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This edition was written by Elijah Asdourian, Sam Boocker, Lorae Stojanovic, and David Wessel.
Adrien Bilal of Harvard and Diego R. Känzig of Northwestern find that the macroeconomic damages of climate change are larger than previously thought. Previous estimates—which used country-level temperature changes to estimate local economic damages—failed to capture rises in extreme temperatures, wind, and precipitation that come from global warming. The authors estimate a Social Cost of Carbon of $1,056 per ton of carbon dioxide, which is six times higher than the high end of existing estimates. The authors estimate that a 2°C increase in global mean temperature between 2024 and 2100 will produce a welfare loss equivalent to a 31% permanent decline in consumption. “[T]he losses from living in a world with climate change relative to a world without it are comparable to fighting a major war domestically, forever,” the authors conclude.
In the years following the COVID-19 pandemic, return to office policies have become a central issue for employers and employees. Using data on 260 million resumes linked to information at Microsoft, SpaceX, and Apple, David Van Dijcke of the University of Michigan, Florian Gunsilius of Ipsos Public Affairs, and Austin Wright of the University of Chicago find that these companies “faced a significant outflow of employees after implementing a return to office mandate.” Employees with longer tenure at each company left more frequently in response to the mandate, increasing the proportion of employees with just 1 to 3 years of experience. The proportion of employees at the three companies who left for firms that weren’t startups (defined as companies with more than 50 employees) increased against a counterfactual with no return to office mandate, while the proportion that left for startups went down. The authors argue that return to office mandates can lead to a significant loss of human capital for firms, as it causes experienced workers to leave for large competitors.
"[S]ometimes central bank communications can have unintended consequences... First, there is always a risk that policymakers' statements about their economic outlook or their expected future path of the policy rate are interpreted by the public with a false sense of certainty... When that interpretation is proven wrong down the road, it can create more volatility and uncertainty than if there had been no announcement. That is why policymakers always make sure to stress the data dependence of future policy decisions. Second, it's also possible that the public misinterprets the views of individual policymakers as a Committee view. The potential for misinterpretation is especially acute when many policymakers speak at the same time and disagree with each other," says Philip Jefferson, Vice Chair of the Federal Reserve Board of Governors.
"The diversity of viewpoints among policymakers lends itself to stimulating debates and, ultimately, better policy. But in such a situation, more communication could increase rather than reduce uncertainty about our policies. I think we stand to benefit a lot from more research in this area."
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