Socrates would've taught the Solow model!
There's some discussion going around as to the usefulness of the Solow model:
The initial question and initial response over at William Polley's blog here.
The response by EclectEcon here.
Some comments from Gavin Kennedy here.
More from EcletEcon here.
Gabriel commenting here.
Mike commenting here.
Then there's also Robert posting a quote by Kaldor which argues that the "whole structure" of neoclassical economics crumbles once one introduces increasing returns which also turned into a somewhat related discussion of constancy of factor shares, the validity/belief in JB Clark's marginal productivity theory of income distribution and the relevance of the Solow models in the comments (as with most sites that do the heterodox economics thing some of the comments are good and some of them are just nonsense).
Anyway. I'm in the You Should Teach The Solow Model crowd.
Why? Because Socrates would've taught it.
Socrates thought there were two, maybe three, kinds of people in the world and that you could arrange them in a hierarchy;
1. Those who don't know but think they know.
2. Those who don't know but know they don't know.
and then maybe some lucky ones;
3. Those who know and know they know.
There aren't many people in the 3rd category. But for some reason we always expect our models to move us from the 2nd category to the 3rd. And we're not satisfied if the movement is from the 1st to the 2nd.
The Solow model basically says that "it ain't capital accumulation" which is the cause of sustained growth, it's something else, the magical so called "Solow residual" which could include technology, policy, CHANGE in institutions etc. (I think a lot of people get confused here. Institutions, almost by definitions, don't change quickly. So they can only affect the LEVEL of income or, alternatively create CONDITIONS for growth. For example, property rights are great. But they don't cause growth by themselves. It's the higher investment which property rights cause that causes growth (and in Solow that ain't gonna work in long run. You gotta have something else))
There've been many people over the years that've concluded that since the Solow model doesn't "explain" growth (because it lumps its major cause into an exogenous residual) it is useless and only an excercise in mathematics.
But people! When you thought you knew (it's capital accumulation!) and then you learn that you don't know (it can't be capital accumulation!) you've learned something just as important and valid as if you've acquired a "positive knowledge".
And before Solow, lots of people DID think that all it took for growth to take place was a higher saving rate and more investment. Lots of development economists, planners in socialist countries, planners in third world countries, advisors from international organizations and so on.
It's good to know that you can get milk from cows. But it's also good to know that you can't get milk from chickens - particularly if you were under the mistaken impression that you could.
The initial question and initial response over at William Polley's blog here.
The response by EclectEcon here.
Some comments from Gavin Kennedy here.
More from EcletEcon here.
Gabriel commenting here.
Mike commenting here.
Then there's also Robert posting a quote by Kaldor which argues that the "whole structure" of neoclassical economics crumbles once one introduces increasing returns which also turned into a somewhat related discussion of constancy of factor shares, the validity/belief in JB Clark's marginal productivity theory of income distribution and the relevance of the Solow models in the comments (as with most sites that do the heterodox economics thing some of the comments are good and some of them are just nonsense).
Anyway. I'm in the You Should Teach The Solow Model crowd.
Why? Because Socrates would've taught it.
Socrates thought there were two, maybe three, kinds of people in the world and that you could arrange them in a hierarchy;
1. Those who don't know but think they know.
2. Those who don't know but know they don't know.
and then maybe some lucky ones;
3. Those who know and know they know.
There aren't many people in the 3rd category. But for some reason we always expect our models to move us from the 2nd category to the 3rd. And we're not satisfied if the movement is from the 1st to the 2nd.
The Solow model basically says that "it ain't capital accumulation" which is the cause of sustained growth, it's something else, the magical so called "Solow residual" which could include technology, policy, CHANGE in institutions etc. (I think a lot of people get confused here. Institutions, almost by definitions, don't change quickly. So they can only affect the LEVEL of income or, alternatively create CONDITIONS for growth. For example, property rights are great. But they don't cause growth by themselves. It's the higher investment which property rights cause that causes growth (and in Solow that ain't gonna work in long run. You gotta have something else))
There've been many people over the years that've concluded that since the Solow model doesn't "explain" growth (because it lumps its major cause into an exogenous residual) it is useless and only an excercise in mathematics.
