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You're so welcome. Yeah, Leonhardt is sometimes really good at synthesis. (I was given a heads-up to this latest Summers-Blanchard work by a sib who's a fellow at PIIE, which for me is handy for augmenting the lay data stream from Krugman et alia.) John Taylor is in Boston tomorrow, gah, at a big Fed meeting: https://www.bostonfed.org/discretionmonpol2017.aspx I wonder if protesting his fool and disproven notions about policy implementation would have any effects...
Although the metaphor has significant limitations, since it's so commonly used, let's compare the U.S. to a business or stock. When a business is young, small and rapidly growing, it makes sense to take all of the profits from that business and reinvest them back into the business to maintain or increase that growth rate. You see this kind of growth rate in undeveloped emerging markets with much smaller GDPs. But once a business gets big, it becomes harder and harder for it to maintain its old growth rate. The law of large numbers gets in the way. The largest most mature blue chip companies generally cease to try to grow rapidly--because they recognize its impossibility--and instead begin to pay dividends.
I don't think GDP growth in the U.S. or anywhere really should be the ultimate measure of any nation's economic well being. A belief in trickle down economics is embedded in this line in the article: "Gross domestic product, or G.D.P., measures the nation’s total output, which largely determines its standard of living." That assumes that GDP is fairly distributed or for instance advances in technology which may actually eliminate not create jobs aren't the source of the GDP growth.
What is especially problematic about our love affair with GDP today is its implicit assumption that we must constantly grow to be economically healthy when that growth is exacerbating climate change via greater carbon emissions from increased production. That tie between GDP growth and climate change is rarely discussed, and as much as technophiles say we can innovate our way out of the problem I don't completely buy it.
Once a nation/company reaches that mature slow growth phase, its not too hard to imagine dividends being paid to instead of grow and create jobs actually get people out of the workforce so there's less competition for the remaining jobs. Social Security is in effect a dividend. A basic guaranteed income for all would be another or simply lowering the age when one receives Social Security. The irony is raising the Social Security age which many politicians want to do will exacerbate our overcapacity problems. More people will work longer instead of retiring and the competition for employment will be stiff as technology eliminates more jobs. By one estimate from Oxford University researchers, almost half the jobs in the U.S. could be eliminated in the next 20 years via technology: nybooks.com/articles/2015/04/02/how-robots-algorithms-are-taking-over/ How are we ever going to grow GDP fast enough to create as many jobs as those we lose? Are we expected to double our production and consumption levels--and double our carbon emissions--to counteract the increases in technological productivity and job loss from it? It seems an untenable situation to think GDP growth is the answer.
@LewisBraham- I guess that you realize that asking thoughtful questions such as these, and your willingness to consider alternative possibilities totally disqualifies you from holding any elective office.
To add something a little different -- for measuring the health of an economy from the residents' POV -- GNP is supposed to get at it better than GDP. Krugman wrote about it in the case of Puerto Rico recently, and more in detail, in a piece about Ireland in 2011 (note title pun).
From the Ireland post:
"Ireland, you see, is a country with an extraordinary amount of foreign-owned capital; this means that gross national product, the income of Irish residents, is substantially smaller than gross domestic product, the income generated in the country. We normally focus on GDP, because it’s easier to measure accurately, but in Ireland’s case this can be misleading — because the gap between GDP and GNP has been widening."
The thing neither political party seems to get is that seeing GDP growth and, they hope, job growth as the end-all be-all of economic goals is a mistake. Sincere Republicans believe tax cuts will stimulate GDP growth and create jobs and sincere Democrats think fiscal spending will stimulate GDP growth and create jobs. (There are of course many who are not sincere that really want to curry favor with powerful members of their base.) I think the latter fiscal spending makes more sense to stimulate growth and create jobs as fiscal spending can be targeted to the industries that need it while tax cuts if they work are a blunt instrument at best, assuming that corporations/wealthy individuals will reinvest in the economy when they may actually do something completely different with the money such as buy foreign made goods and services or stash it in foreign banks/capital markets.
Also, even if a tax cut stimulates U.S. GDP and creates jobs, it assumes all GDP and jobs are good. Quantity of production/output is all that matters as opposed to quality. GDP makes no distinction between a cigarette manufacture increasing production thanks to a tax break and a solar panel manufacturer. Fiscal spending can be targeted to industries and projects that are specifically earmarked for the public good such as building roads, schools, etc. Quality of life for all citizens and the planet itself--climate change/species extinction--need to be factored into economic measures, but GDP sees none of this.
