“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“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
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences 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
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“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 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
“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

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Industrial Policy and Economic Security

Chris Miller Chris Miller's Newsletter

Date Posted:: October 27, 2025

Chris Miller asks, “How much inefficiency should we swallow in exchange for the security of self-sufficiency?” He argues it’s “a tricky calculation” as “security gains are probabilistic” and “long-term economic costs are highly speculative.”

The study of international economics clearly needs to take geopolitical competition more seriously. But scholars and practitioners of economic statecraft also need more focus on what economists call “willingness to pay.” How much inefficiency should we tolerate for the sake of geopolitical resilience? The answer isn’t infinite—costs incurred today make us poorer and therefore less capable of mustering power in the future. So how much inefficiency should we swallow in exchange for the security of self-sufficiency? It's a tricky calculation, because security gains are probabilistic (how likely is an adversary to test our reliance on products from abroad?) and because the long-term economic costs are highly speculative. I’m a believer that, like in 1933, there was a strong case for rebalancing economic and security concerns in favor of the latter. In 1933, the Western powers were far delayed in their rearmament and far too willing to transfer technology and industrial capacity to obviously adversarial powers. But that concern must be balanced against the downsides. Being the world’s richest and most productive economy is a key input to our security, too.

Takeaways by Macro Roundup^® AI

International economics must take geopolitical competition more seriously while also applying "willingness to pay" analysis to determine how much inefficiency is worth tolerating for geopolitical resilience.
Tolerance for inefficiency in pursuit of self-sufficiency is not infinite, because costs incurred today make a country poorer and therefore less capable of mustering power in the future.
The calculation is difficult because security gains from reduced foreign reliance are probabilistic, depending on whether an adversary tests that reliance, while long-term economic costs are highly speculative.

Defense Spending: Macroeconomic Consequences and Trade-Offs

Hippolyte Balima, Jared Bebee, Colombe Ladreit, Andresa Lagerborg, et al. International Monetary Fund

Date Posted:: April 8, 2026
Is Database:: Database

An IMF report notes defense spending booms are associated with an increase in TFP “over longer horizons, consistent with evidence showing that the R&D component of defense spending can boost innovation and crowd in private R&D spending.”

Defense spending booms [periods when the two-year moving average of defense spending increases 1pp of GDP] in peacetime are followed by a sizable increase in real GDP and by a short-lived rise in inflation. Consistent with a large share of the stimulus being allocated to personnel and operating expenses, government consumption rises by about 9% within three years. Total investment shows a comparable positive response, reflecting both higher public investment in defense equipment and infrastructure and increased private investment, particularly in defense-related industries. Turning to the external sector, stimulus-driven demand leads to wider external imbalances, as both the current account and trade balance deteriorate. Imports accelerate—reflecting leakages from defense spending and stronger demand for foreign goods—while exports remain broadly unchanged. Defense spending booms are associated with a subsequent increase in the stock of capital, in line with the documented boost to investment, and an increase in total factor productivity, which may be explained by changes in capacity utilization and learning by necessity, as firms adapt to surging demand by improving productivity when facing capacity constraints. Total factor productivity [loses] its statistical significance once capacity utilization is controlled for. However, defense spending booms are followed by greater total factor productivity over longer horizons, consistent with evidence showing that the R&D component of defense spending can boost innovation and crowd in private R&D spending.

Takeaways by Macro Roundup^® AI

Peacetime defense spending booms, defined as a 1pp of GDP rise in the two-year moving average of defense spending, are followed by a sizable increase in real GDP, a short-lived rise in inflation, and a roughly 9% increase in government consumption within three years.
Defense spending booms widen external imbalances, with both the current account and trade balance deteriorating as imports accelerate on leakages from defense spending and stronger demand for foreign goods while exports remain broadly unchanged.
Defense spending booms are associated with a subsequent increase in the capital stock and in total factor productivity, though the productivity effect loses statistical significance once capacity utilization is controlled for, while greater total factor productivity follows over longer horizons.

The Cold War and the U.S. Labor Market

Ilyana Kuziemko, Donato Onorato and Suresh Naidu National Bureau of Economic Research

Date Posted:: March 31, 2026
Is Database:: Database

Defense spending played a major role in sustaining tight labor markets for low-skill workers following the Second World War. Drops in procurement spending between the 1950s and the 1990s explain between 18 and 30% of the decline in manufacturing employment.

We have shown that in the decades immediately following World War II, the Cold War was a major factor sustaining tight labor markets. On the labor demand side, military procurement increased demand for manufacturing workers and put downward pressure on the share of income flowing to the richest households. We can explain roughly between 18 and 30% of the decline in manufacturing and just under ten percent of the rise in top-ten inequality by the 1950s to 1990s decline in procurement spending. We thus conclude that Cold War procurement—while under-studied in the modern, quantitative economics literature on inequality—played a major role in sustaining tight labor markets for low-skill workers in the decades immediately after World War II and creating political coalitions in support of hawkish foreign policy and military expenditure. Figure 8 panel (a) shows that manufacturing employment is highly sensitive to defense spending, consistent with our state-year evidence. As is well known, manufacturing booms during World War II, but, less discussed, plummets in the years between World War II and Korea. After bouncing back during Korea, it slowly declines alongside the declining defense share of GDP until both series experience an uptick during Vietnam. Overall, the relationship remains highly significant even after taking out a linear time trend and dropping the World War II period.

