Inequality — The authors estimate that including Social Security in household wealth leaves top wealth shares little changed over three decades, with the top 10% and top 1% shares rising 1.1 and 1.6 percentage points versus roughly 9 and 6 points for marketable wealth alone. Social Security wealth grew from $7tn to $39tn.
  • How To Get Rich in 2025 — Academic estimates compiled by The Economist indicate inheritances, after falling over the 20th century, were worth about 10% of GDP on average by the end of the 2010s, with roughly $6tn inherited across the rich world in a year. Falling family sizes mean each inheritance is spread across fewer heirs.
  • A Preliminary Report on Taxing the Great Wealth Transfer: Revenue and Distributional Effects of Taxes on Estates, Inheritances, and Unrealized Capital Gains at Death — The authors argue that replacing the estate tax, paid by those who die, with an inheritance tax, paid by recipients, could raise more revenue and increase progressivity because it targets large individual transfers rather than estates divided among several family members. They also note unrealized capital gains held until death escape income tax entirely.

AI Summary. The UK Treasury announced a £14bn package to repair public finances after weak growth and high borrowing costs, including £4.8bn in gross welfare savings, £3.6bn in day-to-day departmental spending cuts, and relaxed planning rules projected to cut borrowing by a further £3.4bn. Defence spending is set to rise to 2.5% of GDP.

George Parker, Sam Fleming, and Ian Smith Financial Times
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The UK Labour government announced a £4.8B reduction in projected welfare spending and £3.6B in cuts to departmental spending by 2029-30, in part to offset an increase in defense spending to 2.5% of GDP by 2027.

Will spending cuts and planning reform be enough to avoid tax rises?

Core argument: UK Chancellor Rachel Reeves announced a £14bn package to repair the public finances after weak growth and high borrowing costs damaged the fiscal position five months after her first Budget.

[UK Chancellor of the Exchequer] Rachel Reeves has announced a £14bn package to repair the UK public finances after weak economic growth and high borrowing costs blew a hole in the country’s fiscal position just five months after her first Budget. In one of the biggest surprises of the day, she said a relaxation of planning rules would boost GDP and tax receipts, reducing borrowing by a further £3.4bn by 2029-30. Welfare cuts would result in a gross saving of £4.8bn by that time, while cuts to planned day-to-day departmental spending would save £3.6bn. The chancellor confirmed that defence spending would increase to 2.5% of GDP. UK borrowing costs dipped following Reeves’ statement, as the government announced debt sales of £304bn for the coming year, slightly less than the £308bn forecast by markets.

Takeaways by Macro Roundup® AI

  1. UK Chancellor Rachel Reeves announced a £14bn package to repair the public finances after weak growth and high borrowing costs damaged the fiscal position five months after her first Budget.
  2. Reeves said relaxed planning rules would boost GDP and tax receipts, cutting borrowing by a further £3.4bn by 2029-30, with welfare cuts saving £4.8bn gross and departmental day-to-day spending cuts £3.6bn.
  3. UK borrowing costs dipped after Reeves' statement as the government set debt sales of £304bn for the coming year, below the £308bn markets had forecast, and confirmed defence spending rising to 2.5% of GDP.

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AI Summary. Sweden plans to raise defence spending from 2.4% to 3.5% of GDP by 2030, citing Russia's war in Ukraine and uncertainty over US commitment. The rearmament is to be funded largely by borrowing, about SKr300bn ($30bn) by 2035, supported by one of Europe's lowest debt-to-GDP ratios.

Richard Milne Financial Times
Date Posted:
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Sweden is planning on increasing defense spending from 2.4% to 3.5% of GDP over the next five years, financed by borrowing, citing Russia’s war in Ukraine and waning US commitments.

Are European countries borrowing to fund sharply higher defence spending?

Core argument: Sweden will raise defence spending from 2.4% of GDP to 3.5% by 2030, citing Russia's war in Ukraine and uncertainties over US commitment, according to prime minister Ulf Kristersson.

Sweden has said it will increase defence spending to 3.5% of GDP by 2030, becoming the latest European country to propose a sharp rise as it cited Russia’s war in Ukraine and uncertainties over US commitment. The rise from the current 2.4%, to be funded largely by borrowing, was set out by centre-right prime minister Ulf Kristersson on Wednesday and has been agreed with the four parties that support his government. Kristersson said that Sweden would borrow about SKr300bn ($30bn) by 2035 to fund the rearmament, in a deal endorsed by the three parties in his coalition and the nationalist Sweden Democrats. Sweden has one of the lowest debt-to-GDP ratios in Europe, giving it plenty of headroom to borrow more.

Takeaways by Macro Roundup® AI

  1. Sweden will raise defence spending from 2.4% of GDP to 3.5% by 2030, citing Russia's war in Ukraine and uncertainties over US commitment, according to prime minister Ulf Kristersson.
  2. Kristersson said Sweden would borrow about SKr300bn ($30bn) by 2035 to fund the rearmament, with the plan agreed by his three coalition parties and the nationalist Sweden Democrats.
  3. Sweden has one of the lowest debt-to-GDP ratios in Europe, giving it headroom to fund the defence increase largely by borrowing.

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  • Germany’s Parliament Approves Friedrich Merz’s €1tn Spending Plan — Germany's parliament approved constitutional changes allowing up to €1tn for military and infrastructure spending, including unlimited borrowing for defense and a €500bn, 12-year fund to modernize hospitals, schools, roads and energy networks. The plan could revive Europe's largest economy and boost EU rearmament efforts.
  • The Costly End of Europe’s ‘Peace Dividend’ — European leaders are debating raising defence spending to 3.5% of GDP or more, a level not seen in continental Europe since the late 1960s. Sustaining that share from 1995 to 2023 would have required an extra $387bn a year across EU member states and $35bn a year for the UK, according to Financial Times calculations.
  • Behind NATO’s 2 Percent: Measuring the True Scope of Alliance Defense Investments and the NATO Defense Deficit — NATO's collective defense spending averaged 1.72% of GDP over roughly two and a half decades, below the alliance's agreed 2% threshold, leaving a cumulative shortfall the authors estimate at over $2tn that was not invested in force structure, modernization, and readiness. The authors argue closing the gap requires years of sustained investment beyond current commitments.