Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, July 8, 2026

AI Summary. The authors find cognitive ability test scores predict capital income, with the gradient in log capital income about 3x steeper than for labor income, and only partly explained by labor earnings. Higher-ability individuals are associated with higher saving rates and higher risk-adjusted returns while holding portfolios with lower systematic risk.

Spencer Bastani, Kristina Karlsson, Jonas Kolsrud and Daniel Waldenström Uppsala University
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Cognitive ability positively predicts capital as well as labor income, with the capital-income gradient ~3x as large in % terms. This reflects both higher saving rates and higher risk-adjusted returns, neither fully explicable by earnings.

Does cognitive ability predict capital income more strongly than labor income?

Core argument: Cognitive ability, measured on a 1–9 test-score scale, predicts capital income, with a log-income gradient roughly three times steeper than the labor income gradient; in rank terms the labor gradient is steeper, because capital income's heavy right tail compresses rank differences.

We document three results. First, cognitive ability predicts capital income. Figure 2 plots mean log income and mean income rank against the nine cognitive ability scores reporting test performance on a 1–9 scale, with both series normalized to zero at the lowest score. In the log specification (Panel a), the capital income gradient is roughly three times steeper than the labor income gradient. In the rank specification (Panel b), the ordering reverses: the labor income gradient is steeper, because the heavy right tail of capital income compresses rank differences. Figure 3 provides a complementary perspective, plotting average cognitive ability across percentiles of the labor and capital income distributions. [The relationship between ability and rank flattens at the top of the labor distribution but strengthens at the top of the capital distribution.] Second, the capital-income gradient is only partially explained by labor income: a decomposition shows that ability is associated with higher saving rates and investment returns through channels beyond labor income. Third, the investment return channel is consistent with skill rather than risk compensation, as high-ability individuals earn higher risk-adjusted excess returns while holding portfolios with lower systematic risk.

Takeaways by Macro Roundup® AI

  1. Cognitive ability, measured on a 1–9 test-score scale, predicts capital income, with a log-income gradient roughly three times steeper than the labor income gradient; in rank terms the labor gradient is steeper, because capital income's heavy right tail compresses rank differences.
  2. The capital-income gradient is only partially explained by labor income: a decomposition shows cognitive ability is associated with higher saving rates and higher investment returns through channels beyond labor income.
  3. High-ability individuals earn higher risk-adjusted excess returns while holding portfolios with lower systematic risk, a pattern consistent with skill rather than risk compensation.

Related Articles:

  • Cognitive Skills Beyond Childhood — Wages at age 50 rise more steeply with cognitive skills measured at age 16 than with cognitive skills measured at age 50; for women, moving from average to two standard deviations above average raises expected hourly wages from £11 to £22 using age-16 skills, versus £12 to £15 using age-50 skills.
  • Steeper At The Top: Cognitive Ability and Earnings in Finland and Norway — Administrative data on over 350,000 men each in Finland and Norway show a convex relationship between earnings rank and cognitive ability measured by military conscription tests: top-percentile earners score about 1 standard deviation above median earners, who score about 0.5 above bottom-percentile earners. The lowest scores are almost absent among top earners.
  • Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts — The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.

AI Summary. Researchers constructed an Inflation Shock Momentum Index that measures the spending-weighted share of personal consumption categories with three consecutive monthly inflation surprises above expectations minus the share with three consecutive surprises below. The authors find the index improves forecasts of overall personal consumption inflation one to three years ahead, even after accounting for standard predictors.

Kevin Lansing and Adam Shapiro Federal Reserve Bank of San Francisco
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The FRBSF has launched a new Inflation Shock Momentum Index, which uses disaggregated data to isolate persistent positive and negative components of inflation, improving PCE forecasts at 1 to 3 year horizons relative to standard predictions.

Can patterns of repeated inflation surprises improve inflation forecasts?

Core argument: The Inflation Shock Momentum Index (ISMI) helps improve forecasts of overall PCE inflation at horizons of one to three years, even after accounting for standard predictor variables.