Takeaways by Macro Roundup^® AI

The authors estimate the 1950s–1990s decline in U.S. military procurement spending explains roughly 18–30% of the decline in manufacturing and just under 10% of the rise in top-ten inequality.
The authors conclude that Cold War military procurement raised demand for manufacturing workers, pressured the share of income flowing to the richest households downward, and sustained tight labor markets for low-skill workers after World War II.
U.S. manufacturing employment booms in World War II, plummets before Korea, rebounds during Korea, then declines alongside the defense share of GDP until an uptick during Vietnam, a relationship that remains highly significant after removing a linear time trend.

The First 36 Hours of War Consumed Over 3,000 U.S.-Israeli Munitions

Macdonald Amoah, Morgan Bazilian, and Jahara Matisek Foreign Policy

Date Posted:: March 6, 2026
Is Database:: Database

A Colorado School of Mines analysis of the munitions used in the first 36 hours of the war estimates the “mineral bill” and highlights the current and target timelines to replenish these systems, noting critical minerals “cannot be surged.”

Beyond the sheer volume of munitions, the loss of high-value assets introduces another layer of complexity. The destruction of two advanced U.S. radars, the AN/FPS-132 in Qatar and the AN/TPS-59 in Bahrain, highlights a problem where the total weight of the “mineral bill” is less of a concern than the extreme fragility of the supply chain and the extensive timelines for replacement. Per our analysis, for the AN/FPS-132, it will take five to eight years for Raytheon to build a new radar at a cost of $1.1 billion. Meanwhile, Lockheed Martin will require at least 12 to 24 months and an estimated $50 million to $75 million to replace the AN/TPS-59, based on the original Bahrain Foreign Military Sales contract adjusted for inflation. The biggest issue for the defense industrial base will be sourcing the 77.3 kilograms of gallium needed for both systems, a material for which China controls 98% of the global supply. This is not to mention the 30,610 kilograms of copper that will also be needed, a commodity facing surging demand from the technology sector.

Takeaways by Macro Roundup^® AI

The first 36 hours of the war consumed over 3,000 U.S.-Israeli munitions, and two advanced U.S. radars were destroyed: the AN/FPS-132 in Qatar and the AN/TPS-59 in Bahrain.
By the authors' analysis, replacing the AN/FPS-132 will take Raytheon five to eight years at a cost of $1.1 billion, while Lockheed Martin needs at least 12 to 24 months and an estimated $50 million to $75 million for the AN/TPS-59.
Sourcing the 77.3 kilograms of gallium needed for both radars is, by the authors' assessment, the biggest issue for the defense industrial base, since China controls 98% of global supply; the systems also require 30,610 kilograms of copper.

How Russia’s Fatalities Compare With Ukraine’s

Economist Staff The Economist

Date Posted:: February 25, 2026
Is Database:: Database

The Economist estimates one in 25 Russian men btw the ages of 18 and 49 have been killed or wounded in Ukraine since 2022. CSIS estimates Ukrainian casualties at one in 16. Russian losses are escalating; today it is “losing more men than it can recruit.”

Our model suggests that Russian casualties are now between 1.1m and 1.4m, of whom 230,000-430,000 are dead. That would mean one in 25 Russian men between the ages of 18 and 49 may have been killed or severely wounded since the start of the full-scale war. There are too few reliable estimates of Ukrainian deaths to construct a similar meta-estimate. One single estimate, published on January 27th by CSIS, a think-tank, put total Ukrainian casualties at 600,000 as of December, including 100,000-140,000 dead. Though much lower than Russia’s casualties in absolute terms, as a share of its population it is higher—equivalent to about one in 16 Ukrainian men aged 18-49 before the war. These figures exclude civilian deaths, for which reliable data are scarcer still. Ukrainian losses appeared heaviest early in the war: American officials estimated that 70,000 soldiers had already been killed by August 2023. Russia’s campaign, by contrast, has only grown bloodier. Some estimates suggest that it is now losing roughly 1,000 soldiers a day. Our modelling shows that as many may have died in the past year as in the first three combined. It is losing more men than it can recruit.

Takeaways by Macro Roundup^® AI

The Economist's model puts Russian casualties at 1.1m–1.4m, including 230,000–430,000 dead, implying that one in 25 Russian men aged 18–49 may have been killed or severely wounded since the full-scale war began.
CSIS estimated total Ukrainian casualties at 600,000 as of December, including 100,000–140,000 dead, a lower absolute figure than Russia's but a higher share of population, equivalent to about one in 16 prewar Ukrainian men aged 18–49.
Some estimates put Russia's losses at roughly 1,000 soldiers a day, and The Economist's modelling suggests as many may have died in the past year as in the first three combined, more men than Russia can recruit.

