Tabarrok on Macro Musings

Here’s my podcast on Macro Musings with David Beckworth. One bit on China.

Tabarrok: The perspective which we’re getting today is that we’re in competition with China, but actually, when it comes to ideas, we’re in cooperation with China, because the more scientists and engineers that there are in China, then the better that is for us, actually. As you pointed out, if a Chinese researcher comes up with a cure for cancer, great! That’s fantastic! I mean, ideally I would come up with a cure for cancer, but the second best is my neighbor comes up with a cure for cancer, right?

Beckworth: Right.

Tabarrok: So, increasing the size of the Chinese market, with wealthier Chinese consumers, wealthier Indian consumers, that is going to increase the demand to do research and development, and that is going to have tremendous impacts not only in health, but in any field of endeavor which relies on these big, fixed costs. So, any time you have an idea-centered industry, which is a lot of industries today. All of high tech is idea centered. More R&D means more ideas. That comes from having bigger, richer markets.

Comments

None dare call it treason.

"Successful and fortunate crime is called 'virtue.'" Seneca

"Treason doth never prosper: What's the reason? For if it prosper, none dare call it 'Treason.'" John Harington

Fat lot of good that [fairy tale] Chinese cure for cancer will be after they've taken away [and given it to 25 million economic migrants] your private health care and the democrat death panel denies you the treatment.

It is sad.

Just because they have a different opinion from you that makes it treason?

We need a regime change in Brazil. At the rate they are going, they will destroy all of the rain forests by the end of the century.

https://time.com/amazon-rainforest-disappearing/

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Death panels will deny the Chinese cancer cure because its sold at costs without monopoly profits, and is thus too cheap?

China and India manufacture AID/HIV maintenance drugs at manufacturing costs under an international agreement allowing developing, poor, nations to not pay rich nations fees for patents, and other IP rents, when it comes to medical goods.

It's the US that has for four decades sought to create government sanctioned monopolies on medical goods (IP) to extract rents that are many times the costs of production os those goods.

And US government fund more health care research, or reward private public funding with tax dodging, think Howard Hughes Medical Institute, than the for profit medical goods corporations fund. It's mostly out of government/public funded research the for profits derive their IP that the US government grants private monopolies. And argues the rest of the world must honor to increase medical costs to pay the high monopoly profits/rents.

Eg, Truvada is priced at $2,000 a month.
You can order the generic with free air mail from India for $ 189.95, Gilead calls that illegal theft off IP.

Prep is based on research in India and Mass General on using HIV/AIDS drugs to prevent inflection. Gilead merely holds the FDA approval granting drug patent monopoly. The sale of such generics in China, India is counted in the tally of "IP theft" that Trump and his trade negotiators are railing about, and that Trump is fighting by taxing US consumers with import tariffs to punish China, Canada, et al.

@mulp - CNTRL + F + PATENT = 1 hit, this one. Kudos for at least mentioning patents, whether good, bad or ugly, at least you mentioned it. I'm always amazed at two things while spending a career in the invention business: (1) the number of inventors who had few or any patents (and were proud of it), and (2) that an entire conversation on innovation and invention can occur in the lay press without a single mention of patents, when in fact with VC types, in the pre-acquisition checklist before doing a deal, "patents?" is on the first page.
Regarding the last point, it's as if a comprehensive history of WWI was written without a single mention of the assassination of Archduke Franz Ferdinand before WWI. Whether or not you believe that assassination was the spark that started WWI, at least you should mention it in passing.

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mulp making more sense than Dick The Butcher? Senility has gotten the better of you, Dick.

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CUCKS! That is all.

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I haven't listened yet, but I certainly agree with that sample. As the license plate said yesterday, 1WORLD

Make sure that every single child does, in fact, have three, four, and five-year-olds go to school. School! Not day care, school. We bring social workers into homes of parents to help them deal with how to raise their children. It’s not that they don’t want to help. They don’t know what— They don’t know what quite what to do. Play the radio. Make sure the television—excuse me, make sure you have the record player on at night. The phone—make sure the kids hear words. A kid coming from a very poor school—er, a very poor background will hear 4 million words fewer spoken by the time they get there.

The toothless man said, "Poor kids are just as bright and talented as white kids."

1NationUnderGod

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Biden's bad. But interestingly he is bad in the same ways Trump is, only less so.

Record players is nutty, but it isn't as *bad* as saying they are all MS-13.

