New IMF study on inequality:
1. makes growth more volatile/vulnerable to stagnation
2. income redistribution has no meaningful effect on GDP
wasoxygen, I remember a few months ago during a discussion you posed me the question, "Does inequality in and of itself hurt the economy?" So Ostry and these other guys (who I would guess you don't align with) have found that "lower net inequality is robustly correlated with faster growth." Working my way through the study now. Thoughts appreciated, from you or anyone else.
I drafted the beginning of two replies but they were quickly becoming sermons. It's a big issue. "lower net inequality is robustly correlated with faster growth." Faster growth isn't necessarily a sign of welfare. It is mostly a sign that the economy is small, because small things can grow faster than large things. The Top Ten list is not exactly crowded with tourist hotspots: Libya, Sierra Leone, Afghanistan, Mongolia, Turks and Caicos Islands, Niger, Turkmenistan, Panama, Macau, Cote d'Ivoire I was going to say that people want to live in places with high inequality, because that is where there is the most economic activity and wealth. But that list is not very promising either. Haiti is high on all the measures of inequality. It makes sense that large relative differences in some measure does not say much about absolute values of that measure. Therefore I think we should focus on the welfare of the poor, measured in absolute terms, not compared to extremely wealthy people who happen to live nearby.
As an aside, I heard a Marketplace segment this morning talking about specifically this. http://www.marketplace.org/topics/economy/we-probably-should-stop-taking-gdp-so-seriously The economist who created the GDP measurement warned himself that "The welfare of a nation can scarcely be inferred from a measurement of national income". Anyway, just thought I'd drop that in there.Faster growth isn't necessarily a sign of welfare.
I've been reading Aung Sang Suu Kyi's Freedom from Fear (fantastic, btw), and her 1994 speech to UNESCO, Empowerment for a Culture of Peace and Development, addresses precisely this:The welfare of a nation can scarcely be inferred from a measurement of national income
When economics is regarded as "the most important key to every lock of every door" it is only natural that the worth of man should come to be decided largely, even wholly, by his effectiveness as an economic tool.
If material betterment, which is but a means to human happiness, is sought in ways that wound the human spirit, it can in the long run only lead to greater human suffering.
The alleviation of poverty involves processes which change the way in which the poor perceive themselves and the world. Mere material assistance is not enough; the poor must have the sense that they themselves can shape their own future.
I don't ever mind sermons but they usually inspire me to do research and I just don't have time this weekend. Pretty crowded with resources-extraction economies, although I'm curious about Mongolia -- according to Wikipedia Mongolia's mining sector has it ready to become the next Tiger economy or whatever. Didn't know that. Of course, what we want isn't an absolute top ten, it's a list of how the countries with large inequality are growing compared to the countries with "small" inequality. As I understand it that's what they attempted to do at the IMF. More importantly -- what about the conclusion that wealth redistribution has essentially no proven negative side effects in the long term? I'm not pro- or anti- on this issue (generally I don't feel like I know enough about economics to tell what's good and what's bad), but it seems to me that they're saying we could "focus on the welfare of the poor" by focusing on inequality and not have a net negative effect on the economy.Faster growth isn't necessarily a sign of welfare. It is mostly a sign that the economy is small, because small things can grow faster than large things. The Top Ten list is not exactly crowded with tourist hotspots:
Kaldor-Kuznets-Solow consensus does not have any empirical backing. It is just some bullshit that western economists cobbled together to battle communism.
ermmm um .... look a pony. It is very hard to do economic policy experiments on a national level that are scientific.
i.e. Did the soviet experiment fail because central planning does not work or because they were in a cold war? Did America win because of the Market or because of a superior geographic/historical position? At the laboratory level playing econ games with students and cross-culturally with different ethnic groups the predictions of neo-classical economics don't seem to pan out. I would say econ is a troubling discipline.
Right. But from what I see, politicians don't even look at small, potentially-unscalable studies. They just support whatever fits their preconceived notions. I was wondering if I just wasn't looking at the right places. I know a few years ago Italy had a technocracy for like two weeks a year.