"It is true that I have been saying for forty years that this problem of combining a Leninist government with a von Hayekian economy is almost surely irresolvable, and hence the China growth miracle has at most ten more years to run. And I admit that I have been wrong for forty years.
But now—I would say that the odds that I am finally right are good."
Bingo! But remember that the Soviet Union, too, grew strongly for a while So, for China, you might have given at least a couple of decades for the Solow model's transitional dynamic to work its way. Now that China's labor force is shrinking and K/L ratio too extended, perhaps beyond the point of diminishing returns, only productivity growth is left. If I may, people should read Paul Krugman's Foreign Affairs article from way back in the 1990s. It is one of the best pieces ever written about how the Solow growth model and growth accounting relates to the world we see. It is time for people to read it again.
Burn-Murdock: Not quite. It's not over emphasis on the future vs present it failure to relate present to past policy, the future to present policy. The first validate the model that today's policy should address.
BTW the past policies are not JUST past failure to tax net CO2 emissions. They are also failures invest in mitigation and to create incentives to do so (public investments guided by cost-benefit analysis, forward looking hazard insurance rates).
"Relevant to the above. A “meritocratic” system is one that matches people to jobs and situations to actions based on rational Bayesian calculations of likely future performance, rather than trusting 100% to noisy proxy measures."
In his waning years, my econometrics professor, G.S. Maddala, who was from India, once said in class, wagging his index finger ever so slightly, "YOU KNOW, BAYESIANS ARE LIKE THE HARRE KRISHNAS; THE MORE YOU BE WITH THEM THE MORE YOU'LL START THINKING LIKE THEM."
Don't know if was reminiscing about his own career or meant it as career counseling. Years later, some of us got together for drinks. One of the guys stood up and repeated that sentence in proper accent. The rest of us fell off the chairs laughing. Even his C+ students remember GS fondly.
In mid- and late-20th century America, ... the mathematical turn of economics...." in large part due to the aggressive seminar culture spreading from Chicago, focused on testing ideas in a blast furnace and also establishing an intellectual pecking-order rather than building a harmonious community."
True. I've seen this. I've seen too much bad behavior in seminar rooms, especially toward grad students.
"But why it then takes the form of aggressive misogyny I do not know: ... The argument that our ticket-punching indicators of “quality” are very noisy, that women face huge headwinds in our profession, and thus that given those headwinds a woman who is at the 95%-ile of “ticket punching” “excellence” is almost surely a better asset to the university than a man who is at the 98%-ile—they are neurologically incapable of allowing that or other arguments that we do not want an intellectual monoculture enter their brains. Hence they are all 100% certain that women as a group are stealing their rightful jobs and keeping them from having the careers they deserve. And every individual woman thus becomes someone to be dissed because she is a participant in this great female conspiracy to do them down. .... Or such is my guess."
Brad, that's a very good guess. I have heard such bad things many, many times.
I'm afraid Paul Krugman may be wrong, mainly due to his focus on the unemployment rate (even if that focus is in the standard textbook). Here's my case: In the labor market, we haven't yet reached the pre-pandemic capacity despite the low unemployment rate. The level of real GDP may have long regained the pre-pandemic level. But about 4 million people left the labor force during the pandemic and much of that has yet to reverse. Yes, retirees may not come back, but that is all the more reason we need more people from other age groups to fill that hole. We are below full capacity from the point of view of the pre-pandemic labor market. For the Fed to have identified a low unemployment rate as a reason for lift off may also be misguided. Unemployment rates can be low due to lower participation, which was true at the time the Fed started increasing rates and is still true now even though the participation rates have improved since then. But make no mistake, we are still not employing the labor force we had before the pandemic. An implication: inflation went up for reasons other than a "tight" labor market or that the labor market had reached "full capacity." Nope. By focusing on the unemployment rate, without taking into account the level of participation, the Taylor rule has done a lot of disservice to monetary policy. A low unemployment rate may have prompted the Fed to raise interest rates, even though the participation rate then was much lower than the pre-pandemic level. Anyone who has seen that the labor force fell by about 4 million since the pandemic and has seen that the labor force participation rate at the time of lift off was still very low compared its pre-pandemic level may have said that the labor market far from the pre-pandemic capacity. So yes, now that people have realized why inflation was transitory, it may be time to also realize that inflation went up not because the labor market had fully recovered, so to speak. The unemployment rate, without looking at the participation rate, will mislead. The Taylor rule needs to be modified or policymakers will continue to make big mistakes.
On his point about the manufacturing sector, I fully agree. But why have the official data been showing weakness in the manufacturing sector? How are these data collected? Could a sample-selection bias have already developed in a big way? New manufacturing facilities may not yet be in the samples, especially of various surveys of the manufacturing sector.
"It is true that I have been saying for forty years that this problem of combining a Leninist government with a von Hayekian economy is almost surely irresolvable, and hence the China growth miracle has at most ten more years to run. And I admit that I have been wrong for forty years.
