Economics Discussion Thread

[Constantinopolis]

I don't see where he said he was a "strict utilitarian" but:

one could very easily make a utilitarian argument against capitalism especially when comparing what socialist countries had before they implemented socialism, and what they now currently have under capitalism which is in many ways "worse" economically and socially for very many people. Your reasoning for suggesting that utilitarianism would lead one to become capitalists because "the Chinese" apparently "realized this" (all of your comments thus far have been without substance and very vague) doesn't really hold any merit

? there is no strict utilitarian argument for socialism. Retaining the Tsar would've made the most Russians the best off--the one part of Russia where the Whites won (Finland) is the only part of it that is first-world. Taiwan outperforms the mainland on all metrices of human well-being. Was Mao really worth it? Those who threw out the Gang of Four didn't think so.

Because we can totally ignore how retaining the Tsar would have changed the entire 20th century history of the entire world in unpredictable ways and we can just assume that it would have turned Russia into a really big Finland.

All counterfactuals are speculative, but some are just utterly insane. "The Tsarist Empire lives happily ever after and turns into a big Finland and no major changes occur in world history that would impact Russia's fate" is one of the latter group.

Likewise for "Mao never takes over and the mainland just turns into a really big Taiwan and everything else in the world stays the same".

[Constantinopolis]

That's one of the problems with strict utilitarianism. It would be great if we actually knew what all the eventual consequences of the various possible courses of action will be, but in fact, we don't.

You know, it's the famous "going back in time to kill Hitler accidentally ends up destroying the world" problem. We don't actually know what the results of a radically different 20th century might have been.

[Nioya]

What do you guys think about the corporate income tax rate? I once heard it's better for it to be low because it allows companies to invest more.

[Janszoonia]

What do you guys think about the corporate income tax rate? I once heard it's better for it to be low because it allows companies to invest more.

I would say that cutting the corporate tax is a preferable option to giving corporations subsidies.

[Taihei Tengoku]

China hasn't pursued an explicitly communist line since Mao, but nonetheless the greatest periods of economic recovery, improvements in literacy, and living standards were under him

LoL

[Orostan]

What do you guys think about the corporate income tax rate? I once heard it's better for it to be low because it allows companies to invest more.

Companies will not invest more if they do not need to invest more. Cutting the corporate tax rate (which no corporation pays) won't do anything to help anyone but the bourgeois.

[Great Minarchistan]

What do you guys think about the corporate income tax rate? I once heard it's better for it to be low because it allows companies to invest more.

Less corporate tax incentives the creation and expansion of businesses, exacerbating entrepreneurship and innovation, not to say it will probably stop the corporate outflow from the US.

[Taihei Tengoku]

What do you guys think about the corporate income tax rate? I once heard it's better for it to be low because it allows companies to invest more.

Companies will not invest more if they do not need to invest more. Cutting the corporate tax rate (which no corporation pays) won't do anything to help anyone but the bourgeois.

They could invest more--I've yet to hear that Americans "oversave" like the Japanese do.

[Taihei Tengoku]

China hasn't pursued an explicitly communist line since Mao, but nonetheless the greatest periods of economic recovery, improvements in literacy, and living standards were under him

LoL

I know what paper you're talking about--it's the one by Cheremukhin et al. about Mao.

Literally in the abstract:

We show that [Deng Xiaoping's] reforms yielded a significant growth and structural transformation differential. GDP growth is 4.2 percentage points higher and the share of the labor force in agriculture is 23.9 percentage points lower compared with the continuation of the pre-1978 policies. We provide extensive historical evidence for the reforms that are consistent with the evolution of the components of the wedges. The decrease in the production component of the intersectoral wedge is consistent with increased competition and demonopolization of the economy.

Also the same four wrote a paper about how Stalin was unnecessary so I do not think your thirdhand knowledge of this paper is correct, like anything else you believe!

[Taihei Tengoku]

? there is no strict utilitarian argument for socialism. Retaining the Tsar would've made the most Russians the best off--the one part of Russia where the Whites won (Finland) is the only part of it that is first-world. Taiwan outperforms the mainland on all metrices of human well-being. Was Mao really worth it? Those who threw out the Gang of Four didn't think so.

