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Posts Tagged ‘Growth

“Monetary policy is one of the most difficult topics in economics. But also, I believe, a topic of absolutely crucial importance for our prosperity.”*…

Basement of a bank full of banknotes at the time of the Mark devaluation during the economic crisis in the Weimar Republic

What can we learn from a twentieth century economist who was a critic of Keynes and a staunch advocate of the Gold Standard? Samuel Gregg considers the career of Jacques Rueff

Money, it is often said, makes the world go round. The inverse of that axiom is that monetary disorder brings chaos in its wake. As we learned from the hyperinflation that wreaked havoc in 1920s Germany and the stagflation which hobbled Western economies throughout the 1970s, the effects of such disorder go far beyond the economy. Further complicating the problem is that restoring monetary stability is invariably a painful exercise, often bringing unemployment, recession and lasting social damage in its wake.

As a rule, monetary theory and monetary policy are dry affairs, dominated by highly technical discussions concerning topics such as the nature of capital or the likely impact of interest-rates set by central banks. One thinker who did not conform to this mould was the French monetary theorist Jacques Rueff (1896-1978). Arguably France’s most important twentieth-century economist, Rueff played a major role in shaping the Third Republic’s response to the Great Depression in the 1930s, designed the market liberalisation programme that saved France from economic collapse in 1958, and emerged in the 1960s as the leading critic of the US dollar’s role in the global economy and a prominent advocate of a return to the classic gold standard.

Rueff was, however, much more than an economist. A graduate of the École Polytechnique, he was among that small elite of civil servants trained in administration, engineering, mathematics, the natural sciences, foreign languages, and political economy whose role was to inject stability into the perpetual political pandemonium of the Third Republic. But even among that highly-educated cohort, Rueff stood out for the breadth and depth of his knowledge and his willingness to integrate it into his economic reflections. For Rueff, the significance of monetary order went beyond issues such as economic growth or employment, as important as they were. Ultimately, it was about whether Western civilisation flourished or embraced self-delusion…

Gregg recounts Rueff’s career, his championing of “real rights” (e.g., property rights) vs. “false rights” (which involve the state declaring something such as unemployment benefits to be a right and then trying to realize it through means that destroy real rights), and his advocacy of a return to the Gold Standard (part of his critique of the use of the U.S. dollar as a unit of reserve)… all positions with which reasonable people (including your correspondent) might disagree. But Gregg reminds us that Rueff’s most fundamental goal– a healthy society– surely remains desirable, and that his fear of the chaos that monetary meltdowns can cause is only too justified…

Monetary order wasn’t everything for Rueff. His writings reflect deep awareness of the ways in which culture, religion, philosophy, music and literature influenced civilisational development. Nonetheless Rueff insisted the threats posed by monetary disorder were more than economic. For him, civilisational growth was impossible without monetary order…

Let us not allow means with which we disagree to obscure important ends.

After examining the economic chaos of the early twentieth century, monetary theorist Jacques Rueff argued that without monetary order, civilizational growth is impossible: “Jacques Rueff’s quest for monetary order,” from @DrSamuelGregg in @EngelsbergIdeas.

* Maxime Bernier


As we remember that neither should we allow ends with which we disagree to obscure important means, we might spare a thought for Leonid Kantorovich; he died on this date in 1986. An economist and mathematician best known for his theory and development of techniques for the optimal allocation of resources, he is regarded as the founder of linear programming— for which he received the Nobel Memorial Prize in Economic Sciences in 1975.


“The whole of the global economy is based on supplying the cravings of two percent of the world’s population”*…

Perhaps that’s an oversimplification; but as a new McKinsey Global Institute study suggests, perhaps not by much…

We have borrowed a page from the corporate world—namely, the balance sheet—to take stock of the underlying health and resilience of the global economy as it begins to rebound from the COVID-19 pandemic. This view from the balance sheet complements more typical approaches based on GDP, capital investment levels, and other measures of economic flows that reflect changes in economic value… [and] provides an in-depth look at the global economy after two decades of financial turbulence and more than ten years of heavy central bank intervention, punctuated by the pandemic.