But people! When you thought you knew (it's capital accumulation!) and then you learn that you don't know (it can't be capital accumulation!) you've learned something just as important and valid as if you've acquired a "positive knowledge".
And before Solow, lots of people DID think that all it took for growth to take place was a higher saving rate and more investment. Lots of development economists, planners in socialist countries, planners in third world countries, advisors from international organizations and so on.
It's good to know that you can get milk from cows. But it's also good to know that you can't get milk from chickens - particularly if you were under the mistaken impression that you could.
posted by YouNotSneaky! at 1:48 PM
29 Comments:
YNS: I can't find the "Robert" quote from Kaldor you reference. But putting Kaldor together with Gavin's comments, we need to teach Romer '86. Going the route suggested by Gabriel leaves us in the ridiculous Convex World that has ruined the discipline as an account of reality.
""It is the hallmark of the neo-classical economist to believe that, however severe the abstractions from which he is forced to start, he will 'win through' by the end of the day - bit by bit, if he only carries the analysis far enough, the scaffolding can be removed, leaving the basic structure intact. In fact, these props are never removed; the removal of any one of a number of them - as for example, allowing for increasing returns or learning-by-doing - is sufficient to cause the whole structure to collapse like a pack of cards." -- Nicholas Kaldor (1966), "Marginal Productivity and the Macro-Economic Theories of Distribution", Review of Economic Studies, V. 33, N. 4: 309-319."
And yes, convexity spoils people.
"Robert" quotes Kaldor here.
Romer 86 or Romer 90? (I can live with either, the question is more "why not go all the way?")
Does the Solow model really close the case on economic growth as simply a matter of capital accumulation? I would have thought, only on the basis of some very arguable assumptions about linearity and about the validity of the measure of capital employed (my personal suspicion is that the Solow residual is to a very significant extent telling us how bad our depreciation assumptions are). If planners and development economists thought that you could get growth by accumulation of more lumps of undifferentiated abstract capital, then their problem was in the way they were thinking about capital at least as much as underestimating the size of the Solow residual. So as far as I can see, the conclusion is more like telling us that you could get milk from unicorns if they existed but couldn't get milk from manticores, rather than anything useful about cows and chickens.
By itself the Solow model does not close the case of course. Usually no single model clinches anything. But combined with empirical data, which can stand alone, with micro data and some other pieces of evidence I think the conclusion - it ain't capital accumulation - is pretty robust. Or to put it another way, even if the Solow model's all messed up because capital can't be aggregated or whatever, the main lesson that folks should take away from it is probably right. Maybe right for the wrong reasons, but probably right.
So you got 2 things there. First is the "what is this thing called Aggregate Capital that you're talking about?" criticism and the second is... something about linearity which I'll skip... and something about depreciation.
Ok depreciation first. Even if you don't believe in Aggregate Capital, you might be inclined to occasionally admit that there is such a thing as an investment rate. And at the end of the day the Solow model tells you that the cross country, time series, variance in (ln) of per capita incomes cannot be explained by the variance in the investment rates. It's got depreciation in it (the purely technical sort, not the accounting sort that Robert V. discussed) so it's not to hard to ask; "ok, maybe this whole residual business is wacky, maybe we're getting the depreciation rate wrong". But that won't work. In Solow income per capita is positive function of the saving rate (which is true empirically, but not enough) and a negative function of the depreciation rate. I'm guessing you're probably thinking of the difference between circulating capital (100% depreciation rate) and fixed capital and the fact that the model doesn't deal with the first kind. But if it did it would go the other way. It would put MORE burden on exogenous TFP to explain variance in incomes. Ok. But even if not, it's not too hard to ask; by how much depreciation would have to be mis-measured so that it can pick up all that crap in the Solow residual. And the answer is "whole bunches of oats". If you're gonna say that the reason is differences in depreciation you got some serious convincin' to do.
