The Economics Thread

[Spark]

I don't think a lack of GDP growth has been a problem for China.

 

[Ikki]

https://www.theguardian.com/news/2017/nov/14/the-fatal-flaw-of-neoliberalism-its-bad-economics

Pretty good summary of the current worldview of academic econ, which I fully agree with. Rodrik is nailed on for a Nobel at some point.

This has to be up there with the other Coates article you posted for biggest pile of dung of the year. The Guardian though so to be expected.

 

[Uppercut]

There are entire ghost town in China, built and never used. So whilst you could accept that their different way of doing things has worked (given they have such a comparative advantage in labour costs over developed nations it's pretty easy) it excludes the fact that such wasteful spending has held back growth rates. Maybe GDP would be growing x% faster a year if left to private enterprise, compound that loss up and within a few decades they are significantly poorer than they should be.

"But maybe they'd have done even better if X" isn't really an interesting argument in the absence of anything empirical. I don't think anyone considers the Chinese model perfect, but none of the countries that actually did liberalise more rapidly performed anywhere near as well as China.

 

[Spark]

"But maybe they'd have done even better if X" isn't really an interesting argument in the absence of anything empirical. I don't think anyone considers the Chinese model perfect, but none of the countries that actually did liberalise more rapidly performed anywhere near as well as China.

Would Japan count as "liberalising"? I guess they had a lot of help.

 

[Uppercut]

Would Japan count as "liberalising"? I guess they had a lot of help.

I don't really know enough about its fascist economy to say, but old-school liberal ideas were desperately unfashionable at the time so I doubt they were applied in Japan.

I'm not so well versed on the Japanese economy but I'm researching+writing a book chapter on its housing bubble next summer so I might give better answers on it after that .

 

[Spark]

I mean from best I can tell its economy consisted of "steal everything not explicitly nailed down in China/SE Asia and maybe stuff that was, conscript as much slave labour as you need to assist in the stealing, and use the plunder to keep the factories in the Home Islands running".

So, y'know, not exactly a free market paradise. On the other hand, not all that different from 19th century Britain or France either (speaking in strictly crude economic terms, that is).

 

[harsh.ag]

There are entire ghost town in China, built and never used. So whilst you could accept that their different way of doing things has worked (given they have such a comparative advantage in labour costs over developed nations it's pretty easy) it excludes the fact that such wasteful spending has held back growth rates. Maybe GDP would be growing x% faster a year if left to private enterprise, compound that loss up and within a few decades they are significantly poorer than they should be.

This isn't true. The news keeps showing ghost towns when they are built, but don't show when they are filled in after a couple of years. The Chinese have been building towns in anticipation from what I can tell.

It's incredible that you don't think that China has done something remarkable wrt poverty reduction within an astoundingly short period of time. Give props where it's due, dude.

 

[Ikki]

China's case is pretty straightforward. They enacted a system of government that made them so poor that once they allowed a semblance of capitalism and trade their economy has started booming, particularly because of those low wage considerations.

 

[Ausage]

Are we just going to ignore that China is a highly repressive regime that imprisons/murders political dissidents, restricts the ability of its citizens to breed, restricts religion/speech etc?

Funny how these abuses always tend to go hand in hand with a "managed" economy.

 

[smalishah84]

Are we just going to ignore that China is a highly repressive regime that imprisons/murders political dissidents, restricts the ability of its citizens to breed, restricts religion/speech etc?

Funny how these abuses always tend to go hand in hand with a "managed" economy.

i think the chinese made very good choices given the conditions that they had. The last 35 years have been nothing short of a miracle. Half a billion people lifted out of poverty in a very short period of time. The freedoms can wait.

 

[straw man]

It was good to see Richard Thaler awarded the Nobel Prize this year, and the growing focus on behavioural economics i.e. how real people make decisions, rather than rewarding simplistic mathematical models that are entirely divorced from observed human behaviour (and are often used to push an agenda). Daniel Kahneman another important behavioural economist recognised back in 2002.