Yet neither party acknowledges the basic problem of climate change, the law of large numbers for developed nations and technological overcapacity that we are facing in relations to GDP growth. Democrats acknowledge the existence of climate change and want to use stopgap measures like cap and trade or innovate our ways out of the problem, but like Republicans they refuse to give up the golden goose of GDP growth.
You could spend all the money in the world on fiscal spending and end up with boondoggles like they have in Japan. Admittedly, the U.S. legitimately needs infrastructure spending right now, so that is one project worth doing unlike in Japan where there are an excess of paved roads everywhere. But if that gets done, then what? When will any of our elected officials acknowledge that we are producing too much? For anyone doubting the world is suffering from overcapacity I suggest they go to Amazon and search for "plastic poop": https://amazon.com/s/ref=nb_sb_noss_2/133-8038057-0378521?url=search-alias%3Daps&field-keywords=plastic+poop There are 7,200 results currently. Production of that plastic poop is part of our GDP too. But does the world need 7,200 variations of plastic poop? Do we need 7,201 to increase our growth?
I wonder if any elected official would have the courage to say what JFK did in a 1968 speech at the University of Kansas today:
Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
If this is true here at home, so it is true elsewhere in world.
Wordworth ~1802 England, getting sentimental for even then:
The World Is Too Much with Us The world is too much with us; late and soon, Getting and spending, we lay waste our powers; Little we see in Nature that is ours; We have given our hearts away, a sordid boon!
This Sea that bares her bosom to the moon, The winds that will be howling at all hours, And are up-gathered now like sleeping flowers, For this, for everything, we are out of tune;
It moves us not. --Great God! I'd rather be A Pagan suckled in a creed outworn; So might I, standing on this pleasant lea, Have glimpses that would make me less forlorn; Have sight of Proteus rising from the sea; Or hear old Triton blow his wreathèd horn.
While I'm fond of this poem, I recognize the romantic impossibility of separating oneself from the material getting and spending world. I'm no Luddite who sees technology/modern life as the enemy. Rather I see tech as a blunt instrument that can be used positively, negatively or indifferently. I am thinking instead of a different 19th century author who wrote of the means of production--the tech. Whoever controls it rules the world.
Right now that technology is so vast so all encompassing it has led to a severe form of inequality between those who control it and those who don't. Think of it. So many jobs are being automated, reduced to binary code, zeroes and ones. The controllers of the code--Microsoft, Apple--the algorithms--Google--the automation--Uber, Amazon, netflix. These companies have sucked vast amounts of wealth from other industries and while I believe their technology can be beneficial it is not without its costs--costs the owners of the tech never seem to have to pay. One of the costs is overcapacity, over production and ultimately job loss and climate change from the demand to keep the GDP ball constantly rolling.
Comments
Yeah, Leonhardt is sometimes really good at synthesis.
(I was given a heads-up to this latest Summers-Blanchard work by a sib who's a fellow at PIIE, which for me is handy for augmenting the lay data stream from Krugman et alia.)
John Taylor is in Boston tomorrow, gah, at a big Fed meeting:
https://www.bostonfed.org/discretionmonpol2017.aspx
I wonder if protesting his fool and disproven notions about policy implementation would have any effects...
I don't think GDP growth in the U.S. or anywhere really should be the ultimate measure of any nation's economic well being. A belief in trickle down economics is embedded in this line in the article: "Gross domestic product, or G.D.P., measures the nation’s total output, which largely determines its standard of living." That assumes that GDP is fairly distributed or for instance advances in technology which may actually eliminate not create jobs aren't the source of the GDP growth.
I'm not alone in thinking GDP a poor measure:
https://theguardian.com/commentisfree/2009/sep/13/economics-economic-growth-and-recession-global-economy
https://weforum.org/agenda/2016/04/beyond-gdp-is-it-time-to-rethink-the-way-we-measure-growth
What is especially problematic about our love affair with GDP today is its implicit assumption that we must constantly grow to be economically healthy when that growth is exacerbating climate change via greater carbon emissions from increased production. That tie between GDP growth and climate change is rarely discussed, and as much as technophiles say we can innovate our way out of the problem I don't completely buy it.