Because we can totally ignore how retaining the Tsar would have changed the entire 20th century history of the entire world in unpredictable ways and we can just assume that it would have turned Russia into a really big Finland.

All counterfactuals are speculative, but some are just utterly insane. "The Tsarist Empire lives happily ever after and turns into a big Finland and no major changes occur in world history that would impact Russia's fate" is one of the latter group.

Likewise for "Mao never takes over and the mainland just turns into a really big Taiwan and everything else in the world stays the same".

Thankfully we had a nearly perfect natural experiment in the 20th century:

[Orostan]

Companies will not invest more if they do not need to invest more. Cutting the corporate tax rate (which no corporation pays) won't do anything to help anyone but the bourgeois.

They could invest more--I've yet to hear that Americans "oversave" like the Japanese do.

Why would they? There are a bunch of bubbles that are going to pop soon, and they're much more likely to try and boost stock price before that happens with buybacks. Verizon is doing that, I think.

[Constantinopolis]

Because we can totally ignore how retaining the Tsar would have changed the entire 20th century history of the entire world in unpredictable ways and we can just assume that it would have turned Russia into a really big Finland.

All counterfactuals are speculative, but some are just utterly insane. "The Tsarist Empire lives happily ever after and turns into a big Finland and no major changes occur in world history that would impact Russia's fate" is one of the latter group.

Likewise for "Mao never takes over and the mainland just turns into a really big Taiwan and everything else in the world stays the same".

Thankfully we had a nearly perfect natural experiment in the 20th century:

Indeed we did! And guess what?



East Germany grew faster.

Of course, it still always remained behind West Germany, because it started out much poorer and never got to fully catch up (see the numbers at the bottom of the columns).

[Constantinopolis]

Oh, and just in case you want to bring up North Korea vs. South Korea:



Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

[Taihei Tengoku]

East German QOL is lower than what GDP suggests--remember you can raise it by spending money on T-55s and MiGs, which doesn't make your daily life better. Furthermore a lot of West German war recovery happened before 1950 (specifically in 1948). If there was an expectation that economic opportunities were truly better in East Germany because of the faster growth literally a third of the population wouldn't have decamped across the inter-German border.

They could invest more--I've yet to hear that Americans "oversave" like the Japanese do.

Why would they? There are a bunch of bubbles that are going to pop soon, and they're much more likely to try and boost stock price before that happens with buybacks. Verizon is doing that, I think.

This is not a recent phenomenon.

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

They were the same because they were both command economies, North Korea a Stalinist one and South Korea a cartel economy run by chaebols. South Korea decentralized its economy and took off while North Korea persisted on being a house of cards.

[Constantinopolis]

East German QOL is lower than what GDP suggests--remember you can raise it by spending money on T-55s and MiGs, which doesn't make your daily life better. Furthermore a lot of West German war recovery happened before 1950 (specifically in 1948).

I'll take "What is the difference between a level and a growth rate" for $500, Alex.

The level of QOL isn't the issue. The growth rate of QOL is the issue. The number of T-55s and MiGs that they made is irrelevant for the growth rate of quality of life, unless the amount of T-55s and MiGs was growing much faster than the overall economy.

As long as all sectors of the economy are growing proportionally, the growth rate of the overall economy is the same as the growth rate of QOL no matter how little of the economy is dedicated to consumer goods. A bloated military sector might imply a lower level of quality of life, but not a lower growth rate.

If there was an expectation that economic opportunities were truly better in East Germany because of the faster growth literally a third of the population wouldn't have decamped across the inter-German border.

People move from poorer countries to richer countries all the time even when the poorer countries in question are growing faster and are rapidly improving standards of living. Why wait for economic growth to gradually make you richer over a few decades when you can move to some other country and be richer in only a year or two? Especially if moving to the other country is as easy as crossing a street, and they share the same culture and speak the same language as you?

Right now, there are many developing countries that have been growing much faster than the West for decades and have every expectation that they will continue to do so. Yet many people from those countries still want to immigrate to the West. And if immigration was as easy as crossing a street, you can bet that millions would do it, even from the absolute best-performing developing countries.

Economic migration from country A to country B doesn't prove anything except that country B is currently richer than country A. And of course West Germany was richer than East Germany. That is not in debate.