But now—I would say that the odds that I am finally right are good."
Bingo! But remember that the Soviet Union, too, grew strongly for a while So, for China, you might have given at least a couple of decades for the Solow model's transitional dynamic to work its way. Now that China's labor force is shrinking and K/L ratio too extended, perhaps beyond the point of diminishing returns, only productivity growth is left. If I may, people should read Paul Krugman's Foreign Affairs article from way back in the 1990s. It is one of the best pieces ever written about how the Solow growth model and growth accounting relates to the world we see. It is time for people to read it again.
https://www.foreignaffairs.com/articles/asia/1994-11-01/myth-asias-miracle
Burn-Murdock: Not quite. It's not over emphasis on the future vs present it failure to relate present to past policy, the future to present policy. The first validate the model that today's policy should address.
BTW the past policies are not JUST past failure to tax net CO2 emissions. They are also failures invest in mitigation and to create incentives to do so (public investments guided by cost-benefit analysis, forward looking hazard insurance rates).
In a perfect market, there would have been substantial boosts to asset prices today from such mitigation investments. In a perfect market.
A lighter note, on Bayesian issues, if I may:
"Relevant to the above. A “meritocratic” system is one that matches people to jobs and situations to actions based on rational Bayesian calculations of likely future performance, rather than trusting 100% to noisy proxy measures."
In his waning years, my econometrics professor, G.S. Maddala, who was from India, once said in class, wagging his index finger ever so slightly, "YOU KNOW, BAYESIANS ARE LIKE THE HARRE KRISHNAS; THE MORE YOU BE WITH THEM THE MORE YOU'LL START THINKING LIKE THEM."
Don't know if was reminiscing about his own career or meant it as career counseling. Years later, some of us got together for drinks. One of the guys stood up and repeated that sentence in proper accent. The rest of us fell off the chairs laughing. Even his C+ students remember GS fondly.
:-)
In mid- and late-20th century America, ... the mathematical turn of economics...." in large part due to the aggressive seminar culture spreading from Chicago, focused on testing ideas in a blast furnace and also establishing an intellectual pecking-order rather than building a harmonious community."
True. I've seen this. I've seen too much bad behavior in seminar rooms, especially toward grad students.
"But why it then takes the form of aggressive misogyny I do not know: ... The argument that our ticket-punching indicators of “quality” are very noisy, that women face huge headwinds in our profession, and thus that given those headwinds a woman who is at the 95%-ile of “ticket punching” “excellence” is almost surely a better asset to the university than a man who is at the 98%-ile—they are neurologically incapable of allowing that or other arguments that we do not want an intellectual monoculture enter their brains. Hence they are all 100% certain that women as a group are stealing their rightful jobs and keeping them from having the careers they deserve. And every individual woman thus becomes someone to be dissed because she is a participant in this great female conspiracy to do them down. .... Or such is my guess."
Brad, that's a very good guess. I have heard such bad things many, many times.
I'm afraid Paul Krugman may be wrong, mainly due to his focus on the unemployment rate (even if that focus is in the standard textbook). Here's my case: In the labor market, we haven't yet reached the pre-pandemic capacity despite the low unemployment rate. The level of real GDP may have long regained the pre-pandemic level. But about 4 million people left the labor force during the pandemic and much of that has yet to reverse. Yes, retirees may not come back, but that is all the more reason we need more people from other age groups to fill that hole. We are below full capacity from the point of view of the pre-pandemic labor market. For the Fed to have identified a low unemployment rate as a reason for lift off may also be misguided. Unemployment rates can be low due to lower participation, which was true at the time the Fed started increasing rates and is still true now even though the participation rates have improved since then. But make no mistake, we are still not employing the labor force we had before the pandemic. An implication: inflation went up for reasons other than a "tight" labor market or that the labor market had reached "full capacity." Nope. By focusing on the unemployment rate, without taking into account the level of participation, the Taylor rule has done a lot of disservice to monetary policy. A low unemployment rate may have prompted the Fed to raise interest rates, even though the participation rate then was much lower than the pre-pandemic level. Anyone who has seen that the labor force fell by about 4 million since the pandemic and has seen that the labor force participation rate at the time of lift off was still very low compared its pre-pandemic level may have said that the labor market far from the pre-pandemic capacity. So yes, now that people have realized why inflation was transitory, it may be time to also realize that inflation went up not because the labor market had fully recovered, so to speak. The unemployment rate, without looking at the participation rate, will mislead. The Taylor rule needs to be modified or policymakers will continue to make big mistakes.
On his point about the manufacturing sector, I fully agree. But why have the official data been showing weakness in the manufacturing sector? How are these data collected? Could a sample-selection bias have already developed in a big way? New manufacturing facilities may not yet be in the samples, especially of various surveys of the manufacturing sector.