Once a nation/company reaches that mature slow growth phase, its not too hard to imagine dividends being paid to instead of grow and create jobs actually get people out of the workforce so there's less competition for the remaining jobs. Social Security is in effect a dividend. A basic guaranteed income for all would be another or simply lowering the age when one receives Social Security. The irony is raising the Social Security age which many politicians want to do will exacerbate our overcapacity problems. More people will work longer instead of retiring and the competition for employment will be stiff as technology eliminates more jobs. By one estimate from Oxford University researchers, almost half the jobs in the U.S. could be eliminated in the next 20 years via technology: nybooks.com/articles/2015/04/02/how-robots-algorithms-are-taking-over/
How are we ever going to grow GDP fast enough to create as many jobs as those we lose? Are we expected to double our production and consumption levels--and double our carbon emissions--to counteract the increases in technological productivity and job loss from it? It seems an untenable situation to think GDP growth is the answer.
Sad.
From the Ireland post:
"Ireland, you see, is a country with an extraordinary amount of foreign-owned capital; this means that gross national product, the income of Irish residents, is substantially smaller than gross domestic product, the income generated in the country. We normally focus on GDP, because it’s easier to measure accurately, but in Ireland’s case this can be misleading — because the gap between GDP and GNP has been widening."
Also, even if a tax cut stimulates U.S. GDP and creates jobs, it assumes all GDP and jobs are good. Quantity of production/output is all that matters as opposed to quality. GDP makes no distinction between a cigarette manufacture increasing production thanks to a tax break and a solar panel manufacturer. Fiscal spending can be targeted to industries and projects that are specifically earmarked for the public good such as building roads, schools, etc. Quality of life for all citizens and the planet itself--climate change/species extinction--need to be factored into economic measures, but GDP sees none of this.
Yet neither party acknowledges the basic problem of climate change, the law of large numbers for developed nations and technological overcapacity that we are facing in relations to GDP growth. Democrats acknowledge the existence of climate change and want to use stopgap measures like cap and trade or innovate our ways out of the problem, but like Republicans they refuse to give up the golden goose of GDP growth.
You could spend all the money in the world on fiscal spending and end up with boondoggles like they have in Japan. Admittedly, the U.S. legitimately needs infrastructure spending right now, so that is one project worth doing unlike in Japan where there are an excess of paved roads everywhere. But if that gets done, then what? When will any of our elected officials acknowledge that we are producing too much? For anyone doubting the world is suffering from overcapacity I suggest they go to Amazon and search for "plastic poop":
https://amazon.com/s/ref=nb_sb_noss_2/133-8038057-0378521?url=search-alias%3Daps&field-keywords=plastic+poop
There are 7,200 results currently. Production of that plastic poop is part of our GDP too. But does the world need 7,200 variations of plastic poop? Do we need 7,201 to increase our growth?
I wonder if any elected official would have the courage to say what JFK did in a 1968 speech at the University of Kansas today: https://en.wikipedia.org/wiki/Robert_F._Kennedy%27s_remarks_at_the_University_of_Kansas
The World Is Too Much with Us
The world is too much with us; late and soon,
Getting and spending, we lay waste our powers;
Little we see in Nature that is ours;
We have given our hearts away, a sordid boon!
This Sea that bares her bosom to the moon,
The winds that will be howling at all hours,
And are up-gathered now like sleeping flowers,
For this, for everything, we are out of tune;
It moves us not. --Great God! I'd rather be
A Pagan suckled in a creed outworn;
So might I, standing on this pleasant lea,
Have glimpses that would make me less forlorn;
Have sight of Proteus rising from the sea;
Or hear old Triton blow his wreathèd horn.
Right now that technology is so vast so all encompassing it has led to a severe form of inequality between those who control it and those who don't. Think of it. So many jobs are being automated, reduced to binary code, zeroes and ones. The controllers of the code--Microsoft, Apple--the algorithms--Google--the automation--Uber, Amazon, netflix. These companies have sucked vast amounts of wealth from other industries and while I believe their technology can be beneficial it is not without its costs--costs the owners of the tech never seem to have to pay. One of the costs is overcapacity, over production and ultimately job loss and climate change from the demand to keep the GDP ball constantly rolling.
Some of the wiser members of the tech community recognize these social costs:
https://ft.com/content/b0659404-0fea-11e7-a88c-50ba212dce4d
http://www.google.com/search?q=Silicon+Valley+aims+to+engineer+a+universal+basic+income+solution&btnG=
In other words, UBI is no longer pie in the sky romanticism.