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

They were the same because they were both command economies, North Korea a Stalinist one and South Korea a cartel economy run by chaebols. South Korea decentralized its economy and took off while North Korea persisted on being a house of cards.

You keep using that term, "command economy". I don't think it means what you think it means.

Also, Amsden credits the chaebols as playing an essential role in kickstarting the South Korean economy.

[Taihei Tengoku]

The proximate cause of Korean divergence was the Treasury decartelizing the chaebols in the early 80s. Unsurprisingly, economic growth (and therefore accumulation) took off when the institutional/memetic framework changed, rather than when some critical mass of spinning looms and bullion was reached, just as it had been the case in China.

As for East Germany, its QOL with a large army is worse at every level than West Germany. Furthermore, it hit the 20-year doubling period when it was going between 6,000 and 12,000 euros while West Germany hit that period going from 10,000 to 20,000 euros--its growth tapers off like the Solow Curve suggests and at a lower point overall (doubly lower taking the yoke of the NVA into account). It might actually never catch up.

[Great Minarchistan]

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

Wrong. Even if North Korea kept their pace of growth they would be nowhere as good as South Korea later on. Speaking of, why not disclose the data of North Korea vs. South Korea from mid-70s to nowadays? Nevermind, I'll do that.



P.S.: Both are represented in nominal dollars, so the discrepance between nominal vs adjusted ends. Also scaled in logarithmic scale since NK had an actual sad progress.

[Great Minarchistan]

Oh, and by the way, I wish people would stop confusing growth rates with current income levels. A poor country isn't necessarily having low economic growth, and a rich country isn't necessarily having high economic growth.

In fact, since growth rates tend to go down as a country becomes more developed, the opposite is usually true.

Using US as a model, you can see that real wages grow in unison with real GDP/c:

[Barbarossistan]

sigh

-ever realized that the middle ages did not just have a peasant economy but from he 11th century trade and townbased crafts took of? money wages were the norm there

-the middle ages saw the first systematic development of inanimate power sources in human history, arguably the industrial revolution starts right there and steam was just an improved powersource, itself in due course to be replaced

-the rise of moneybased exchange undermined the position of the feudal aristocracy as peasants were increasingly allowed to pay rent/taxes in money and fixed amounts were usually agreed that were then hollowed out by inflation

-merchant capitalism is a thing

-the industrial revolution was an acceleration of trends that started in the middle ages and wee never funded from slavery, "capitalis and slavery" is ake history written to a political agenda, answer me this: how did Germany, never much involved in colonialism and the slave trade industrialize? an no, it wasnt British capital, it was local firms using local capital

-the Comecon -did- fall behind, Bohemia was one of the wealthiest and most industrialized parts of Europe before 1940, it fell behind all West Europe under socialism, simple fact is that in 1989 every socialist economy was falling behind the West and the Soviets knew it

-you regard socialsism as good in itself, I regard it as evil in itself as it has always brought what it must bring, poverty and death

[Chestaan]

1. https://www.theguardian.com/environment ... food-waste
http://www.independent.co.uk/news/uk/ho ... 09601.html

1.Don't have time to fully digest these right now, but I'd need hard data on: to what extent are these niche/luxury foods or essential staples that working class would rely on? To what extent is this actually impacting food prices in affected areas in any way, are there food shortage problems there (my guess: no)?

Houses were overproduced in many nations, the one I am most familiar with is Ireland, which were then left empty when the bottom fell out of the market. Meanwhile homelessness skyrocketed.

2.Sure, bubbles can occur.

2. Incomes are endogenous, true, but it would be a massive stretch to claim that incomes are solely or mostly determined by how much a consumer wants a good. Its not the case necessarily that rich people want goods more, and that poor people want them less.

3.My point is that you can't isolate a partial part of the system, the market can determine output, prices and incomes - it's not just about distributing a preset numb of goods to a preset collection of people according to their WTP. You need to look at the big picture - and to save you the time, mathematically under ideal assumptions, a free market really is the most optimal/welfare maximising system of distribution, as long as the government can do lump sum transfers. Now obviously, it's rare these ideal assumptions all hold, so economics is about looking at these violations (e.g. asymmetric info, irrationality, natural monopolies, free riding etc...) and seeing what policies can fix them. This is a fair approach imo - rather than trying to abolish everything and plan an entire economy instead.