My response to the legacy of slavery is

No, I’m going to go like the rest of them do, twice over, OK? Because here’s the deal. The deal is that we’ve got this a little backwards. And by the way, in Venezuela, we should be allowing people to come here from Venezuela. I know Maduro. I’ve confronted Maduro. No. 2, you talk about the need to do something in Latin America. I’m the guy that came up with $740 million to see to it those three countries, in fact, change their system so people don’t have to chance to leave. You’re all acting like we just discovered this yesterday! Thank you very much.

Send me to Joe....3....030.....30...3030

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One of your more retarded quips. Trump is an idiot racist buffoon. Biden is literally senile. Senile. He doesn’t know what year it is.

Democrats are rallying behind a candidate that does not know where he is, what year it is, or what questions are being asked. He uses childlike references, a clear sign of senility. Send him to a nursing home, not the presidency.

For all of the jellybean jokes about Reagan, Democrats are putting forth a non-incumbent candidate that thinks slavery legacy questions are about Maduro.

Democrats are going all in on losing the election. I guess it makes sense if the alternative is Bernie or Warren.

Much better to have Trump for another four years. He won’t raise taxes and will help pave the way for a moderate in 2024. Dems will have 8 years of Trump to run against.

The rational position for anyone that’s a net taxpayer is probably to vote for Trump now and then wait for a moderate Dem in 2024.

Are you actually arguing that age related cognitive decline is not one of Trump's problems?

Guess what?

He's senile too. He just hides it beneath rants that are so incomprehensible in other ways that it's hard to factor.

Yellow skin and lightbulbs.

Trump doesn’t respond with Biden level answers.

You can bullshit your way with other candidates. But the truth is that Biden does not understand where or why he is/exists.

Trump is an ass but is mentally functional. Biden is a lost old man in a nursing home.

Really

http://dctribune.org/psychologist-makes-stunning-revelation-about-trumps-mental-health-hes-in-a-state-of-pre-dementia/

"Bookworm Room Blog: "If listening to Trump irks you, stop listening and start focusing on his accomplishments. Next, do the same for the Dem candidates. Then vote for Trump."

I love you, man.

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During the 1988 presidential campaign, vice-presidential hopeful Dan Quayle was invariably described by the media as lacking "gravitas". Oddly, that word is no longer used, even in regard to dopes like Biden, or even more relevantly, Robert O'Rourke. The word must have been excised from the The New York Times Manual of Style and Usage.

Trump killed off any thought of presidential gravitas. Apparently it's no longer needed.

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Or

http://nymag.com/intelligencer/2018/01/trump-is-mentally-unwell-and-everyone-around-him-knows-it.html

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Bonus link

https://www.usatoday.com/story/opinion/2019/04/09/does-donald-trump-have-dementia-we-need-know-psychologist-column/3404007002/

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If Biden is bad, the Democrats are bad.

He’s mentally retarded.

We agree on some things. Mostly competence in governmental functions. You’re literally advocating for an executive who’s completely lost his sanity and mind!?

Democrats 2020: vote for literal insanity and senility. It might be better!?

Wasn't that the whole argument for Trump, a lesser evil?

So we have reached the point where Democrats are all in for Senility.

Ok, then vote Republican. The man in the Whitehouse should know what decade it is. Why have Democrats decided on a literally senile 80 year old!?

Maybe you are just so used to Trump's infirmity that you can't see it anymore.

But for those who can, it's pretty simple. Which senile old guy are you going to support, the one who is too nice, or the one who is too mean?

If you pick mean, look to your own soul.

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I like your "style."

The Dem alternatives are too stupid to govern.

Biden is simply senile.

And, Crazy Uncle Joe is not so stupid as to call voters "racists' or "deplorable."

Groper Joe is not vowing to take away Americans' gas cars and stoves, their private healthcare, their affordable gas and electricity, their tax cuts, and their jobs. Or, is he? I stopped listening when he opened his toothless maw.

Good thing Trump never endorsed the groping on tape.

As I say, bad in the same ways, but worse.

Democrats 2020 poster:

Our candidate may be senile. And he thinks black parents are incapable of raising their children without social workers. He has no idea where he is , what year it is, and thinks black families should buy record players to teach their children words.

He also thinks Venezuela is directly related to the effects of slavery in the US. He thinks Venezuela is Iraq is the most logical explanation. Yikes.

But Trump doesn’t want to dissolve ICE, the Border Patrol, and give all illegal future citizens Medicare.

Vote Democrat 2020! If you like your doctor, your hospital will collapse with Medicare reimbursement rates, so your doctor won’t have a place to practice.

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"Biden's bad. But interestingly he is bad in the same ways Trump is, only less so."

