Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a 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 is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

AI Summary. The authors estimate that food and especially energy price shocks, along with increased demand for durable goods combined with supply-chain shortages, accounted for much of U.S. pandemic-era inflation, while the contribution of tight labor markets was small or negative early on. They estimate that tight labor-market conditions became an increasingly important, though not dominant, source of inflation over time.

Ben Bernanke and Olivier Blanchard Brookings Institution
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.@benbernanke and @ojblanchard1 argue that bringing the current inflationary episode to target implies an unemployment rate of 4.3%, up from 3.4% last month.

What drove pandemic-era inflation, supply shocks or tight labor markets?

Core argument: The authors' decomposition of U.S. inflation from 2020Q1 to 2023Q1 attributes much of the rise in overall inflation in late 2021 and the first half of 2022, and its decline in the second half of 2022, to energy price shocks, with food price shocks also contributing substantially.

Figure 12 shows the estimated sources of inflation from 2020Q1 to 2023Q1. For comparison, the continuous line shows actual inflation. (The inflation data are quarterly, at annualized rates, and thus more jagged than the annualized series we often see.)  Figure 12 yields several conclusions. First, the contributions of food [light blue] and (especially) energy [dark blue] price shocks to the pandemic-era inflation were large. Energy price shocks in particular account for much of the rise of overall inflation in late 2021 and the first half of 2022, and the for the decline in inflation in the second half of 2022. The large and extended contributions of commodity price shocks to inflation shown in Figure 12 are not inconsistent with our earlier finding that price shocks tend to have transitory effects on inflation, as both energy and food prices rose continuously over much of the period (see Figures 4 and 5), which our procedure interprets as a series of positive shocks. Second, the combination of increased demand for durables and shortages [yellow] associated with disrupted supply chains was the dominant source of inflation in 2021Q2, and the effects of supply chain problems, both direct and indirect, remained significant through the end of our sample period. Third, and importantly, the contribution to inflation of tight labor-market conditions [red] —the leading concern of many early critics of U.S. monetary and fiscal policies—was quite small early on, and indeed was negative in 2020 and early 2021 as labor markets suffered from the effects of the pandemic recession. However, over time, as the labor market has remained tight, the traditional Phillips curve effect has begun to assert itself, with the high vacancy-to-unemployment ratio becoming increasingly important, though by no means dominant, source of inflation.

Takeaways by Macro Roundup® AI

  1. The authors' decomposition of U.S. inflation from 2020Q1 to 2023Q1 attributes much of the rise in overall inflation in late 2021 and the first half of 2022, and its decline in the second half of 2022, to energy price shocks, with food price shocks also contributing substantially.
  2. Increased demand for durables combined with shortages from disrupted supply chains was estimated as the dominant source of inflation in 2021Q2, and supply chain effects, both direct and indirect, remained significant through 2023Q1.
  3. Tight labor-market conditions contributed little to inflation early on and negatively in 2020 and early 2021, with the high vacancy-to-unemployment ratio becoming an increasingly important, though not dominant, source over time.
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