This Economic Letter describes a new indicator called the Inflation Shock Momentum Index (ISM), which provides a timely signal of emerging inflationary or disinflationary pressures. We construct the ISMI by sorting categories of the personal consumption expenditures (PCE) basket of goods and services into groups based on the pattern of recent monthly surprises, called inflation shocks. Positive momentum categories are identified as those with three consecutive positive inflation shocks, while negative momentum categories are identified as those with three consecutive negative inflation shocks. The ISMI represents the expenditure-weighted share of inflation categories with positive momentum minus the share with negative momentum.The ISMI helps improve forecasts of overall PCE inflation at horizons of one to three years, even after accounting for standard predictor variables. Panel A of Figure 1 plots the ISMI together with 12-month PCE inflation. Pronounced positive or negative fluctuations of the index align well with historical inflation narratives.

Takeaways by Macro Roundup® AI

  1. The Inflation Shock Momentum Index (ISMI) helps improve forecasts of overall PCE inflation at horizons of one to three years, even after accounting for standard predictor variables.
  2. The ISMI is constructed as the expenditure-weighted share of PCE categories with three consecutive positive monthly inflation shocks minus the share with three consecutive negative shocks.
  3. Pronounced positive or negative fluctuations of the ISMI align well with historical inflation narratives when plotted alongside 12-month PCE inflation.

Related Articles:

  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Why Did Inflation Rise And Fall In 2021-24? Channels And Evidence From Expectations — Across countries, unexpectedly higher government deficits relative to earlier International Monetary Fund forecasts are associated with unexpectedly higher inflation, measured by each factor's contribution to the increase in public debt, a relationship the author finds statistically significant. This evidence is consistent with a fiscal channel for inflation.
  • The Post‑Pandemic Global R* — Using an econometric model extracting the common trend in real interest rates across advanced economies, the authors estimate that the global neutral real interest rate fell about 3.5 percentage points from 1990 to 2019, then rose about 1 percentage point after COVID, leaving global and U.S. estimates near 0.5%.

AI Summary. Japan's 10-year government bond yield reached 2.87%, its highest since 1996, in a sell-off investors attribute to a $2.3tn, 14-year government spending plan and concern the Bank of Japan will let inflation exceed its 2% target. The premium for borrowing 10 years rather than two widened to 1.4 points.

Ian Smith and Leo Lewis Financial Times
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The yield on the benchmark Japanese 10-year government bond rose to 2.87%, its highest level since 1996, on budgetary concerns and doubts about the BOJ. The premium of the 10yr bond over the 2yr has risen sharply, from 1pp in April to 1.4pp today.

Are government spending plans and inflation concerns driving up Japan's borrowing costs?

Core argument: Japan's benchmark 10-year government bond yield reached 2.87%, its highest level since 1996, after a sell-off in Japanese government bonds this year.

A bruising sell-off in Japanese government bonds this year pushed the country’s benchmark 10-year yield to 2.87% on Wednesday, its highest since 1996. Investors say the policies of Prime Minister Sanae Takaichi — centred on a $2.3tn spending plan spread over 14 years — are stoking the sell-off in long-term debt. Some also worry that the Bank of Japan, which raised interest rates to 1% last month, will fall behind the curve and let inflation rise above its 2% target. Market concern over long-term risks is reflected in the premium that investors are charging Japan to borrow for 10 years rather than two, which has risen from less than 1 percentage point in April to 1.4 percentage points today. This premium has recently been flat or falling in other big bond markets such as the US and Germany.

Takeaways by Macro Roundup® AI

  1. Japan's benchmark 10-year government bond yield reached 2.87%, its highest level since 1996, after a sell-off in Japanese government bonds this year.
  2. Investors attribute the sell-off in long-term Japanese debt to Prime Minister Sanae Takaichi's policies, centred on a $2.3tn spending plan spread over 14 years.
  3. The premium investors charge Japan to borrow for 10 years rather than two rose from less than 1 percentage point in April to 1.4 percentage points, while that premium has been flat or falling in the US and Germany.