This maybe the best take on the political situation:

Vote Biden! He's not quite as Bad as the Orange Man.

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I have heard the whole thing now and I must say it is a wonderful and wide-ranging conversation.

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Show your hand. For 30 pieces of silver, you sell our land.

+1

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Yes, China is investing in research and in productive capital far in excess of the US, in part because China saves (invests): China saves nearly 50% of GDP compared to our about 5%. But nothing stays the same, and as China becomes wealthier, its consumption rate will increase and increase by a lot, and China's consumption of American made goods will correspondingly increase. That's if trade isn't destroyed first by you know who. If trade is destroyed, the world (including the US) will be a poorer place.

I will listen to the podcast. Beckworth is an excellent interviewer. His interviews are about the interviewee and his or her expertise not about Beckworth.

Beckworth is pretty good but not excellent. I started listening to this one but gave up at around the halfway mark. Alex is full on about the benefits of open border style mass migration, the underlying message is that talent and intelligence is evenly distributed in all populations and therefore the more the better. David gave no pushback on this or anything else Alex said. David rarely gives pushback to any of his guests, his interviews are often more like a conversational hagiography than enquiry.

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What will the US produce using US labor to sell to Chinese consumers other than organic raw materials?

Apple produces are manufactured in China. Fashion brands from shoes, handbags, dresses, to underwear are manufactured in China. GMs biggest market today is China, but most of the manufacturing is in China: models of Buicks never seen in the US.

China buys pig feed from the US, pigs, pig raising and processing IP. When China buys old US factories, its to make stuff sold in the US cheaper than importing from China.

Trump's trade war is in part about rent extraction, ie, getting cash from China for US labor mostly before 2000, eg, Mickey Mouse, John Denver, Star Trek/Wars.

Amazon has driven Keynes policy in media. AWS enabled Netflix, and other, then Amazon Prime Video, which has disrupted the cable monopoly protected by Congress to prevent Google/AT&T, Verizon, and local government competition, so, we now have so much investment in video, consumers can't consume it all, forcing prices and profits down to labor costs. But none is in a Chinese language, but China has lots of workers to use the same equipment, often made in China, to produce video and stream it in China.

Trump is stating most clearly the conservative/GOP ideology: government must give customers money to pay for US profits, because businesses should never be responsible for putting money in its customer pockets.

Trump sees China as cheating because it does not promote monopoly profits and scarcity rents by blocking building capital. Eg, helping Comcast block fiber to every address by AT&T, Verizon, Google, local governments

Right now the US sells higher education, houses, semiconductors, software, engineering and design services to Chinese people. Maybe also some petrochemicals. Arguably the US, via its multinationals, is also selling managerial and logistics expertise. The US also sell agricultural products as well. Those are roughly the same things that the US sells to Europe, if I am not mistaken. So I would expect that absent a really long trade war, that will continue.

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rayward: as China becomes wealthier, its consumption rate will increase and increase by a lot

Not necessarily the case at all rayward.

China may well follow the Singapore path, where private consumption drops or stagnates as GDP grows - https://www.ceicdata.com/en/indicator/singapore/private-consumption--of-nominal-gdp / https://www.theonlinecitizen.com/2017/06/27/personal-consumption-expenditure-spore-36-hong-kong-66-of-gdp/.

Singapore is a rich country in Asia measured by GDP, but not a rich one measured by consumption, and particularly not by consumption adjusting for its urbanisation!

China is not a democracy where the Communists stay in power by promising and delivering increases in living standards to win votes or by catering to global and globalist businesses which owns the media and which fetishizes "openness". They do so via patriotic claims amplified by the state-run media to strengthen the nation, and by a network of secret police, political patronage, re-education, fear, and purges of "corruption".

It is quite thinkable that they will never open to imports, if they view the deindustrialisation of China or dependence on imports as a threat to their power. It's not some inevitability that exists outside of the political environment.

Many nations, even in the democratic states place a premium on production and savings and exports over consumption - at the mild end, the more "developmental states" of Germany and Japan - even if that means depressed living standards and wages for people at the low economic scale in their nations.

China's levels of consumption are on a separate trend of being low for GDP: https://www.imf.org/external/pubs/ft/wp/2010/wp1093.pdf

There are many structural reasons for this, and ultimately these are political economic reasons.

Even considering a simple four countries comparison of the US, China, SK and Japan, and ignoring the tendencies for consumption share of GDP to drop in many countries. And even if they do have a turnaround, there is no reason why this consumption would be met by imports, and much less of a reason why this consumption would be met by American imports, from a country the Chinese Communist Party sees as its main geostrategic competitor for influence in Asia (and has done since long before Trump).