Drones Are Key to Winning Wars Now. The U.S. Makes Hardly Any.

Farah Stockman New York Times

Date Posted:: July 14, 2025
Is Database:: Database
Is Important:: Important

China’s DJI can manufacture millions of drones a year; about 500 American drone manufacturers are collectively building fewer than 100,000 drones annually.

DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial use, such as aerial photography, package delivery and weather research. The company declined to share market data, but industry experts estimate that DJI’s output far exceeds that of any other drone manufacturer. “No one even comes close,” said Bobby Sakaki, chief executive of UAS NEXUS, a drone industry consultant. “DJI can make millions of drones per year. That is a hundred times more than anybody in the United States can make.” About 500 companies manufacture drones in the United States, producing fewer than 100,000 a year, according to Ryan Carver, communications manager for the Association for Uncrewed Vehicle Systems International, a nonprofit organization of industry professionals.

Takeaways by Macro Roundup^® AI

DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial uses such as aerial photography, package delivery and weather research, with industry experts estimating its output far exceeds that of any other drone manufacturer.
About 500 U.S. companies manufacture drones and together produce fewer than 100,000 a year, according to Ryan Carver of the Association for Uncrewed Vehicle Systems International.
Bobby Sakaki, chief executive of drone industry consultant UAS NEXUS, says DJI can make millions of drones per year, a hundred times more than any manufacturer in the United States can make.

Germany Backs Donald Trump Goal For Nato To Spend 5% Of GDP On Defence

Anne-Sylvaine Chassany and John Paul Rathbone Financial Times

Date Posted:: May 15, 2025
Is Database:: Database

Germany will aim to raise spending on defense to 5% of GDP by 2032 by increasing “hard military spending” from this year’s 2% to 3.5%, while adding 1.5% of GDP of “related spending, including infrastructure and cyber security.”

Speaking at a meeting in Antalya on Thursday, German foreign minister Johann Wadephul said Berlin was “following” Trump on his demand that Nato allies reach a 5% goal. Currently the alliance has a 2% spending target. Wadephul also signalled that the way the country would meet the target would be by embracing a proposal by Nato secretary-general Mark Rutte. The Dutchman has called for Nato members to reach 3.5% of GDP on “hard military spending” by 2032, to which he has suggested adding 1.5% of GDP on “related spending” including infrastructure and cyber security.

Takeaways by Macro Roundup^® AI

German foreign minister Johann Wadephul said in Antalya that Berlin is "following" Donald Trump's demand that NATO allies spend 5% of GDP on defence, up from the alliance's current 2% target.
NATO secretary-general Mark Rutte has called for members to reach 3.5% of GDP on "hard military spending" by 2032, and has suggested adding 1.5% of GDP on "related spending" including infrastructure and cyber security.
Wadephul signalled that Germany would meet the 5% goal by embracing Rutte's proposal.

Chris Miller asks, “How much inefficiency should we swallow in exchange for the security of self-sufficiency?” He argues it’s “a tricky calculation” as “security gains are probabilistic” and “long-term economic costs are highly speculative.”

How much economic inefficiency should national security justify?

Takeaways by Macro Roundup® AI

Related Articles:

An IMF report notes defense spending booms are associated with an increase in TFP “over longer horizons, consistent with evidence showing that the R&D component of defense spending can boost innovation and crowd in private R&D spending.”

How do defense spending booms affect output, inflation, and productivity?

Takeaways by Macro Roundup® AI

Related Articles:

Defense spending played a major role in sustaining tight labor markets for low-skill workers following the Second World War. Drops in procurement spending between the 1950s and the 1990s explain between 18 and 30% of the decline in manufacturing employment.

How much did falling military procurement drive manufacturing decline and inequality?

Takeaways by Macro Roundup® AI

Related Articles:

A Colorado School of Mines analysis of the munitions used in the first 36 hours of the war estimates the “mineral bill” and highlights the current and target timelines to replenish these systems, noting critical minerals “cannot be surged.”

Do replacement timelines constrain radar rebuilding more than materials cost?

Takeaways by Macro Roundup® AI

Related Articles:

The Economist estimates one in 25 Russian men btw the ages of 18 and 49 have been killed or wounded in Ukraine since 2022. CSIS estimates Ukrainian casualties at one in 16. Russian losses are escalating; today it is “losing more men than it can recruit.”

How do Russian and Ukrainian war casualties compare?

Takeaways by Macro Roundup® AI

Related Articles:

China’s DJI can manufacture millions of drones a year; about 500 American drone manufacturers are collectively building fewer than 100,000 drones annually.

Does China outproduce the US in drone manufacturing?

Takeaways by Macro Roundup® AI

Related Articles:

Germany will aim to raise spending on defense to 5% of GDP by 2032 by increasing “hard military spending” from this year’s 2% to 3.5%, while adding 1.5% of GDP of “related spending, including infrastructure and cyber security.”

Will Germany back a higher NATO defence spending target?

Takeaways by Macro Roundup® AI

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