Related Articles:

  • The Quiet Implosion of Japan — Across G10 economies, Japan carries a far higher gross public debt burden yet its 30-year government bond yield is barely above Germany's, which the author argues shows Japanese long-term yields should be much higher. As long as that is prevented, the yen stays under depreciation pressure toward 170 per dollar and intervention grows less effective.
  • Yen Hits Four-Decade Low in Historic Slide That’s Rattled Japan — The yen weakened past 161.95 per dollar to its lowest level since 1986, putting traders on alert for Japanese intervention to support the currency. The weak yen is lifting exporters' profits and Japanese stocks to record highs while raising import costs for oil and gas and fueling inflation that hurts consumers.
  • Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money — Japan's public sector operates as a highly leveraged sovereign wealth fund, funding risky assets by borrowing from banks and depositors at below-market rates, with returns sustaining its debt-to-GDP ratio above 200% without primary surpluses. The authors argue the resulting duration and currency mismatches expose Japan to mark-to-market losses that could trigger a fiscal crisis or a run on the yen.

AI Summary. As labor force participation falls, a shrinking group of workers generates the income, taxes, and innovation supporting a growing number of non-workers, leaving the economy more fragile because labor shocks are concentrated among fewer participants. Labor scarcity raises the return on automation, robotics, and software, making growth depend on productivity rather than participation.

Paul Kedrosky Applied Complexity
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Overall LFP is at a 50-year low. Kedrosky warns, “As fewer adults work or seek work, a larger fraction of voters experience the economy mostly as consumers, retirees, or rentiers, not as workers…[which] changes incentives around….taxation and redistribution.”

How does falling labor force participation reshape growth and fragility?

Core argument: Falling labor force participation leaves a shrinking core of workers generating the income, taxes, and innovation that support a growing number of non-workers, and makes the economy more fragile because labor shocks are concentrated among fewer participants.

As fewer adults work or seek work, a larger fraction of voters experience the economy mostly as consumers, retirees, or rentiers, not as workers. That changes political incentives around wages, immigration, AI, taxation, and redistribution. The economy becomes increasingly dependent on a shrinking core. A shrinking group of workers generates the income, taxes, and innovation that support a growing number of non-workers. The economy becomes more fragile because labor shocks are concentrated among fewer participants. Capital must increasingly substitute for labor. Labor scarcity raises the return on automation, AI, robotics, and software. The AI bet becomes as much about compensating for workers' absence as simple replacement. Growth increasingly depends on productivity, on not participation. Any [productivity] miss will be much more consequential than in the past, given that labor no longer picks up the slack.

Takeaways by Macro Roundup® AI

  1. Falling labor force participation leaves a shrinking core of workers generating the income, taxes, and innovation that support a growing number of non-workers, and makes the economy more fragile because labor shocks are concentrated among fewer participants.
  2. As more voters experience the economy as consumers, retirees, or rentiers rather than workers, political incentives shift around wages, immigration, AI, taxation, and redistribution.
  3. Labor scarcity raises the return on automation, AI, robotics, and software, making the AI bet as much about compensating for workers' absence as replacing them, with growth depending on productivity rather than participation and any productivity miss more consequential than in the past.

Related Articles:

  • Baby Busts and Growth Booms: Demographic Change and the Macroeconomy — A 1pp lower birth rate 20 years earlier is associated with 22 log points higher output per worker 20 years later and 29 log points higher after 40 years, about 0.73pp faster annual growth. The authors find lower birth rates are also associated with more labor-saving patents, larger high-tech shares, and higher productivity growth.
  • Have We Entered an Era of High Productivity Growth? — Labor productivity has grown solidly while the San Francisco Federal Reserve's total factor productivity index, which adjusts for the equipment and technology workers use, has grown modestly, suggesting gains so far reflect better tools rather than broader advances. A regime-switching model puts the probability of a high-productivity regime at 57% using labor productivity and 21% using total factor productivity.
  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.

AI Summary. Gallup polling shows the share of Democrats who are extremely proud to be American has fallen from an average of 58% to 14%. Republicans report higher pride overall, but their responses also shift with which party holds the presidency, ranging from an average of 79% down to 60% and back to 74%.

Eli McKown-Dawson and Nate Silver Silver Bulletin
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Gallup finds only 17% of Democrats are “extremely proud” to be an American, versus 30% of independents and 74% of Republicans – notable declines from 2005–2009, when 58% of Democrats/independents and 79% of Republicans were “extremely proud” to be an American.

Has American pride declined and shifted with the ruling party?

Core argument: The share of Democrats extremely proud to be American fell from an average of 58% during George W. Bush's second term to 30% during Trump's first term and 14% in the most recent Gallup poll.