And this aggregate capital business. Fine. But at the end of the day you DO want to know whether an increase in output is due to more inputs or a more efficient use of the inputs. And basically most micro studies of industry level output, where capital aggregation is not a problem unless you want to get really pedantic about it, find that yup, over time, the increases in the industry's output are mostly due to being able to produce more output with the same amount of industry-specific machines (which can be measured in units of machines which are, um, common to the industry) and the same amount of labor employed. Or in other words, if you look at micro level, you see the "technological progress" that winds up in the macro Solow residual.
The linearity business. I don't quite know what you mean unless you're willing to be more specific. I'm guessing you have something like increasing returns to scale and multiple equlibria in mind. Ok, fine. That's one way to reintroduce the importance of capital accumulation into growth. Still, even there capital accumulation ends up being a necessary not a sufficient condition. So at best you go from "it ain't capital accumulation" to "it cannot be JUST capital accumulation".
And of course, what are the alternatives? The whole linear production approach, whether of the Leontief, or Marxian, or Sraffian, or whatever variety is mind-numbingly restrictive. How DO you introduce pure technological growth (in the sense of being able to produce more output with the same amount of inputs) into those models? Not saying that it's true empirically but at least a model should admit that possibility. And hey, maybe it's been done, maybe it's in one of the heterodox journals and if so I'd be happy be to know more about it. But how would it work? You introduce a new 'technique' that all of sudden becomes available? You scale the unit-input coefficients of an old technique? All that's gonna play havoc with the nice linear algebra of those models and at least as far as I know you can't do it in any meaningful fashion. All you can do with those model is say "if the economy saves a higher proportion of it's corn as seed corn then it's growth rate will increase" or something similar. Which is why those kind of models get caricatured (deservedly) as just fancier versions of the AK model which says that all you need for higher growth is a higher investment rate. And that works somewhat. But not enough.
Even if you don't believe in Aggregate Capital, you might be inclined to occasionally admit that there is such a thing as an investment rate.
well no, not on an aggregate basis. I'll agree that there's a savings rate simply because it's one minus the consumption rate, but that's it. I don't see why you thought I would believe in an investment rate, particularly since you're going to want to use that as an input into an aggregate production function which you know I also don't believe in.
But at the end of the day you DO want to know whether an increase in output is due to more inputs or a more efficient use of the inputs.
But the whole point of the CCC is that while you might want this piece of information, you can't have it, because (at least as applied to capital), it's not actually a logically coherent question to ask.
The whole linear production approach, whether of the Leontief, or Marxian, or Sraffian, or whatever variety is mind-numbingly restrictive.
It's restrictive in that it restricts you to saying things that make sense; but the additional freedom you get from dropping this sort of restrictiveness isn't worth having. Here's a reasonable article of the sort that JPKE and Metroeconomica regularly publish on the general topic of Schumpeterian growth theory.
The point here is that you can draw up IO tables at different points in time for an economy, which will show you how various sectors inputs and outputs have grown in importance.
All that's gonna play havoc with the nice linear algebra of those models and at least as far as I know you can't do it in any meaningful fashion
the proposition that major economic change comes about as the result of entrepreneurial processes that are not susceptible to mathematical modelling is not exactly uncongenial to heterodox economics - it's pretty much the whole of what Paul Davidson's been saying for the last thirty years. A step jump to a new model makes a lot more sense than most of endogenous growth theory. There are some things which shouldn't be in the model.
You seem here to be defending the specific Solow model as if it were the only model ever made in which there was such a thing as technological progress, against a straw man who keeps asserting that only savings rates determine everything. But that's not right. The reason that people don't want the Solow model to be the basis of teaching is that it reaches this uncontroversial conclusion on the basis of a screwed-up framework of aggregate production functions, undifferentiated capital, linear returns, Uncle Tom Cobbleigh and all.
"well no, not on an aggregate basis."