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...very basic stuff:

human labor is a critical but always scarce economic resource -- the more the better for human society, if employed productively.
And Division-of-Labor is a tremendous productivity booster.

Cooperation & Markets are always good for society.
Conflict & War are always bad.

The problem with China is its oligarch government, not its people.
The problem with America is its oligarch government, not its people.

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POW WOW CHOW

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'ideally I would come up with a cure for cancer'

Why would it be ideal for you to come up with a cure? Anyone coming up with a cure would be ideal, compared to what currently exists.

Sometimes, even with all of Prof. Cowen's attempts to claim that the market is basically solely responsible for human cooperation, it is strange to see how those attracted to a libertarian framework seem to simply ignore the fact that most people are not so rigorously self-centered, and that cooperation is what fosters progress.

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I was talking to someone who got her PhD in biomedical sciences in the 80's on markers of cancerous cells. She was telling me she had directed a friend who had a cancer diagnosis, and that there were trials on a drug that was designed to treat cells with specific markers.

40 years.

If China comes up with a drug it won't be because of brilliant scientists, but because they don't have the ball and chain of the FDA to drag around.

A friend is doing statistical work at a famous cancer hospital. His take away is there still plenty of work to do matching cancers to treatments. And it's hard enough that it isn't even for a "type" of cancer. They are gene sequencing cancerous cells within a type.

No need for "200 mpg carburetor" level conspiracy theory.

Still if the commies do figure out the key, they'll offer to sell it.

"No need for "200 mpg carburetor" level conspiracy theory."

You're reading comprehension is poor. He didn't say it was some kind of conspiracy about suppressing the cure for cancer. He's saying that are medical research establishment isn't particularly effective.

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AT is right on the economics but ignores the geopolitics. Chinese researchers curing cancer is great. Chinese engineers developing better surveillance tech or better weapons, not so great. Wealthier Indian consumers, unambiguously good. Wealthier Chinese consumers, good for the most part but can't ignore that those consumers are captive to a tyrannical Chinese government. For example, that Chinese government has used its jurisdiction over Chinese airport slots, which became more important only because of increased Chinese GDP, to control the content of US companies' US websites. If a US regulator, say financial regulators, used its powers to punish US banks that criticized Trump, I'm sure that AT would be among the first to recognize the threat to liberty. I see no reason to scrutinize a government agency less simply because that agency belongs to a foreign government. (For some reason, libertarians of the non-interventionist ilk seem strangely unconcerned about unlimited government so long as those governments are foreign.)

During the Cold War we had all sorts of restrictions on dealing with the Soviets. Trade and economic theories were *not* the right way to understand those restrictions.

Yet, our Japanese "friends" betrayed us and armed the Soviets? Why do we keep supporting the Japanese regime

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Is not HK an example of a relatively large middle class fighting back against government for more freedom? A wealthy Chinese consumer class will not necessarily be a docile one. The history of China is littered with rebellions against authority that is unjust or incompetent.

"Is not HK an example of a relatively large middle class fighting back against government for more freedom? "

They have to be successful for it to be relevant.

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Why should the American public sign up for a Cold War against China that will in no way benefit ordinary Americans? The CCP aren’t saints (though they are Jesuitical) but they aren’t comparable at all to the Soviets. They don’t want to foment revolution in other countries, and there expansionism is limited to some border disputes with their neighbors that are not worth fighting real wars over. Like any superpower, they are going to try to influence the world to suit their interests. But if that is the threat, then the answer to meeting that threat is easy; simply show that liberal democracy is a better form of government.

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'but because they don't have the ball and chain of the FDA to drag around'

Yet this cancer prevention vaccine was resisted by some, none with any connection to the FDA - https://en.wikipedia.org/wiki/Gardasil

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Alex agreed that the most valuable resource is ideas.

The test in this case is the following: do the ideas from China make it to the rest of the world?

Isn’t bike sharing a Chinese idea? Or is it that the Chinese were the first ones to do it at a massive scale?

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For thousands of years it has.

Should we pay for Chinese ideas or just steal them?

Does Alex offer his books free in Chinese, for example?

BTW, we did steal them for centuries. I'm open to changing the rules. But they need to be changed for both countries. If its cool to steal tech, then be open about it. We should change our laws.

End copyright. End patents. End trademarks.

or, if you want a world where ideas are created worldwide, and sold worldwide, China has to change.