During George W. Bush’s second term, an average of 58% of Democrats were extremely proud to be American according to Gallup, as was an identical share of independents — though Republicans were higher. The rough parity between Democrats and independents lasted through Barack Obama’s second term, but the share of extremely proud Democrats fell to an average of 30% during Trump’s first term and was just 14% in the most recent Gallup poll. Although Republicans are generally more patriotic, their opinions can shift based on who occupies 1600 Pennsylvania Avenue too. The share of Republicans extremely proud to be American fell from 79% on average during Bush’s second term to 60% during Biden’s term. What happened after Trump retook office? It jumped right back up to 74%.

Takeaways by Macro Roundup® AI

  1. The share of Democrats extremely proud to be American fell from an average of 58% during George W. Bush's second term to 30% during Trump's first term and 14% in the most recent Gallup poll.
  2. Republicans extremely proud to be American averaged 79% during Bush's second term, fell to 60% during Biden's term, and rebounded to 74% after Trump retook office, according to Gallup.
  3. Gallup found Democrats and independents at an identical 58% extremely proud to be American during Bush's second term, with that rough parity lasting through Obama's second term.

Related Articles:

  • Zero-Sum Thinking and the Roots of US Political Differences — The authors construct an index of "zero-sum thinking" — the belief that one group's economic gains come at another's expense across ethnic groups, citizens versus non-citizens, and countries in international trade. Among both moderate and strong Democrats, those in the top quartile of zero-sum thinking voted for Donald Trump at a disproportionately high rate.
  • A Note on Factors Influencing Trust in Government — Using survey data for 34 OECD countries, the authors estimate that higher real income per capita, social spending, decentralization, and economic freedom raise trust in government, while inflation, unemployment, debt per capita, human capital, and a larger elderly population share lower it. Their estimates place a heavier weight on inflation than unemployment.
  • Life Under Two: Debt, Deficits, and the AI Discontinuity — The United States averaged annual GDP growth above 3% for decades, but 2% or less is now more likely. Over ten years, the author estimates that gap amounts to a $3.36tn larger economy, $3.7tn more tax revenue, and 6m more jobs, shifting public psychology from abundance toward scarcity.

Thursday, July 9, 2026

AI Summary. Across 22 countries, the gap between women's and men's daily hours of housework and caregiving is strongly correlated with lower total fertility rates. Countries that modernized rapidly show larger gender gaps in home work and lower fertility than those with more continuous economic growth since 1920.

Claudia Goldin National Bureau of Economic Research
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Goldin puts forth a “mismatch” theory of low fertility in countries that moved from stagnation to rapid growth such as Japan and southern Europe. “These countries have an excess number of unpaid hours worked by women. They also have lower birth rates.”

Do larger gender gaps in housework correspond with lower fertility?

Core argument: Across 22 nations, the correlation between total fertility rate and the gender difference in household and care hours is strong, with larger female excess burdens at home accompanying lower fertility.

Group 1 nations had fairly steady increases in economic growth across the long period from 1920 to 2022. Group 2 nations did not. Men in these currently developed countries that modernized rapidly do considerably less housework and care for others in their homes, relative to women, than do men in countries that had more continuous growth experiences. That fact can be seen in Figure 12, which provides data for 22 nations on women’s excess burdens at home. On the horizontal axis is the difference in household and care hours per day done by the average woman minus that done by the average man. On the vertical axis is the total fertility rate. All six Group 1 nations are in the upper left of Figure 12, with higher fertility and lower time differences between the genders. All six Group 2 nations are in the lower right, with lower fertility and higher time differences between the genders. The difference in hours of house- and care-work for Japan, for example, is 3.1 hours and is 3 hours for Italy. Their TFRs (in 2019) were 1.36 and 1.27 respectively. But the hours difference was 0.8 for Sweden and 0.9 for Denmark. Their TFRs (in 2019) were both 1.7. The correlation between the country’s TFR and the gender difference in household and caring hours is strong.