Wait. So you don't believe in the I in C+I+G+X?
(reply to rest later)
I'll believe in it as part of an accounting identity, which in turn is based on a decomposition of final demand into consumption goods and capital goods; I'll even reify it to a certain degree as being a useful concept (to the extent that the distinction between consumption and capital goods makes sense because demand for the two is determined differently).
But if you're going to cumulate that expenditure into a capital stock, and then divide it by the cumulated and depreciated total to get an investment rate, then no. Double no if you're going to close your model in a way which determines the equilibrium level of that investment rate rather than leaving it to animal spirits.
I don't need to divide it by cumulated capital stock. I just need to divide it by total output to get the investment rate. And it doesn't matter in Solow how the investment rate is determined. All that it says is that the economy saves (invests) a constant fraction of its output each period. Of course you can go the whole MPK and MPL route but all that is no way necessary for the "it's not capital accumulation, or at least not investment rates" conclusion.
All that it says is that the economy saves (invests) a constant fraction of its output each period.
But it also needs this constant fraction of output to buy a particular amount of capital; you're going to need a capital stock and a return on that capital in your model if you're going to get the Schumpeter result[1] in the Solow way.
By the way, I really think you're wrong about input/output models here. Chapter 12 of "The Economics of Input/Output Models" by Tijs ten Raa is all about deriving and extending the Solow results in an IO framework. The great thing about IO economics is that it's ideologically neutral in this way.
And if you're going to do neoclassical growth accounting, then the IO approach (among others, including later versions of Solow's model) has the advantage of allowing you to tackle other questions, like why are machines more expensive in poor countries? There are a fair couple of stylised facts like this which are just as well established as the Schumpeter result, but which don't really fit into a Solow (1956) framework at all.
[1] I'm calling it this because it really is a bit much to use the empirical proposition that growth can't be explained simply by capital accumulation at constant technology, as a reason to teach the specific Solow (1956) model. It's not as if it was wholly original to Schumpeter either.
"a straw man who keeps asserting that only savings rates determine everything"
But this is a straw man which consists of the AK model, the Harrod-Domar model, pretty much any linear production model with crs and circulating capital (in which a rise in the saving rate affects the growth rate) and most thinking in development economics in the 1950's and 1960's. Even these days if you look through a lot of textbooks on Development Economics, there's a whole lotta stress laid on capital accumulation (which is what investment is, minus depreciation) to the exclusion of other factors.
In your last comment you seem to be agreeing with the proposition that "it ain't capital accumulation" though you don't want to attribute it to Solow and you think the same point can be made with better, IO, models. Fine.
But first, no model/idea is without its predecessors and yeah, sure we can call it the Schumpeter result or whatever. The Solow model does present the result in a stark colors however... and in a way that undergrad can understand.
Second, I'm glad to hear that growth accounting and similar can be done with I/O models and I do appreciate the references. However if you think that it is possible to teach undergrads I/O analysis you're crazy.
So unless you wanna get hung up on arguments over marginal productivity theory, which isn't even necessary to the main result of Solow, the Solow model, with its treatment of capital as homogenous as a simplifying abstraction, is a great vehicle to teach that basic lesson;
"it ain't capital accumulation"
Even these days if you look through a lot of textbooks on Development Economics, there's a whole lotta stress laid on capital accumulation
Well yes Sherlock. If the Solow model has taught you that it's possible to have technological progress etc etc with no effing capital, then it's done some damage. This is my point; precisely because it decomposes things into three completely separate but homogeneous components, the "Solow residual" is a really bad starting point for thinking about the phenomenon under study.
btw wtf? Of course you can teach undergraduates IO tables. You can teach it to yourself out of a book. It's easy.
"If the Solow model has taught you that it's possible to have technological progress etc etc with no effing capital"
Which is 1) not true 2) irrelevant here.
