That is the topic of his column today, I had not seen this very good point before:
One possibility is that the numbers are missing the reality, especially the benefits of new products and services. I get a lot of pleasure from technology that lets me watch streamed performances by my favorite musicians, but that doesn’t get counted in G.D.P. Still, new technology is supposed to serve businesses as well as consumers, and should be boosting the production of traditional as well as new goods. The big productivity gains of the period from 1995 to 2005 came largely in things like inventory control, and showed up as much or more in nontechnology businesses like retail as in high-technology industries themselves. Nothing like that is happening now.
Overall Krugman is agnostic on the stagnation argument.
Given that non-financial total corporate debt is estimated by McKinsey to amount to $12.5tn, Chinese companies are paying on a nominal basis some $812bn in interest payments each year. In real terms, this amounts to $1.35tn. This is not only significantly more than China’s projected total industrial profits this year; it is slightly bigger than the size of a large emerging economy such as Mexico.
The entire FT discussion is here.
R. asks me:
I’ve been reading your blog for years and it remains my favorite. I am an attorney planning to travel for 1-2 months in Eastern/Northern Asia and Europe this fall before starting work at a law firm. Since you are so widely traveled, I would love to read a post listing the most memorable places you’ve traveled or travel experiences you’ve had.
An answer to that could fill many books, but here is a simple rule to start: follow the per capita gdp. Perhaps my favorite travel experience of all time is Tokyo, but more generally I say master the area lying between London, Paris, Berlin, Rome, and Madrid, give or take. There are so many high quality sights and experiences to be had there you can chunk it many different ways.
If you wish to visit the United States, specialize in the eastern seaboard, Chicago, but most of all southern Utah down to the northern rim of the Grand Canyon, much better than the southern rim but book in advance. That latter part of the country has perhaps the world’s most compelling natural beauty, plus a good look at real American culture along the way. For all its fame, it remains oddly under-visited (thank goodness). Toss in San Francisco for good measure, and then drive through some godforsaken parts for a few days, the worse the better.
For the emerging economies, I say Beijing and Mumbai are good places to start, how can you not wish to be introduced to a country of a billion people or more? Mexico City is extremely underrated, especially if you live nearby in North America, just don’t expect English to be spoken. By the way, it is safer than you might think. Then spend some serious time in the countryside, almost any safe (or unsafe) emerging economy can serve this function.
The author is Michael North, and this new and excellent book, when it comes to the earlier centuries, emphasizes the role of Swedes and Germans in shaping a region of prosperity and trade. The most interesting section (starts p.239) is about the 1920s, when the Baltic nations underwent a radical deindustrialization, due to their severing from the Russian empire. That is when they deviated from the Nordic economies, which for the most part continued their industrialization.
I also recommend Sverre Bagge, Cross & Scepter: The Rise of the Scandinavian Kingdoms from the Vikings to the Reformation. If nothing else, this book will make you wonder if the recent success of the Nordic nations are in fact so deeply historically rooted after all. As North (p.205) points out: “Industrialization arrived in all of these countries relatively late.” Tom Buk-Swienty’s 1864: The Forgotten War That Shaped Modern Europe is a good book on how and why Denmark lost so much territory to Prussia/Germany.
There is a new paper by Karol Jan Borowiecki, published in Oxford Economic Papers:
I investigate the consequences of long-run persistence of a society’s preferences for cultural goods. Historical cultural activity is approximated with the frequency of births of music composers during the Renaissance and is linked with contemporary measures of cultural activity in Italian provinces. Areas with a 1% higher number of composer births nowadays show an up to 0.29% higher supply of classical concerts and 0.16% more opera performances. Classical concerts and opera performances have also rather bigger audiences and obtain greater revenues in provinces that have been culturally active in the past. Today, those provinces also exhibit a somewhat lower supply of other forms of entertainment (e.g., sport events), thereby implying a tantalizing divergence in societies’ cultural preferences that is attributable to events rooted in the past. It is also shown that the geography of composer births is remarkably persistent over a period of seven centuries.
For the pointer I thank Ben Southwood.