Takeaways by Macro Roundup® AI

  1. Across 22 nations, the correlation between total fertility rate and the gender difference in household and care hours is strong, with larger female excess burdens at home accompanying lower fertility.
  2. Japan and Italy show gender gaps of 3.1 and 3 hours per day in house- and care-work with 2019 total fertility rates of 1.36 and 1.27, while Sweden and Denmark show gaps of 0.8 and 0.9 hours with rates of 1.7 each.
  3. The six Group 1 nations, with fairly steady economic growth from 1920 to 2022, cluster at higher fertility and smaller gender time differences, while the six rapidly modernizing Group 2 nations cluster at lower fertility and larger differences.

Related Articles:

  • The Downside of Fertility — In developed countries that modernized very rapidly, men do considerably less housework and care for others at home relative to women than in countries with more continuous growth. Larger gender gaps in household and caring hours are strongly correlated with lower fertility rates across these countries.
  • The Demographic Future of Humanity: Facts and Consequences — The authors estimate the world total fertility rate is around 2.17, below the global replacement rate of roughly 2.21, meaning humanity is already below replacement, with fertility and births falling faster than anticipated. They project middle-income countries' fertility may fall below that of rich countries outside East Asia, with emigration compounding population decline.
  • Babies and the Macroeconomy — Fertility rates have fallen in nearly every country, but timing differed: some developed nations fell below the 2.1 replacement level as early as the 1970s, while others dropped to "lowest low" levels below 1.3. The author argues nations with rapid, discontinuous growth saw sharper declines as women's expectations outpaced tradition-bound men's willingness to share family time.

AI Summary. If artificial intelligence profits arrive later than expected, committed capital spending and depreciation would still hit on schedule, squeezing margins, stretching balance sheets toward more debt and possible ratings downgrades, and repricing equities. Because a handful of large technology firms dominate the indices, the author argues the damage would spread to chips, power, data centers and the broader market.

Torsten Sløk Apollo
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Noting that falling token prices and ground-gaining Chinese open source models put the hyperscalers’ free cash flow projections at risk, Slok suggests that the lower payoff to the data center buildout would risk “tipping the economy into recession.”

What happens to markets and the economy if AI profits arrive later?

Core argument: A slower-than-expected AI payoff would push the projected free cash flow surge later while committed capital expenditure and heavy depreciation hit on schedule, squeezing margins and marking down forecasts.

What are the consequences if the AI payoff comes slower than expected? 1) Cash flows and earnings disappoint: the projected free cash flow surge slips later while committed capex and heavy depreciation hit on schedule, squeezing margins and marking down [forecasts]. 2) A Mag 7 sell-off that takes the market with it: equity prices built on a fast payoff re-rate, and because the Magnificent 7 now account for so much of the indices, the pain can't stay contained, it spreads to chips, power, data centers and the S&P 500 as a whole. 3) Balance sheets stretch and credit risk rises: with internal cash unable to cover spending, hyperscalers lean further on debt, raising leverage and inviting possible ratings downgrades if profits lag. The bottom line is that AI has been the one thing holding up both the economy and markets, and with so much riding on so few names, a slower payoff wouldn't just be a sector problem, it would risk tipping the economy into recession and the S&P 500 into a correction.

Takeaways by Macro Roundup® AI

  1. A slower-than-expected AI payoff would push the projected free cash flow surge later while committed capital expenditure and heavy depreciation hit on schedule, squeezing margins and marking down forecasts.
  2. Because the Magnificent 7 account for so much of the indices, a re-rating of equity prices built on a fast AI payoff would spread to chips, power, data centers and the S&P 500 as a whole.
  3. Hyperscalers whose internal cash cannot cover spending would lean further on debt, raising leverage and inviting possible ratings downgrades if profits lag, with a slower payoff risking recession and an S&P 500 correction.

Related Articles:

  • AI: The ROI Runway Could Be Long Outside the Tech Sector — AI company valuations rest on the assumption that profit margins across non-tech firms will eventually rise, but outside a handful of sectors adoption is slow, creating a divergence between front-loaded valuations and slower cash flows. If the per-use costs of AI models converge toward zero, revenue may be insufficient for all major cloud providers.
  • The State of the AI Economy — An analysis estimates the AI ecosystem generated $110bn in revenue over 12 months excluding double-counting, with the most recent month annualizing to a $175bn run rate. After separating AI-specific capital spending from the roughly $120bn hyperscalers already spent annually and depreciating compute over 6 years, revenues attributable to hyperscalers roughly cover depreciation.
  • Why .400 Hitters Disappeared — and What It Means for AI — Artificial intelligence models' capability gains are shrinking in percentage terms, falling from about 15% relative to the baseline early on to roughly 10% for the same absolute increment, narrowing the gap between frontier and good-enough models. The author argues this points to a commoditizing market where price, not minor model differences, becomes the main differentiator, pressuring frontier firms' margins.