Across ten countries that account for about 60 percent of global GDP—Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States—the historic link between the growth of net worth and the growth of GDP no longer holds. While economic growth has been tepid over the past two decades in advanced economies, balance sheets and net worth that have long tracked it have tripled in size. This divergence emerged as asset prices rose—but not as a result of 21st-century trends like the growing digitization of the economy.

Rather, in an economy increasingly propelled by intangible assets like software and other intellectual property, a glut of savings has struggled to find investments offering sufficient economic returns and lasting value to investors. These savings have found their way instead into real estate, which in 2020 accounted for two-thirds of net worth. Other fixed assets that can drive economic growth made up only about 20 percent the total. Moreover, asset values are now nearly 50 percent higher than the long-run average relative to income. And for every $1 in net new investment over the past 20 years, overall liabilities have grown by almost $4, of which about $2 is debt…

The rise and rise of the global balance sheet: How productively are we using our wealth?,” from @McKinsey_MGI

(Image above: source)

* Bill Bryson


As we recalculate: we might spare a thought for composer, musician, director, and producer Frank “anything played wrong twice in a row is the beginning of an arrangement” Zappa; he died (of pancreatic cancer) on this date in 1993 at age 52.

“Politics is the entertainment branch of industry”

“The bottom line is always money”


“When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals”*…

It’s said that nothing lasts forever…

In 1930, the English economist John Maynard Keynes took a break from writing about the problems of the interwar economy and indulged in a bit of futurology. In an essay entitled “Economic Possibilities for Our Grandchildren,” he speculated that by the year 2030 capital investment and technological progress would have raised living standards as much as eightfold, creating a society so rich that people would work as little as fifteen hours a week, devoting the rest of their time to leisure and other “non-economic purposes.” As striving for greater affluence faded, he predicted, “the love of money as a possession . . . will be recognized for what it is, a somewhat disgusting morbidity.”

This transformation hasn’t taken place yet, and most economic policymakers remain committed to maximizing the rate of economic growth. But Keynes’s predictions weren’t entirely off base. After a century in which G.D.P. per person has gone up more than sixfold in the United States, a vigorous debate has arisen about the feasibility and wisdom of creating and consuming ever more stuff, year after year. On the left, increasing alarm about climate change and other environmental threats has given birth to the “degrowth” movement, which calls on advanced countries to embrace zero or even negative G.D.P. growth. “The faster we produce and consume goods, the more we damage the environment,” Giorgos Kallis, an ecological economist at the Autonomous University of Barcelona, writes in his manifesto, “Degrowth.” “There is no way to both have your cake and eat it, here. If humanity is not to destroy the planet’s life support systems, the global economy should slow down.” In “Growth: From Microorganisms to Megacities,” Vaclav Smil, a Czech-Canadian environmental scientist, complains that economists haven’t grasped “the synergistic functioning of civilization and the biosphere,” yet they “maintain a monopoly on supplying their physically impossible narratives of continuing growth that guide decisions made by national governments and companies.”

Once confined to the margins, the ecological critique of economic growth has gained widespread attention. At a United Nations climate-change summit in September, the teen-age Swedish environmental activist Greta Thunberg declared, “We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you!” The degrowth movement has its own academic journals and conferences. Some of its adherents favor dismantling the entirety of global capitalism, not just the fossil-fuel industry. Others envisage “post-growth capitalism,” in which production for profit would continue, but the economy would be reorganized along very different lines. In the influential book “Prosperity Without Growth: Foundations for the Economy of Tomorrow,” Tim Jackson, a professor of sustainable development at the University of Surrey, in England, calls on Western countries to shift their economies from mass-market production to local services—such as nursing, teaching, and handicrafts—that could be less resource-intensive. Jackson doesn’t underestimate the scale of the changes, in social values as well as in production patterns, that such a transformation would entail, but he sounds an optimistic note: “People can flourish without endlessly accumulating more stuff. Another world is possible.”