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Alex T: "Well, pretty interestingly, if you look on the longest time scale, it's pretty clear that people are brains, and why do I say that? I say that because both GDP per capita, and actually the growth rate in GDP per capita, have increased along with world population. In fact, if you want to ask, "Well, when has the world economy grown the fastest?" It's actually right now. It's actually today. The world economy is growing faster now than it ever has before,..."

This was probably true until the 1970s but not in recent decades. The World Bank shows that the world GDP per capita has grown at:

1960s... 3.5%
1970s... 2.6%
1980s...1.2%
1990s...1.1%
2000s...1.6%
2010s...1.7%

https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG

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Oh Professor Tabarrok, you sweet summer child!

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Alex T:" so South Korea had several of those doublings, and by the 1990s, they're basically on the level of a European economy,"

South Korea reached parity with both Italy and the EU average in 2013 but with much longer working hours.

In 1995, South Korea's GDP per capita was 65% that of the EU.

https://stats.oecd.org/Index.aspx?DataSetCode=PDB_LV

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Maybe Alex Taborrak should spend less time convincing Americans of these points, and more time convincing the Chinese?

They are the ones that have been convinced for several decades that China must make its own airplanes, must demand tech cooperation, sets up funds and orgs to bring back Chinese researchers, that has Chinese nationals come back from the US with USB full of Tesla or Uber software...

Dear US economists: you have Chinese students in your classes. TEACH THAT ITS OKAY TO BUY FROM AMERICA AND CHINESE AUTARKY ISN'T A GOOD IDEA.

Jesus, translate your videos into Mandarin and get them on youkou.

The USA is already a very free market, the last year notwithstanding. Work on the countries that have had large tariffs, NTB's, and who steal technology to stop doing that. We wouldn't have Trump if China has played fair.

You are making the exact opposite of the points you think you are making. We want China to steal our ideas. In particular, individual liberty, freedom, and democracy. They already stole capitalism from us and are doing a good enough job with it. IP is fake property and government granted monopolies backed by force is an affront to individual liberty. In China, everybody steals everybody else's IP that is why they are prospering while in the US, we waste everyone's time with IP lawsuits. It is not enough to have an idea but to execute on it to make products and be judged by the market.

Yes, I want them to steal those idea...perhaps the professor could spend time teaching his students about them.

But speaking of cancer treatments...

https://twitter.com/Jkylebass/status/1173725599921266688

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Right, Comrade. Except China only copies, it doesn't innovate. But they don't have any scruples when it comes to cloning.

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From the perspective of China:

1840s - So, increasing the size of the British market, with wealthier British consumers, that is going to increase the demand to do research and development, and that is going to have tremendous impacts not only in health, but in any field of endeavor which relies on these big, fixed costs. So, any time you have an idea-centered industry, which is a lot of industries today. All of high tech is idea centered. More R&D means more ideas. That comes from having bigger, richer markets.

1930s - So, increasing the size of the Japanese market, with wealthier Japanese consumers, that is going to increase the demand to do research and development, and that is going to have tremendous impacts not only in health, but in any field of endeavor which relies on these big, fixed costs. So, any time you have an idea-centered industry, which is a lot of industries today. All of high tech is idea centered. More R&D means more ideas. That comes from having bigger, richer markets.

No downsides that I can think of.

Neither of those were the perspective of China. Nice strawman though if a bit repetitive.

It was more of an "imagine if" scenario. As in "imagine if" China actually welcomed the prospect of domination by economically ascendant rivals because the world would benefit overall from the new technological discoveries.

"It's okay that we've essentially lost all power and sovereignty, because fewer people are dying of cholera now!"

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Alex, no one contests that Chinese development will have net spillover advantages.

Well, some do, mainly on environmental grounds (which is absolutely viable), but this is a somewhat separate question.

But what some of us do believe is that it would be a safer world in which this development comes more in sync with the development of Asian powers which were not both a) a large Communist state with b) a long imperial history of throwing their weight around as a self conceived centre of the world.

A world where SE Asian states, Russia, India, Japan and Korea, with the help of US and European allies can largely check and frustrate the Chinese Communist Party in any direction, and one where China gets old before its rich and converge with Asia as a whole, is probably much safer than one in which it can't, even if this costs us some in China's "market size".

Much of this may be out of our control, but there's no reason why we have to actively pivot towards being an enabler of the CCP, and to pivot towards an incestuous bilateral relationship where our consumer markets feed Chinese export advantages with massive spillover advantages to their development as a whole, when we could be feeding export-led industrialisation in exactly the national forces in Asia that would check, frustrate and restrain the Chinese Communist Party.

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