Economic Growth – Page 23 – artdiamondblog.com

The Progress Paradox Documents How Life Is Better Here and Now

Source of book image: http://grigr.com/

Greg Easterbrook’s book has been out for several years, but I am a slow reader and have a long “to read” list. I enjoyed the first half or so of the book very much, and also enjoyed some parts of the second half. Roughly speaking, the first half is devoted to illustrating how much better life is now than before, and here (the West) than there (the less-developed countries). Roughly speaking, the second half of the book asks why we aren’t happier, and complains about areas of life where Easterbrook sees room for improvement.
Some of the part I like has now been updated, or written with better argument or more panache, by Matt Ridley in The Rational Optimist. But even so, Easterbrook often gives examples, or arguments, that complement Ridley’s case.
And even though Ridley is on average more eloquent than Easterbrook, the latter is eloquent plenty often enough to be worth reading. (And maybe my judgment about eloquence is colored by my agreeing with Ridley 90% of the time, and only agreeing with Easterbrook 75% of the time.)
On the less-satisfying second half of the book: worthwhile questions are often asked, but the answers are few and not very satisfying.
In the next few weeks, I’ll occasionally be quoting a few of the more illuminating or edifying passages in the Easterbrook book.

Easterbrook’s book:
Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.

The Ridley book that I mention:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.

Egypt’s Urban Decline as Cause (or Symptom) of Slow Growth

Source of graphs: online version of the NYT article quoted and cited below.

We all know that correlation is not the same as causation. The main cause of Egypt’s slow growth is its lack of institutions and policies supporting entrepreneurial capitalism, and not the decline of Egyptian cities. (But the decline of Egyptian cities does not help.)

(p. B1) Since then, the cities of Asia have expanded rapidly, drawing in millions of peasant farmers looking for a better life — and, more often than not, finding it. Almost 50 percent of East Asians now live in cities. And Egypt? It is the only large country to have become less urban in the last 30 years, according to the World Bank. About 43 percent of Egyptians are city dwellers today.

This urban stagnation helps explain Egypt’s broader stagnation. As tough as city life in poor countries can be, it’s also fertile ground for economic growth. Nearly everything can be done more efficiently in a well-run city, be it plumbing, transportation or the generation of new ideas and businesses. “Being around other people,” says Paul Romer, the economist and growth expert, “helps make us smarter.”
Edward Glaeser, a Harvard economist (and weekly contributor to the Times’s Economix blog), has just published a book, “The Triumph of the City, making the case that cities are humanity’s greatest invention. Countries that become more urban tend to become far more productive, Mr. Glaeser writes. The effect is even bigger for poor countries than rich ones.
. . .
Three researchers — Michael Clemens, Lant Pritchett and Claudio Montenegro — recently found a novel way to measure how well various countries use the workers they have. The three compared the wages of immigrants to the United States with the wages of similar workers from the same country who remained home.
A 35-year-old urban Egyptian man with a high school education who moves to the United States can expect an incredible eightfold increase in living standards, the researchers found. Immigrants from only two countries, Yemen and Nigeria, receive a larger boost. In effect, these are the countries with the biggest gap between what their workers can produce in a different environment and what they are actually producing at home.
No wonder 19 percent of Egyptians told Gallup (well before the protests) that they would move to another country if they could. Mr. Clemens says that for every green card the United States awarded in a recent immigration lottery, 146 Egyptians had applied.

For the full commentary, see:
DAVID LEONHARDT. “Economic Scene; For Egypt, a Fresh Start, With Cities.” The New York Times (Weds., February 16, 2011): B1 & B11.
(Note: ellipsis added.)
(Note: the online version of the article was dated February 15, 2011.)

The scholarly article summarized is:
Clemens, Michael, Claudio Montenegro, and Lant Pritchett. “The Place Premium: Wage Differences for Identical Workers across the Us Border.” HKS Faculty Research Working Paper Series # RWP09-004, January 2009.

The Glaeser book is:
Glaeser, Edward L. Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. New York: Penguin Press, 2011.