Even within mainstream economics, the growth orthodoxy is being challenged, and not merely because of a heightened awareness of environmental perils. In “Good Economics for Hard Times,” two winners of the 2019 Nobel Prize in Economics, Abhijit Banerjee and Esther Duflo, point out that a larger G.D.P. doesn’t necessarily mean a rise in human well-being—especially if it isn’t distributed equitably—and the pursuit of it can sometimes be counterproductive. “Nothing in either our theory or the data proves the highest G.D.P. per capita is generally desirable,” Banerjee and Duflo, a husband-and-wife team who teach at M.I.T., write…

As the estimable John Cassidy (@JohnCassidy) explains, the critique of economic growth, once a fringe position, is gaining widespread attention in the face of the climate crisis: “Can We Have Prosperity Without Growth?

See also Branko Milanovic (@BrankoMilan): “Degrowth: solving the impasse by magical thinking.”

* “When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.” — John Maynard Keynes, Economic Possibilities for Our Grandchildren


As we internalize externalities, we might send carefully-conserved birthday greetings to Gifford Pinchot; he was born on this date in 1865.  An American forester, he became the first chief of the Forest Service in 1905. By 1910, with President Theodore Roosevelt’s backing, he built 60 forest reserves covering 56 million acres into 150 national forests covering 172 million acres.  Roosevelt’s successor, President Taft– no environmentalist– fired Pinchot.  Still Pinchot’s efforts earned him the honorific, “the father of conservation.”


Written by (Roughly) Daily

August 11, 2021 at 1:00 am

“The loudest of doomsayers, so often, carry the weightiest of sin”*…

A quick look at how some of the grimmest prognoses for the pandemic’s effect have turned out…

When misfortunes multiplied during the coronavirus pandemic, observers seized on a four-letter word signaling end of days for the largest state with one-eighth the U.S. population and 14% of its gross domestic product. “California doom: Staggering $54 billion deficit looms,” the Associated Press concluded a year ago in May. “California Is Doomed,” declared Business Insider two months earlier. “Is California doomed to keep burning?” queried the New Republic in October. California is “Doomed” because of rising sea levels, according to an April EcoNews Report. Bulletins of people leaving the world’s fifth-biggest economy for lower-cost states because of high taxes and too much regulation stifling business continue unabated.

No one anticipated the latest data readout showing the Golden State has no peers among developed economies for expanding GDP, creating jobs, raising household income, manufacturing growth, investment in innovation, producing clean energy and unprecedented wealth through its stocks and bonds. All of which underlines Governor Gavin Newsom’s announcement last month of the biggest state tax rebate in American history.

By adding 1.3 million people to its non-farm payrolls since April last year — equal to the entire workforce of Nevada — California easily surpassed also-rans Texas and New York. At the same time, California household income increased $164 billion, almost as much as Texas, Florida and Pennsylvania combined, according to data compiled by Bloomberg. No wonder California’s operating budget surplus, fueled by its surging economy and capital gains taxes, swelled to a record $75 billion

If anything, Covid-19 accelerated California’s record productivity. Quarterly revenue per employee of the publicly traded companies based in the state climbed to an all-time high of $1.5 million in May, 63% greater than its similar milestone a decade ago, according to data compiled by Bloomberg. The rest of the U.S. was nothing special, with productivity among those members of the Russell 3000 Index, which is made up of both large and small companies, little changed during the past 10 years.

While pundits have long insisted California policies are bad for business, reality belies them. In a sign of investor demand, the weight of California companies in the benchmark S&P 500 Index increased 3 percentage points since a year ago, the most among all states, according to data compiled by Bloomberg. Faith in California credit was similarly superlative, with the weight of corporate bonds sold by companies based in the state rising the most among all states, to 12.5 percentage points from 11.7 percentage points, according to the Bloomberg Barclays U.S. Corporate Bond Index. Translation: Investors had the greatest confidence in California companies during the pandemic.