1) because it says you can have technological progress with no CHANGE in capital (and throughout this whole discussion you seem to be confusing levels and growth rates)
2) what's that got to do with Development Textbooks teaching that capital accumulation - doing more with more - rather than TFP growth - doing more with same - is key to development?
"btw wtf? Of course you can teach undergraduates IO tables. You can teach it to yourself out of a book. It's easy."
I'm sure you could teach a simple example. That's not the point. If the book you mentioned has a simple way of teaching/capturing the distinction between increases in growth rate due to increasing your saving of seed corn, and increases in the productivity of labor then I'm willing to be corrected. But I seem to recall you yourself saying something about how in all these models one starts out with a simple "two goods corn and iron, and one factor, labor" and then very quickly winding up with a complicated set of matrices and invoking advanced theorems from linear algebra.
Check the archives of your own blog and I'm sure you'll find it there.
and btw, if you can give me a model which can do growth accounting in that it can break down growth into the part which is due to more inputs and that which is due to a better use of inputs, which doesn't say "all you need for higher growth is to raise your saving rate of seed corn" and which one is straightforward and simple enough to teach at the undergrad level, then I'd be happy to give up the Solow model (so I ordered the ten Raa book (here:http://www.amazon.com/Economics-Input-Output-Analysis-Thijs-ten/dp/052160267X)
) since I don't have any particular emotional attachment to it. On the other hand, some people do seem to have a negative emotional reaction to its mentioning rather than seeing it as the very simplified but useful framework that it is.
And I just looked at the introduction of the Raa book and no, it could not be used in an undergraduate class.
hmm your undergraduates are nuggets then. I have no better than undergraduate maths and I thught the ten Raa book was straightforward from start to finish.
because it says you can have technological progress with no CHANGE in capital
listen to yourself! does that even make sense? How, exactly, does one get technological progress, without any new capital?
"hmm your undergraduates are nuggets then. I have no better than undergraduate maths and I thught the ten Raa book was straightforward from start to finish."
Alright, now I know you're just fucking around. All I read is the introduction and the table of contents;
http://www.amazon.com/gp/reader/0521841798/ref=sib_dp_pt#reader-link
Introduction: let's see, Hessian matrices, nonlinear optimization, a rigorous definition of the derivative, proofs, and that's just the review in introduction.
I'm sure YOU had no problem with it, being all smart and shit, but your average undergraduate ain't you.
Table of Contents:...complementary slackness condition...the substitution theorem...
and I'm sure that the chapter on Stochastic input-output analysis ain't cake either. One way I'm sure is that it has the word "Stochastic" in it which tends to give non-math non-physics major undergrads bouts of epilepsy and bed wetting.
"How, exactly, does one get technological progress, without any new capital?"
Through a more efficient use of existing capital! What exactly is so hard to understand about that?
And if you're gonna say something about being on the production possibilities frontier here's an example:
you got 2 machines. They produce 4 units of output if they're stacked one on top of each other but only 2 units if they're sitting side by side, but you initially don't know that (so you sit then next to each other). Each machine is a unit of capital.
If you run only 1 machine but could run the other costlessly you're not on your PPF. Your capital input is 2 (since either way you got 2 machines) and your output is 1.
If you run both, you're on your PPF, given your existing stock of knowledge. Your capital output is 2 and your output is 2.
Then someone says "hey buddy, if you stack those puppies one on top of each other they'll produce more". You slap your forehead and your PPF shifts out.
Now, if you run only one machine your output is 2, and your capital input is 2 and you're not on your PPF.
If you run both, your output is 4, your capital input is 2 and you're on your PPFs.
In all cases you've got two units of capital. You can improve your productivity by either employing idle capital (which is why some of these models made sense when they were written down - plenty of capital sitting around during the Great Depression) but you can also improve your productivity by improvement in technology - by sitting the machines one on top of each other.
Yes, in practice it may be hard to distinguish between fluctuations in capacity utilization and "pure" technological growth (and there's plenty of work on that) from aggregate data but that doesn't mean that second phenomenon doesn't exist.