AI Summary. Chinese officials have discussed with domestic AI labs how to safeguard their most powerful models' proprietary technology, out of concern that sharing it could aid adversaries and be weaponized against China. Models from Chinese companies such as DeepSeek and Moonshot AI are widely used by US firms as a cheaper alternative to OpenAI and Anthropic.

Raffaele Huang and Tina Li Wall Street Journal
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Beijing is considering export controls on its open-source LLMs, fearing “they may ultimately get weaponized against China.” This marks a sea-change, as until recently China promoted its models world-wide as a form of “soft power.”

Will China restrict open access to its most powerful AI models?

Core argument: Chinese officials have held discussions with domestic AI labs producing the country's most powerful models about safeguarding their proprietary technology, according to people familiar with the matter.

Across Silicon Valley, models made by Chinese companies such as DeepSeek and Moonshot AI have become core to daily work at companies large and small, offering a less costly alternative and supplement to the products of OpenAI and Anthropic. Chinese officials have recently held discussions with domestic AI labs that produce the country’s most powerful models about how to safeguard their valuable proprietary technology, according to people familiar with the matter. Beijing is concerned that sharing some of this technology could help adversaries or other malicious actors and ultimately get weaponized against China, the people said. Until recently, Beijing wanted to encourage the rapid spread of Chinese AI models globally, believing this represented a form of Chinese soft power.

Takeaways by Macro Roundup® AI

  1. Chinese officials have held discussions with domestic AI labs producing the country's most powerful models about safeguarding their proprietary technology, according to people familiar with the matter.
  2. Beijing is concerned that sharing some Chinese AI technology could help adversaries or other malicious actors and ultimately be weaponized against China, according to people familiar with the matter.
  3. Models from Chinese companies including DeepSeek and Moonshot AI have become core to daily work at Silicon Valley firms large and small, serving as a less costly alternative and supplement to OpenAI and Anthropic products.

Related Articles:

  • Semiquincententacles — Leading artificial-intelligence labs are moving to usage-based token pricing on a cost-plus basis that includes total ownership costs, pushing token prices higher and giving some enterprises reason to migrate to cheaper open models. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, where maximum performance is required.
  • Why .400 Hitters Disappeared — and What It Means for AI — Artificial intelligence models' capability gains are shrinking in percentage terms, falling from about 15% relative to the baseline early on to roughly 10% for the same absolute increment, narrowing the gap between frontier and good-enough models. The author argues this points to a commoditizing market where price, not minor model differences, becomes the main differentiator, pressuring frontier firms' margins.
  • The AI Trade Is Losing One of Its Key Signals — An index blending artificial intelligence token prices and usage is ambiguous when it softens, since token prices have fallen more than 90% since 2023 while total spending has roughly doubled over the past year. Allianz Research measures a nearly 46% growth gap between artificial intelligence investment and sales, wider than the 32% divergence during the 2001 telecom bust.

AI Summary. Just under half of Americans say capitalism is working very or somewhat well, down from 60% about a decade ago, according to a Wall Street Journal-NORC survey. Only 12% say democracy is working very or extremely well, and 16% say average citizens have considerable influence on politics.

Aaron Zitner Wall Street Journal
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A new WSJ poll finds only 35% of Americans think the assertion that “if you work hard, you’ll get ahead” still holds. Only 42% of respondents aged 18–34 think capitalism is working very or somewhat well, relative to 56% of those 65 or older.

Has American confidence in capitalism and democracy declined?

Core argument: Just under half of Americans say capitalism is working very or somewhat well, down from 60% about a decade ago, according to a Wall Street Journal-NORC survey.

