Edward Conard

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  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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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  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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 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
  • “…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 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
Upside of Inequality Oxford Unintended Consequences

Brad DeLong Grasping Reality
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The gap btw risky & safe interest rates has fluctuated significantly over the past decades, standing at 5.5%-points today, driven by factors such as the end of dot-com exuberance & increased demand for safe assets during the China shock.

The gap between the risky discount rate and the safe interest rate has fluctuated significantly over the past decades, standing at 5.5%-points today compared to 1%-point 20 years ago and 7.5% 40 years ago. This persistent gap often exceeds rational assessments of risk, driven by factors such as the end of dot-com exuberance (1998-2002) and increased demand for safe assets during the China shock (2002-2008). Political and economic risks in emerging markets have further heightened demand for U.S. Treasuries, pushing the equity premium higher. The financial crisis eroded confidence in non-government AAA assets, reinforcing this trend. The current global economy's preference for holding wealth in Global North sovereigns' reserve currencies suggests a need for these governments to increase debt issuance to stabilize the equity return premium at a sensible level, addressing the risk of secular stagnation.

Found Brad DeLong's thoughts on some of his takeaway from Summer's paper on the ERP interesting

"...Economic and finance professors continue to attempt to understand this large equity return premium as somehow reflecting some market-maker somewhere's attitude toward risk. They fail. They will continue to fail. The gap between the risky discount rate and the safe interest rate is5.5%-points today, was 1%-point 20 years ago, was 7.5% 40 years ago, and was 4% 50 years ago.Most of the time since the development of stock markets that were more than grifter cons for insiders 150 years ago, this gap has been vastly in excess of any rational assessment of the extra risk born from investing in a diversified portfolio of stocks rather than in safe government bonds. But sometimes—1998, when the risk associated with investments in stocks was not low but was unusually high—it is not....tempted by the following narrative to account for the past 20 years' moves in the equity return premium:The end of dot-com irrational exuberance that drives the equity premium up from 1998-2002 with no effect on the *safe interest rate. The financial side of the China shock 2002-2008 that greatly increases the demand worldwide for safe assets.Political risks in emerging markets and economic risks of stalling emerging-market growth greatly increased demand for safe assets like U.S. Treasuries: it seems sensible to hold U.S. Treasuries for that portion of your portfolio which will be the only thing left if the balloon goes up and you have to flee your country in the Learjet, or in a rubber boat. This drives the equity premium up further. The financial crisis's destruction of confidence that any organization besides Global North governments is or will be in the business of providing AAA assets eliminated AAA and near-AAA private close substitutes for Treasuries.This drives the equity premium up still further.The natural conclusion I am tempted to draw—which Łukasz Rachel and Lawrence H. Summers do not—isThe world economy today desperately wants to hold its wealth in claims on Global North sovereigns with exorbitant privilege issuing reserve currencies. A well-functioning economy creates things of value. The Global North sovereigns with exorbitant privilege issuing reserve currencies can create a lot of value. They should do so: governments should run up their debts until they satisfy demand with an equity return premium at a value we think is sensible and "normal"...."

Brad DeLong, "On Falling Neutral Real Rates, Fiscal Policy, and the Risk of Secular Stagnation,"Grasping Reality, March 7, 2019, https://www.bradford-delong.com/2019/03/which-interest-rate-on-on-falling-neutral-real-rates-fiscal-policy-and-the-risk-of-secular-stagnation.html

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