I don't see this at all. One wouldn't have to teach the entire ten Raa book, any more than one has to teach the entire growth accounting literature, and anyone seriously attempting an economics degree ought to be capable of learning linear programming, surely to hell?
And let's have a real close look at your example, thinking in real-world terms rather than Solow-world. Development consultants are always coming up with just-so stories like this, but they tend to find that, once you've pointed out to the Solowistanis that they could double their output by putting the machines on top of one another, they say "well yes bwana, but:
"1) that would mean shutting down the plant for a month, and we need the foreign exchange earnings
2) we don't have the necessary cranes and bolts to be lifting machines all over the place
3) that configuration makes maintenance a lot more complicated, which wouldn't be a problem if we could fit a permanent jig and crane in place, but that would need more capital which we don't have
4) and so on"
In other words, you can't separate the problem of the inefficient organisation of the production system from the problem of the lack of sufficient financial and physical capital to do anything about it, which is exactly the separation that the Solow model teaches you to believe is possible. It's the capital theory equivalent of "work smarter, not harder" and about as useful.
"I don't see this at all. One wouldn't have to teach the entire ten Raa book"
Which is why I referenced the mathematical review in the introduction.
"anyone seriously attempting an economics degree ought to be capable of learning linear programming, surely to hell?"
Sure to some extent. Definitely at grad level. But this is undergrad level where overall maths are still eschewed in favor of graphs etc. Personally I think that anyone seriously attempting an economics degree ought to be capable of learning dynamic programming as well. After all, math undergrads have to learn differential equations so why wouldn't econ undergrads? But that's not gonna fly.
And to teach anything interesting with input/output you gotta go beyond the kind of simple example that could actually be taught.
"And let's have a real close look at your example, thinking in real-world terms rather than Solow-world.
...
In other words, you can't separate the problem of the inefficient organisation of the production system from the problem of the lack of sufficient financial and physical capital to do anything about it, which is exactly the separation that the Solow model teaches you to believe is possible."
Three things here. First is the "endogeneity of investment" in your example which, yeah, you gotta account for when doing empirical work, else you will OVERESTIMATE the contribution of capital accumulation to output growth.
Second, the above example is perfectly in line with Solow, where the only capital accumulation that happens in steady state (aside from replacing worn out machinery) is DUE TO technological progress. The cranes needed to lift the machines so that they can be effectively used.
Third, the nice thing about using aggregate production functions is that it's a flexible enough framework so that it can easily be extended to capture things like "capital embodied technological progress" and so on
(like here:
http://www.google.com/search?q=capital+embodied+technological+progress&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a)
And you CAN do this sort of thing at the undergrad level with just a bit more, unlike the input/output stuff.
"It's the capital theory equivalent of "work smarter, not harder" and about as useful."
Is it useful? Well, that's the whole point of the post! If before you've thought that the only way to get richer is "work harder" then knowing that working harder eventually's not gonna get you anymore (due to diminishing returns and inada conditions) is certainly useful. And the fact that differences in investment rate can't explain that much of the differences in per capita output points to the fact that in the real world per capita incomes DO in fact increase mostly due to "working smarter".
Does the Solow model tell you what it takes to "work smarter"? No. But again, that's not the point here.
9:36 AM"
Have you ever tried to work smarter without working harder? It's usually about as successful as the very many (all to often US Government-sponsored) programmes which have tried to export "know-how" to the third world on the basis that this is what they need rather than mere capital.
"Have you ever tried to work smarter without working harder? "
Ummm..... yup. Two concrete examples that spring immiedietly to mind because of what I'm busy with now:
1. Data entry. Good bit of data entry involves making sure that you're not making stupid mistakes when imputing data. To make sure of that you can either a) go through each entry and double check it, or b) set up some simple functions which more or less randomly test that given entry(ies) are what they're supposed to be. For example that if you're entering shares, they add up to 1. Or more complicated schemes depending on the nature of the data. Usually you don't immiedietaly realize these short cuts until you've done it the "work harder" way for awhile and then you realize "hey, I could work smarter" (endogenous technological progress). Or if somebody tells you (exogenous technological progress) a trick.
b) Grading exams. Usually it is far more quicker and also more accurate if you grade exams "by questions" (i.e. grade q1 for all students, then go on to grade q2 for all students, etc.) then if you grade "by student" (entire exam for student 1, then entire exam for student 2, etc.). This is definietly "working smarter" than "working harder" since your overall labor input is lower, quality is higher and your capital input (a pencil) is the same.