The biggest impediment to behavioural economics would historically have been the difficulty of collecting data from any and all types of human interactions, and then drawing conclusions from said extremely messy data. This is a field that is ripe for the application of machine learning to extract patterns from the many and varied types of data available, on a scale previously only imaginable. Quite similar to what the big tech companies do with their analysis of all data available to them, except with a broader remit than 'sell more things'. Should be huge in coming years.

 

[Uppercut]

Are we just going to ignore that China is a highly repressive regime that imprisons/murders political dissidents, restricts the ability of its citizens to breed, restricts religion/speech etc?

Funny how these abuses always tend to go hand in hand with a "managed" economy.

Yeah like I don’t mean to justify it by not mentioning it. But if you’re going to have a conversation about the determinants of economic growth while stopping to disapprove of every brutalist regime you won’t get very far.

Your second point is sort of inconsistent with Western and Northern Europe... existing? Like there’s literally a whole half-continent of countries with heavily managed, highly successful economies and exceptional levels of political freedom? Like I know I troll about it a lot but it’s a massive, hilarious hole in the crank economics that’s weirdly caught on in this corner of the internet.

 

[Redbacks]

This isn't true. The news keeps showing ghost towns when they are built, but don't show when they are filled in after a couple of years. The Chinese have been building towns in anticipation from what I can tell.

It's incredible that you don't think that China has done something remarkable wrt poverty reduction within an astoundingly short period of time. Give props where it's due, dude.

What, like get out of the way and turn their backs on a policy that killed millions...congrats...

We had engineers/scientists from my previous company in China specifically to deal with the massive problems in their water supply systems in these towns. There is a lack of flow of potable water in the pipes and they are fouling, it's a real thing.

People miss the subtlety of the argument, mal-investment doesn't mean that you completely waste money, rather it's spent in a way that's sub-optimal and leads to waste. We have a feedback mechanism to maximise investments: profit/loss.

If you grow at 3% less than you could, take that path for 25 years: 1.03^25 = 2.09. GDP could be double what it will be through wasteful spending. Would have thought sound economic/social policy was to increase the wealth of your citizens in the quickest way.

 

[Spark]

China's case is pretty straightforward. They enacted a system of government that made them so poor that once they allowed a semblance of capitalism and trade their economy has started booming, particularly because of those low wage considerations.

"Made them so poor" is inaccurate. "Kept them incredibly poor" is more accurate, as they'd been astonishingly dirt-poor for well over a century before Mao rode in.

 

[Ausage]

Yeah like I don’t mean to justify it by not mentioning it. But if you’re going to have a conversation about the determinants of economic growth while stopping to disapprove of every brutalist regime you won’t get very far.

Your second point is sort of inconsistent with Western and Northern Europe... existing? Like there’s literally a whole half-continent of countries with heavily managed, highly successful economies and exceptional levels of political freedom? Like I know I troll about it a lot but it’s a massive, hilarious hole in the crank economics that’s weirdly caught on in this corner of the internet.

It was more directed at the "give props where it's due" sentiment tbh. Not a fan of "yeah but at least they're doing well with the economy" line of argument wrt authoritarian regimes.

Northern Euro economies aren't really "managed" in the same way China's is. Not that cultural factors don't play a part in the level of political freedom but I don't see how you could manage an economy on the scale that China does without having to exert force upon people.

 

[harsh.ag]

Praising their economic performance doesn't mean condoning their entire spectrum of domestic policy. They should be given massive props for such fantastic poverty reduction inside 50 years. People acting like it isn't a massive achievement are pretty one-eyed in my view.

That's not to say there aren't many things wrong with the government. But authoritarian regimes generally tend to get in their own way when it comes to economic progress and they have avoided doing that.

Everyone throws around the Chinese wasteful government spending, but if China hasn't made you question your over-confidence in your thought process, then you haven't been tough enough on your brain.

 

[Ikki]

It was more directed at the "give props where it's due" sentiment tbh. Not a fan of "yeah but at least they're doing well with the economy" line of argument wrt authoritarian regimes.

Northern Euro economies aren't really "managed" in the same way China's is. Not that cultural factors don't play a part in the level of political freedom but I don't see how you could manage an economy on the scale that China does without having to exert force upon people.

