Ideas and wealth creation

rawA break from the economics (sort of), with a quote from the late social philosopher and eclectic thinker, Robert Anton Wilson, from one of his most popular books (and one of my favourite), Prometheus Rising, which tries to make sense of the workings of the human mind and its role in human development in its broadest sense. Here he is on page 113:

All wealth is created by human beings using their neurons intelligently.

A neurotic young man once went to a Zen Master and asked how he could find peace of mind.

“How can you lack anything,” the Roshi asked, “when you own the greatest treasure in the universe?”

“How do I own the greatest treasure in the universe?” asked the young man, baffled.

“The place that question comes from is the greatest treasure in the universe,” said the Master, being more explicit than is common for a Zen teacher.

Of course, as a Buddhist, the Master had taken a vow of poverty and did not mean exactly what we mean here. But he knew that the brain produces all that we experience – all our pain and worry, all our bliss states and ecstasies, all our higher evolutionary vistas and trans-time Peak Experiences, etc. It is also “the greatest treasure in the universe” in the most materialistic economic sense: it creates all the ideas which, socially employed, become wealth: roads, scientific laws, calendars, factories, computers, life-saving drugs, medicines, ox-carts, autos, jet planes, spaceships…”

Despite many changes in today’s modern global economy developmental states are needed more than ever — Developing Economics

In the fall of 2017, SPERI’s Matthew Bishop and Anthony Payne gathered essays from a group of nine development economists who produced essays on ‘Revisiting the developmental state’ (SPERI Paper No. 43). They drew upon a body of work published on the SPERI Comment blog and in other publications about the state’s appropriate role in […]

via Despite many changes in today’s modern global economy developmental states are needed more than ever — Developing Economics

Anwar Shaikh on the mythology of neoliberalism

“Neoliberalism claims that free trade is the best way to foster economic development. But its doctrine is premised on the faulty notion that international competition levels the mighty and raises up the weak. Real competition operates quite differently: it rewards the strong and punishes the weak. From this perspective, the neoliberal push for unfettered free trade can be viewed as a strategy that is most beneficial to the advanced firms of the rich countries.

This also explains why the Western countries themselves, and subsequently Japan, Korea and the Asian Tigers, resisted free-trade theories and policies so strenuously when they were themselves moving up the ladder. Equally importantly, it allows us to make sense of the actual policies that they followed in their rise to success: using international access to markets, knowledge and resources as part of a greater social agenda. The object should not be to level the playing field, but to bring up the levels of the disadvantaged players. In this regard, practising neoliberalism on the poor of the world is a particularly cruel sport.”

Anwar Shaikh (2005), The Economic Mythology of Neoliberalism, in Alfredo Saad-Filho and Deborah Johnston (eds.), Neoliberalism: A Critical Reader, Pluto Press, p.48

Tax, redistribution and economic performance: the micro and the macro

Alexandria Ocasio-Cortez, the youngest woman ever to be elected to the US Congress, has made headlines recently with her arguments for much greater marginal rates of tax on the highest earners. Oxford University’s Simon Wren-Lewis yesterday posted this helpful piece on some of the economics and politics of such a policy. He is broadly in favour, and makes a good case for it.

Wren-Lewis is something of a New Keynesian, coming from the centre-left of mainstream thinking. The post covers plenty of ground, but tends to only focus on the microeconomics, while neglecting the macroeconomics, of higher taxes and redistribution. Continue reading

What is GDP in China? Thoughts on the slowdown from Michael Pettis

A fascinating piece from Michael Pettis, an economist I regularly reference, on how China is probably growing much more slowly than the official GDP figures make out, alongside a discussion of the nature and measurement of GDP itself.

This would confirm his long-held thesis that China’s ultra-high investment growth model has been unsustainable for some years, and will change of necessity, either through enlightened policy or, more painfully, in the absence of such a policy.

Trade tensions and rising protectionism are combining with the exhaustion of the recent economic upturn to slow growth in many countries.

The slowdown in China could lead to a ‘lost decade’ of relative economic stagnation there, until growth rebalances away from a significant share of unproductive investment and towards a higher share of consumption and a lower but more productive share of investment in overall demand.

Although the country is already economically powerful, its rise to global dominance could be much further away than many ‘China bulls’ have predicted. Even so, given its prominence in global manufacturing value chains, relative stagnation will have a large but uneven impact on global economic activity.