Alright, this's gone on long enough and at this point it seems like you're denying the obvious or just messing around, so I'll let you have the last word(s) and let that stand. Go ahead.
Simply to note that the input/output approach allows one to quite easily differentiate between reductions in x-inefficiency and genuine technical progress (on a sectoral level too!) and thus is able to deal with these examples of yours in a way that the production functions approach has to get really quite sophisticated to handle.
And also that sectoral composition matters, because once one gets out of a one-good-undifferentiated-capital world, one is brought face to face with the fact that an increase in "output" (in terms of total production of final consumption goods at market price) does not necessarily mean a monotonic outward shift of the production possibility frontier; it typically involves shifting resources from one sector to another (a stylised fact which has been rather important in the history of economic development). This is something that ought to be brought in sooner rather than later and as something fundamental to the model rather than an extension, which is why the IO approach is better than the Solow model.
by the way, second best economics in action - which side do you take in the Rodrik/Cowen controversy over whether trade deregulation will avert a food crisis?
I pretty much agree with Barkley Rosser in Dani's comments in that it'd probably be a good thing in the present situation if food-importing countries removed or lowered tariffs on their food imports and food exporting countries eased export restrictions on their exports.
As Barkley says, it doesn't make sense to argue against trade liberalization in food just because it will lower prices in Argentina while there may be a famine in Africa (I think he flips the sign in his last sentence).
But liberalizing trade (on the right side) maybe - probably - is not going to get you that much of an effect.
I also tend to agree with the rest of Barkley's comment about land redistribution (I've written on this before) and sort of agree with your comments (though I think you've got way too much hyperbole - Stalin?????) that *some* "neoliberals" misplaced emphasis in the past on eliminating fertilizer subsidies and getting rid of storage is making things worse in the present. This is the second best economics at work here.
I say "sort of" because 1) it's my understanding that it was really a subset of these so called "neoliberals" that put any kind of emphasis on these aspects of "reform" and 2) it is also my understanding that for the most part to the extent these "reforms" were actually implemented they were fairly quickly rescinded and I doubt they're having much impact on the situation now.
I'm willing to be convinced otherwise on 2) but on 1) it'd probably get bogged down into a separation of who's a "real neoliberal" and who's a "real economist" and that'd be pretty useless.
Or hey, if you wanna agitate for increased (temporarily) ag subsidies in the EU I might be willing to wear a pin or something.
Have you read Peter Griffiths' book "The Economist's Tale"? I don't actually think that the hyperbole is particularly misplaced, particularly since the general idea is fairly and squarely in the tradition of the way in which the Irish and Bengali famines were organised.
In re the Rodrik/Cowen thing, it's a classic example of long term solutions to short term problems - or comparative static solutions to problems with dangerous short term dynamics (something I would have thought Barkley Rosser of all people would have been quickest to spot).
I wouldn't dignify Tyler Cowen's NYT piece with the term "neoliberal" - it's a piece of chuckleheaded market cheerleading that even the Economist would have rejected, precisely because it is so transparently trying to push a totally unrelated agenda while hanging it on the topical peg of a potential food crisis (which strikes me as a certainly unhelpful and really rather nasty thing to do).
But if we're actually among the realm of the serious people and actually thinking about whether there are trade policy measures that could help with the actual sitution, then the case for food importing poor countries to eliminate tariffs seems pretty irresistible. But Rodrik is surely correct to say that messing around with export barriers is something you don't do unless you're very sure of what you're doing, is correct that the WB assessment of the effect on the market for rice sez what he sez it sez and in general has a rather good point about relative prices. NB that it is entirely possible for a country to be a net exporter of food but a net importer of the staple foodstuffs of the poor - aggregation really is a bitch in this context.
