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
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “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
  • “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 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
Upside of Inequality Oxford Unintended Consequences

AI Summary. As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.

Paul Kedrosky Applied Complexity
Date Posted:
Is Database:
Database
Is Important:
Important

.@pkedrosky argues that the historical relationship between labor markets and wages is being severed by automation. “Our economic frameworks are increasingly misaligned with the realities of an automated economy.”

Does automation weaken the link between tight labor markets and inflation?

Core argument: Robots and AI break the link between wage pressures and inflation, leaving wages less responsive to employment changes and tight labor markets generating weaker inflationary pressure.

As wages in an increasingly AI-economy become less responsive to employment changes, the inflationary pressures that would traditionally result from tight labor markets decline. This is largely due to how robots and AIs break the link between wage pressures and inflation. As such, central banks relying on inflation-targeting regimes that depend on this relationship are facing a growing challenge. The effectiveness of monetary policy in such a scenario is questionable, as central banks may find that traditional tools, such as interest rate adjustments, have less impact on inflation and wage dynamics. The implications are immense. Monetary authorities may be forced to implement much larger-than-usual adjustments in interest rates to achieve the desired economic outcomes. To get the same effect as a smaller rate change once did, central banks will need to raise or lower rates far more aggressively. This will lead to more volatile economic conditions, and even less reliable outcomes, as the traditional metrics for evaluating monetary policy’s effectiveness become less reliable.

Takeaways by Macro Roundup® AI

  1. Robots and AI break the link between wage pressures and inflation, leaving wages less responsive to employment changes and tight labor markets generating weaker inflationary pressure.
  2. Central banks using inflation-targeting regimes that depend on the wage–inflation relationship face a growing challenge, as interest rate adjustments may exert less impact on inflation and wage dynamics.
  3. Monetary authorities may need far more aggressive rate increases or cuts to achieve what smaller changes once did, producing more volatile economic conditions and less reliable outcomes.

Related Articles:

  • Assessing the Implications of a Productivity Miracle — If artificial intelligence can perform economically valuable cognitive tasks at very low marginal cost, consumers would buy far more of the cheapened goods and spend the savings in other categories, expanding activity and employment in sectors facing new demand. Where supply is inherently limited, such as real estate, those savings could bid up prices and produce inflation.
  • The AI Transition One Year Later: On Track, but Macro Impact Still Several Years Off — Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.
  • Erik Brynjolfsson: ‘This Could Be The Best Decade in History — Or The Worst’ — Studies of large language models across tasks including software coding, consulting, and writing find double-digit productivity gains appearing within months, with less-skilled workers typically benefiting most. Given the large share of modern work these tools can augment, the author projects US productivity growth near 3% annually in the 2020s, roughly double the Congressional Budget Office's 1.4% projection.
Showing 77 database articles primarily about Innovation/Research