Paul Romer Looking to Found a “Charter City”

Romer’s idea of setting up a Charter City sounds like a more advanced version of a free trade zone. It might work if you could find a well-governed nation to serve as guarantor of the city’s charter. That’s a big “if.”
Still, it’s a more intriguing idea for advancing economic development than most of the default policies (like sending foreign aid to be stolen by corrupt dictators).

(p. A2) For the past couple of years, economist Paul Romer has been hopscotching the globe looking for a country desperate enough to try his audacious notion: Start a new “charter city,” an enclave free of old laws and practices, as William Penn did in Pennsylvania. (Think “charter school,” a school free of union contracts and school bureaucracy.)

. . .
About a decade ago, he walked away from academia, started an online teaching company, sold it and then turned to his next big idea: To create jobs to lift millions out of poverty, take an uninhabited 1,000 square-kilometer tract (386 square miles), about the size of Hong Kong, preferably government-owned. Write a charter: the all-important rules. Allow anyone to move in or out. Invite foreign investors to build infrastructure for profit. And sign a treaty with a well-governed country, say Norway or Canada, to serve as “guarantor” to assure investors and residents that the charter will be respected, much as the British once did for Hong Kong, and–. . . .

For the full story, see:
DAVID WESSEL. “CAPITAL; The Quest for a ‘Charter City’.” The Wall Street Journal (Thurs., FEBRUARY 3, 2011): A2.
(Note: ellipses added.)

“A Great Artisan Can Make a Family Prosperous; A Great Inventor Can Enrich an Entire Nation”

(p. 247) We feel real poignancy when we recall the bucolic life (even if we do so through the soft focus of nostalgia) of a country weaver happy in his work skills and content with his life. But those skills, like those of a medieval goldsmith or an ancient carpenter, could not, by their very nature, reproduce themselves outside the closed community of the initiates. One lesson of the Luddite rebellion specifically, and the Industrial Revolution generally, is that maintaining the prosperity of those closed communities–their pride in workmanship as well as their economic well-being—-can only be paid for by those outside the communities: by society at large. A great artisan can make a family prosperous; a great inventor can enrich an entire nation.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

UNESCO Condemns Africans to Live in a Poorer Past: More on Why Africa is Poor

“As a World Heritage site, Djenné, Mali, must preserve its mud-brick buildings, from the Great Mosque, in the background, to individual homes.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) DJENNÉ , Mali — Abba Maiga stood in his dirt courtyard, smoking and seething over the fact that his 150-year-old mud-brick house is so culturally precious he is not allowed to update it — no tile floors, no screen doors, no shower.

“Who wants to live in a house with a mud floor?” groused Mr. Maiga, a retired riverboat captain.
With its cone-shaped crenellations and palm wood drainage spouts, the grand facade seems outside time and helps illustrate why this ancient city in eastern Mali is an official World Heritage site.
But the guidelines established by Unesco, the cultural arm of the United Nations, which compiles the heritage list, demand that any reconstruction not substantially alter the original.
“When a town is put on the heritage list, it means nothing should change,” Mr. Maiga said. “But we want development, more space, new appliances — things that are much more modern. We are angry about all that.”
. . .
Mahamame Bamoye Traoré, the leader of the powerful mason’s guild, surveyed the cramped rooms of the retired river boat captain’s house, naming all the things he would change if the World Heritage rules were more flexible.
“If you want to help someone, you have to help him in a way that he wants; to force him to live in a certain way is not right,” he said, before lying on the mud floor of a windowless room that measured about 6 feet by 3 feet.
“This is not a room,” he said. “It might as well be a grave.”

For the full story, see:
NEIL MacFARQUHAR. “Ancient City in Mali Rankled by Rules for Life in Cultural Spotlight.” The New York Times, First Section (Sun., January 9, 2011): 4.
(Note: ellipsis added.)
(Note: the online version of the article is dated January 8, 2011 and had the title “Mali City Rankled by Rules for Life in Spotlight.”)

“Many residents of Djenné say they long for more modern homes, but Unesco preservation guidelines limit alterations to original structures.” Source of caption and photo: online version of the NYT article quoted and cited above.