Ok, but what exactly is the menu of "short term solutions to short term problems"? Removing import tariffs' on there. But what else? Foreign aid? Not likely, unless, as you note yourself, rich countries discover a new found willingness to pony up. Land redistribution that Barkley mentions? Talk about a long term solution.
In that context, removal of export restrictions would probably have a fairly quick effect. And, again, as Barkley notes, even though prices may rise in Argentina, that's not exactly the place where there's a threat of famine (and if you want to be careful, then replace the word "food" with the phrase "food staples" in what I said before).
"the general idea is fairly and squarely in the tradition of the way in which the Irish and Bengali famines were organised"
No, since a good bit of point behind Sen's analysis of the Bengali famine, and the Irish one, and the Ukrainian Holdomor, and the one engineered by Mao, and the Ethiopian famine, is precisely that these were not "natural" as in "naturally caused by the market", or by a production shortfall. There was grain sitting in the silos while people were starving during all of these. Or at least that even if the initial crisis situation was created by market forces (as you could argue is the case right now) particular governments and people in power at the time found it politically convenient to make things worse. If I remember correctly, in the case of the Bengali famine, merchants who wanted to take advantage of the higher food prices were actually prevented by British authorities from taking grain to famine stricken areas.
I haven't read Griffith's book but I recall the discussion on CT.
Also I just got the Raa book and after looking at more than the introduction, I'm even more convinced that you could not use it to teach undergrads. You could maybe, as I said before, teach a very very simplified version of it but pretty much in a way that would miss most of the points. I think you have a very inaccurate idea of what undergraduate econ education looks like.
There was grain sitting in the silos while people were starving during all of these.
Not in the case of Ireland; grain was being exported. It was, of course, being exported rather than eaten because it was the property of the people who owned the land rather than the people who worked it, and the price of wheat in England was higher than in Ireland; in other words, the market mechanism was working normally.
I don't think you can be remembering right about Bengal btw; Sen's account had the shortage exacerbated by hoarding and exports of grain from Bengal. But my main source for this one is "Late Victorian Holocausts" and there is a bit of a Mike Davis Discount Factor so I wouldn't stake too much on this.
In general, though, it's not just Argentina. Anywhere in the world which has export controls and a local price of rice below the world price would see prices go up if they removed export controls.
I don't know what the short term solution is. Maybe there is no short term solution. But if we get to choose the timing of when we want to incur the short term adjustment costs of the long term solution, now seems like it might be a bad time.
We clearly do have very different views of undergraduate education. I just find that book incredibly clear and easy to follow. I think ten Raa is correct in the introduction, when he claims that you could follow it even if you'd missed a university education due to fighting in the Liberian Civil War.
WoW shares many wow gold of its features with previously launched games. Essentially, you battle with wow gold cheap monsters and traverse the countryside, by yourself or as a buy cheap wow gold team, find challenging tasks, and go on to higher aoc gold levels as you gain skill and experience. In the course of your journey, you will be gaining new powers that are increased as your skill rating goes up. All the same, in terms of its features and quality, that is a ture stroy for this.WoW is far ahead of all other games of the genre the wow power leveling game undoubtedly is in a league of its own and cheapest wow gold playing it is another experience altogether.
Even though WoW is a Cheap Wow Gold rather complicated game, the controls and interface are done in warhammer gold such a way that you don't feel the complexity. A good feature of the game is that it buy wow items does not put off people with lengthy manuals. The instructions cannot be simpler and the pop up tips can help you start playing the game World Of Warcraft Gold immediately. If on the other hand, you need a detailed manual, the instructions are there for you to access. Buy wow gold in this site,good for you, BUY WOW GOLD.
Post a Comment
<< Home