The thing is you can have capitalism in a dictatorship, it isn't a form of government. As Friedman often said, capitalism necessitates freedom but in and of itself it does not suffice to bring freedom about, which encapsulates a lot of political considerations.

"Made them so poor" is inaccurate. "Kept them incredibly poor" is more accurate, as they'd been astonishingly dirt-poor for well over a century before Mao rode in.

I've read articles re the Republican period of China being beneficial (more open) before Mao helped bring it down. To China's credit they've been pragmatic about it in many ways, but it could be definitely improved upon.

Praising their economic performance doesn't mean condoning their entire spectrum of domestic policy. They should be given massive props for such fantastic poverty reduction inside 50 years. People acting like it isn't a massive achievement are pretty one-eyed in my view.

That's not to say there aren't many things wrong with the government. But authoritarian regimes generally tend to get in their own way when it comes to economic progress and they have avoided doing that.

Everyone throws around the Chinese wasteful government spending, but if China hasn't made you question your over-confidence in your thought process, then you haven't been tough enough on your brain.

They're still getting their way. They're just opening up the tap slowly, so to speak. China's success is really a refutation of their self-inflicted system and their begrudging moves and engagement of freer economic policies should be used to credit those thoughts. Not some bastardised version of it they're clinging on to for power. It goes to show you how quick and wide-ranging capitalism and trade can be for economic wealth and prosperity in a society.

What, like get out of the way and turn their backs on a policy that killed millions...congrats...

We had engineers/scientists from my previous company in China specifically to deal with the massive problems in their water supply systems in these towns. There is a lack of flow of potable water in the pipes and they are fouling, it's a real thing.

People miss the subtlety of the argument, mal-investment doesn't mean that you completely waste money, rather it's spent in a way that's sub-optimal and leads to waste. We have a feedback mechanism to maximise investments: profit/loss.

If you grow at 3% less than you could, take that path for 25 years: 1.03^25 = 2.09. GDP could be double what it will be through wasteful spending. Would have thought sound economic/social policy was to increase the wealth of your citizens in the quickest way.

Excellent post.

 

[Spark]

Yeah I would not say the Republican period of China was particularly prosperous (or indeed stable given the civil war). Certainly it was better than the late imperial period where various European powers basically fleeced the country for fun and caused ungodly amounts of harm (and ditto for the period of Japanese rule) but that's no high bar to clear.

 

[harsh.ag]

They're still getting their way. They're just opening up the tap slowly, so to speak. China's success is really a refutation of their self-inflicted system and their begrudging moves and engagement of freer economic policies should be used to credit those thoughts. Not some bastardised version of it they're clinging on to for power. It goes to show you how quick and wide-ranging capitalism and trade can be for economic wealth and prosperity in a society.

I think you just see what you want to see tbh.

When something bad happens to the economy of country A, you point your finger at the various restrictions they have in place.
When something good happens to the economy of country B, you point your finger at the various restrictions they have lifted, even if they may have far more total number of restrictions than country A.

 

[Ikki]

I think you just see what you want to see tbh.

When something bad happens to the economy of country A, you point your finger at the various restrictions they have in place.
When something good happens to the economy of country B, you point your finger at the various restrictions they have lifted, even if they may have far more total number of restrictions than country A.

The bolded is highly ironic. And you need to be specific. China didn't so much plan on economic freedom - they're communist's FFS - as much as they were compelled towards it. So what they've ended up doing is showing people like myself right. Which is why I said it was ironic as your view is crediting the Chinese government for trying to open up as countries like America did, as if they invented something new. The reason you do this is, obviously, because you come from a statist point of view.

I'm pretty consistent: have free market capitalism and allow trade, and it doesn't matter what you have the more of it you have the better it will be in the long-run. Even in your warped example:

- when something bad happens (contextually, usually because of government interference) it is the government's fault
- so the fact that their government has increasingly gotten out of the way is not their credit

People and their human ingenuity, allowing for the freedom to express itself, will create prosperity.