1. This one has something to with Richmond, otherwise I don’t know how to title it.
2. Do innovators find it easier to justify bad behavior?
3. Are New Jerseyans more flammable than other people? Or something else?
4. Erik Angner, Well-Being and Economics; among other things, a good look at how cardinal utility and interpersonal comparisons overlap with work in post-Sen welfare economics.
5. Easing deposit arbitrage in Europe.
The recent terror attack in Karachi won’t help any, but still the news is looking up, from The FT:
The IMF has acknowledged that Pakistan averted a balance of payments crisis in 2013 and managed to stabilise its foreign reserves. This week Standard & Poor’s, the credit rating agency, raised the outlook for its B minus rating from stable to positive, while Moody’s last month raised its outlook to stable from negative — albeit for a Caa1 rating, which puts it one notch above Greece.
With liquid foreign reserves having grown almost fourfold in the past year to $12.5bn, a figure equivalent to about three months of imports, Mr Wathra has less cause for concern about the stability of the rupee than some of his predecessors.
The recent plunge in the price of crude has seen the cost of oil imports fall to $9.7bn in the nine months to March, down from just over $11.2bn a year earlier, according to central bank figures.
Falling oil prices have also helped lower the fiscal deficit to an expected 5 per cent of gross domestic product in the year to June, down from above 8 per cent just over two years ago. And the country’s GDP is forecast to grow by about 4 per cent this year, following a similar rise last year.
You may recall my earlier post on Pakistan being an undervalued economy, more here too. It still is.
That is the new Anders Aslund book, and it is instructive throughout. Here are a few things I learned:
1. 80 percent of Ukrainian youth receive higher education of some kind.
2. Ukraine has the world’s highest rate of pension expenditures as a share of gdp, at about 18 percent, circa 2010. Most of that is old age pensions, and that is for a population with a relatively short lifespan, 68.5 years, 122th in the world according to UNDP.
3. At the time of publication, Ukraine’s public expenditures stood at 53 percent of gdp.
4. “Ukraine is running out of money…” OK, that one I already knew.
5. “No economy has fared as poorly in peacetime as Ukraine did from 1989 to 1999. For a decade, Ukrainian GDP plummeted by a total of 61 percent, according to official statistics.” Some of this, however, was offset by the growth of black markets.
6. Crimea is no longer included in Ukraine’s formal measure of gdp, although Donbas is still included.
This very good Justin Wolfers piece outlines some possible explanations, for instance:
For those not keeping track, it boils down to two camps: economists who blame first-quarter weakness on idiosyncratic factors versus those blaming mismeasurement.
The weather would be one — but not the only — possible idiosyncratic factor.
I wonder, however, if a third class of explanation perhaps should be in play. It is well-known that economies undergo relatively strong “seasonal cycles,” most notable a major contraction in the first quarter, following the boom of the holiday season. Might this seasonal contraction interact with the real economy in a different way than before the Great Recession? Perhaps negative economic momentum, even when expected, chills other drivers of economic activity more than it used to. This could arise from complementarities, increasingly important thick market externalities, signal extraction problems combined with greater fearfulness, or perhaps it is revealing information about the fragility of risk premia. Other mechanisms may be operating as well — can you think of any?
In other words, those first-quarter slumps are real, not idiosyncratic, and also not mismeasurements, but still they are (all other things being equal) likely temporary.
This is just a hypothesis, do you have any ideas about how to test it?
Luo Yufeng, who has worked in the salons for four years, reports:
Q. What are your thoughts on the New York manicure industry in general?
A. I think it’s fine. Many of my friends have been doing the work for more than 10 years, and they generally think it’s better than working in restaurants. The difference between a manicurist and her boss is not clear-cut. An ordinary worker can start in a nail salon to learn the techniques, and, after three or five years, she can pay around $30,000 to buy a salon and become a boss herself. I found this highly inspiring. Even when I was cursed or when my customers found fault with me, my heart was still full of hope, because one day I could become a boss, too.
The interview is interesting throughout. By no means do I think her account is the whole story, but relatively few people will see this interview, on the NYT Sinosphere blog, and nail salons have been a topic of discussion as of late. A discussion of life in the Vietnamese countryside would be illuminating as well.