I suppose a good question would be to ask is any of the many different systems that utilise a price mechanism better than all the others?

4.And I'd say the best approach is to just look at the most successful countries and see how they do it.

1. But even if there is no price impact and no shortages in those areas, the fact that excess is produced and not used would indicate a waste of resources wouldn't it?

2. Bubbles aren't the problem exactly. I mean they are a problem, sure, but the problem I am specifically talking about is how a good can be both over-produced while at the same time those who need that good do not receive it. Over-production of housing while there is a homelessness crisis is a good example.

3.Firstly let me state again that I am not advocating for a command economy, I am merely pointing out the inefficiencies within the market system. Secondly, yes it may be welfare maximising, under those specific assumptions, but welfare is only a good measure insofar as it can proxy for utility. And arguably welfare is a poor proxy for utility. The main problem with it being that, all else equal, a high income person's welfare is weighted higher than a low income person's welfare. And while a lot of economics is about dealing with the cases where welfare is not maximised, a lot of work is also done on inequality, even though the negative effects of this are not necessarily represented in welfare models.

4. Depends what you mean by most successful.

[Dejanic]

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

Not to mention the insane amount of foreign governmental aid that South Korea has received; as well as favourable trade deals. It would be impossible for SK to be anything other than a success.

[The of Japan]

Most of NSG is wrong so by Bayesian probability...

If you are a strict utilitarian you would be a capitalist roader. The Chinese, wisest of all communists, realized this.

I don't see where he said he was a "strict utilitarian" but:

one could very easily make a utilitarian argument against capitalism especially when comparing what socialist countries had before they implemented socialism, and what they now currently have under capitalism which is in many ways "worse" economically and socially for very many people. Your reasoning for suggesting that utilitarianism would lead one to become capitalists because "the Chinese" apparently "realized this" (all of your comments thus far have been without substance and very vague) doesn't really hold any merit

Arguments can be made by both sides through cherry picking, we get that.

[Great Minarchistan]

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

Not to mention the insane amount of foreign governmental aid that South Korea has received; as well as favourable trade deals. It would be impossible for SK to be anything other than a success.

North Korea also received Soviet (or was it Chinese?) subsidies and traded with them. Also, there is a *small* difference between a stagnation and a 4000% growth since the 1970s.

[Taihei Tengoku]

Oh, and just in case you want to bring up North Korea vs. South Korea:

(Image)

Their economic performance was basically the same up until the 1970s. Afterwards, yeah, North Korea started to suck. Increasingly more so as the years went on. But the point is that the North Korean economy was originally perfectly fine, and only became a disaster later, as the Kim dynasty shifted the focus of economic policy away from development and towards insane levels of ultra-militarization.

Not to mention the insane amount of foreign governmental aid that South Korea has received; as well as favourable trade deals. It would be impossible for SK to be anything other than a success.

This argument keeps getting brought up--if foreign aid accumulationism was true then the period of fast growth would've been in the 50s, not the 80s (also the Solow Curve wouldn't exist). Postwar growth in Europe would reflect distribution of Marshall Plan aid, rather than the opposite, where the country that got the least aid (West Germany) took off while the one that got the most (UK) stagnated. One doesn't consider large remittances signs of a healthy economy, which is basically the same thing as "foreign aid."

[Forsher]

Oh, and by the way, I wish people would stop confusing growth rates with current income levels. A poor country isn't necessarily having low economic growth, and a rich country isn't necessarily having high economic growth.

In fact, since growth rates tend to go down as a country becomes more developed, the opposite is usually true.

Using US as a model, you can see that real wages grow in unison with real GDP/c:

What are you trying to say here?

Firstly, Constantinopolis is talking about the "catch up effect" in oblique terms.

Secondly, between 1910 and 1942 and then again from 1946-1962 (all years approximate) what happened was the wage level measure (whatever that is) was being outstripped by GDP per capita (hence falling from about 80% of GDP per capita to about 40%, recovering to about 50% before returning to 40% ish). That's not growth in unison. It's not a temporary trend either.

Periods which seem to indicate "in unison" growth (i.e. a stationary ratio) include 1790-1798, 1826-1858, (kindly) 1870-1910 and 2002-2016.