The most trusted measure of economic strength says California is the world-beater among democracies. The state’s gross domestic product increased 21% during the past five years, dwarfing No. 2 New York (14%) and No. 3 Texas (12%), according to data compiled by Bloomberg. The gains added $530 billion to the Golden State, 30% more than the increase for New York and Texas combined and equivalent to the entire economy of Sweden. Among the five largest economies, California outperforms the U.S., Japan and Germany with a growth rate exceeded only by China.

Even with the economic disruptions caused by the pandemic, California cemented its position as the No. 1 state for global trade, with its Los Angeles and Long Beach ports seeing growth that led all U.S. rivals for the first time in nine years in 2020. Much has been made of the state reporting its first yearly loss in population, or 182,000 last year. Had it not been for the Trump administration preventing new visas, depriving as many as 150,000 people from moving to California from other countries annually, the 2020 outcome would have been more favorable.

Even so, Republicans, opposed to Newsom’s policies favoring immigration, criminal justice reform and greater benefits for housing, health and child care, want voters to decide whether he should be replaced in a potential recall election later this year. Former San Diego Mayor Kevin Faulconer, a Republican who is among those running to succeed him, said Newsom, a Democrat, hurt the state’s small businesses.

That’s not what the data shows. The 373 California-based companies in the Russell 2000 Index, which includes small-cap companies across the U.S., appreciated 39% the past two years and 85% since 2016, beating the benchmark’s 34% and 67%, respectively. The same California companies reported revenue growth of 56% the past five years, dwarfing the benchmark’s 34%, according to data compiled by Bloomberg. More important, California companies invested 16% of their revenues in R&D, or their future, when the rest of the U.S. put aside just 1%. 

Investing in the future is California’s way, the opposite of doom.

The Golden State has no peers when it comes to expanding GDP, raising household income, investing in innovation, and a host of other key metrics: “California Defies Doom With No. 1 U.S. Economy.” From Matthew Winkler (@Matthew_Winkler).

Someone ought to publish a book about the doomsayers who keep publishing books about the end of publishing

Evgeny Morozov

* Ta-Nehisi Coates


As we check the facts, we might recall that it was on this date in 1978 that the Rainbow Flag was flown for the first time during the San Francisco Gay Freedom Day Parade. Created by Gilbert Baker, it has become a sign of LGBTQ pride worldwide.


Written by (Roughly) Daily

June 25, 2021 at 1:00 am

“Our situation is unique in the annals of life, yet inscribed for all time in the logic of history”*…




A scan of the history of gross world product (GWP) at multi-millennium time scale generates fundamental questions about the human past and prospect. What is the probability distribution for negative shocks ranging from mild recessions to the pandemics? Were the agricultural and industrial revolutions one-offs or did they manifest dynamics still ongoing? Is the pattern of growth best seen as exponential, if with occasional step changes in the rate, or as super exponential? If the latter, how do we interpret the typical corollary,that output will become infinite in finite time? In a modest step toward answering such ambitious questions, this paper introduces the first internally consistent statistical model of world economic history…

[Looking back to 10,000 BCE, the author concludes that] the world economic system over the long term tends not to the steady growth seen in industrial countries in the last century or so, but to instability. The credible range of future paths seems wide.

Oh, so very wide… David Roodman (@davidroodman) goes big: “Modeling the Human Trajectory” (pdf).

(Image above: source)

* François Meyer, 1974. La surchauffe de la croissance: Essai sur la dynamique de l’évolution


As we take the long view, we might recall that it is on this date each year that the roughly 300 residents of a small village participate in a drawing that determines who will be sacrificed to insure a good harvest… in Shirley Jackson’s short story, “The Lottery.”

Originally published in the June 26, 1948, issue of The New Yorker, it evoked strong initial negative response; subscriptions were cancelled; much hate mail received throughout the summer; and the Union of South Africa banned the story.  It is now considered a classic of short fiction (and among the most famous American short stories); it spawned several radio, television, and film adaptations, and inspired voluminous analysis, both literary and sociological.

lottery source



Written by (Roughly) Daily

June 27, 2020 at 1:01 am

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