Americans are losing confidence in two main pillars of society: capitalism and democracy. Just under half of Americans say capitalism is working very well or even somewhat well, down from 60% who said so about a decade ago, according to a new Wall Street Journal-NORC survey. Only 35% are even fairly sure that the nation offers people the ability to get good jobs and achieve the American dream. Confidence in the nation’s system of government is even lower. Only 12% say democracy is working very well or extremely well, and a mere 16% say average citizens have considerable influence on politics. Two-thirds of Republicans said they were very proud of American history, three times the share of Democrats who said so. And Republicans in the survey stood apart in their belief in American exceptionalism, the long-held idea that the U.S. is unique or superior among nations. Nearly half of Republicans said that America stands above all other countries in the world, compared with only 8% of Democrats and 13% of independents.

Takeaways by Macro Roundup® AI

  1. Just under half of Americans say capitalism is working very or somewhat well, down from 60% about a decade ago, according to a Wall Street Journal-NORC survey.
  2. Only 12% of Americans say democracy is working very or extremely well, 16% say average citizens have considerable influence on politics, and 35% are fairly sure the nation offers good jobs and the American dream.
  3. Two-thirds of Republicans said they were very proud of American history, three times the Democratic share, and nearly half said America stands above all other countries, compared with 8% of Democrats and 13% of independents.

Related Articles:

  • Life Under Two: Debt, Deficits, and the AI Discontinuity — The United States averaged annual GDP growth above 3% for decades, but 2% or less is now more likely. Over ten years, the author estimates that gap amounts to a $3.36tn larger economy, $3.7tn more tax revenue, and 6m more jobs, shifting public psychology from abundance toward scarcity.
  • Zero-Sum Thinking and the Roots of US Political Differences — The authors construct an index of "zero-sum thinking" — the belief that one group's economic gains come at another's expense across ethnic groups, citizens versus non-citizens, and countries in international trade. Among both moderate and strong Democrats, those in the top quartile of zero-sum thinking voted for Donald Trump at a disproportionately high rate.
  • Political Representation Gaps and Populism — A study comparing survey responses of citizens and parliamentarians across 27 European countries finds that policymaking reflects voters' economic attitudes well, but the average parliamentarian is about one standard deviation more culturally liberal than the national mean voter. The author finds this cultural gap spans nearly all issues, countries, and established parties, and that right-wing populists fill it.

AI Summary. Germany has reached an agreement with the United States to purchase American Tomahawk cruise missiles, part of an effort to strengthen its deterrence against Russia after Washington dropped plans to station a Tomahawk-equipped battalion in Germany. Europe has no immediately available ground-launched long-range missile systems.

Aysun Bora and Anne-Sylvaine Chassany Financial Times
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Berlin has struck a deal with Washington to buy Tomahawk cruise missiles. No timeline for delivery was announced; as American production capacity remains strained.

Is Germany buying US cruise missiles to strengthen deterrence against Russia?

Core argument: Germany has struck a deal with Washington to buy US Tomahawk cruise missiles, Chancellor Friedrich Merz says, capping months-long efforts to strengthen German deterrence against Russia after the US scrapped plans to deploy a Tomahawk-equipped battalion in Germany.

Berlin has struck a deal with Washington to buy American Tomahawk cruise missiles, capping months-long efforts to improve its deterrence against Russia after the US scrapped plans to deploy a battalion equipped with the weapons in Germany. Europe currently has no immediately available ground-launched long-range systems. The UK has submarine-launched Tomahawks, which have a range of 1,600km, and France has deployed a domestically built cruise missile with a range of 1,000km on its submarines. The German government sought to persuade the Trump administration to sell the Tomahawks together with their Typhon ground launchers, according to people with knowledge of their strategy. Berlin had initially made a request a year ago, left unanswered.

Takeaways by Macro Roundup® AI

  1. Germany has struck a deal with Washington to buy US Tomahawk cruise missiles, Chancellor Friedrich Merz says, capping months-long efforts to strengthen German deterrence against Russia after the US scrapped plans to deploy a Tomahawk-equipped battalion in Germany.
  2. Europe has no immediately available ground-launched long-range systems, with the UK relying on submarine-launched Tomahawks with a 1,600km range and France on a domestically built submarine-launched cruise missile with a 1,000km range.
  3. Berlin sought to persuade the Trump administration to sell the Tomahawks together with their Typhon ground launchers, according to people with knowledge of the strategy, after an initial German request a year ago went unanswered.

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