Higher Cancer Rates Due More to Longer Life Spans than to Modern Life Styles

“DIAGNOSIS. Evidence of tumors in the skull of a male skeleton exhumed from an early medieval cemetery in Slovakia. Often thought of as a modern disease, cancer has always been with us.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) When they excavated a Scythian burial mound in the Russian region of Tuva about 10 years ago, archaeologists literally struck gold. Crouched on the floor of a dark inner chamber were two skeletons, a man and a woman, surrounded by royal garb from 27 centuries ago: headdresses and capes adorned with gold horses, panthers and other sacred beasts.

But for paleopathologists — scholars of ancient disease — the richest treasure was the abundance of tumors that had riddled almost every bone of the man’s body. The diagnosis: the oldest known case of metastasizing prostate cancer.
The prostate itself had disintegrated long ago. But malignant cells from the gland had migrated according to a familiar pattern and left identifiable scars. Proteins extracted from the bone tested positive for PSA, prostate specific antigen.
Often thought of as a modern disease, cancer has always been with us.
. . .
(p. D7) . . . , Tony Waldron, a paleopathologist at University College London, analyzed British mortality reports from 1901 to 1905 — a period late enough to ensure reasonably good records and early enough to avoid skewing the data with, for example, the spike in lung cancer caused in later decades by the popularity of cigarettes.
Taking into account variations in life span and the likelihood that different malignancies will spread to bone, he estimated that in an “archaeological assemblage” one might expect cancer in less than 2 percent of male skeletons and 4 to 7 percent of female skeletons.
Andreas G. Nerlich and colleagues in Munich tried out the prediction on 905 skeletons from two ancient Egyptian necropolises. With the help of X-rays and CT scans they diagnosed five cancers — right in line with Dr. Waldron’s expectations. And as his statistics predicted, 13 cancers were found among 2,547 remains buried in an ossuary in southern Germany between A.D. 1400 and 1800.
For both groups, the authors wrote, malignant tumors “were not significantly fewer than expected” when compared with early-20th-century England. They concluded that “the current rise in tumor frequencies in present populations is much more related to the higher life expectancy than primary environmental or genetic factors.”
. . .
“Cancer is an inevitability the moment you create complex multicellular organisms and give the individual cells the license to proliferate,” said Dr. Weinberg of the Whitehead Institute. “It is simply a consequence of increasing entropy, increasing disorder.”
He was not being fatalistic. Over the ages bodies have evolved formidable barriers to keep rebellious cells in line. Quitting smoking, losing weight, eating healthier diets and taking other preventive measures can stave off cancer for decades. Until we die of something else.
“If we lived long enough,” Dr. Weinberg observed, “sooner or later we all would get cancer.”

For the full story, see:
GEORGE JOHNSON. “Unearthing Prehistoric Tumors, and Debate.” The New York Times (Tues., December 28, 2010): D1 & D7.
(Note: ellipses added.)
(Note: the online version of the article is dated December 27, 2010.)

If the Feds Want an Effective Stimulus, They Should Spend to Reduce the Patent Backlog

In my seminar on the Economics of Technology on Tuesday night (11/30/10), Gauri presented some interesting information on intellectual property. At one point she summarized that the lag in processing patents is about three years, but it takes, on average, only about 18 hours to process a patent once the processing has begun.
Later in the seminar, we talked about a brief article by Amar Bhidé on whether large economic stimulus programs have worked in the past, and will work in the present. Bhidé was skeptical, and I am too.
But it occurred to me that one modest economic stimulus expenditure might help. Why not make the highest stimulus spending priority to hire and train enough patent examiners to reduce the patent lag from three years to, say, three weeks?

The Bhidé article mentioned above is:
Bhidé, Amar. “Don’t Believe the Stimulus Scaremongers.” Wall Street Journal, (Tues., February 17, 2009): A15.

If You Think Life Was Better in the Past, “Say One Single Word: Dentistry”

(p. 2) In general, life is better than it ever has been, and if you think that, in the past, there was some golden age of pleasure and plenty to which you would, if you were able, transport yourself, let me say one single word: “dentistry.”

Source:
O’Rourke, P. J. All the Trouble in the World: The Lighter Side of Overpopulation, Famine, Ecological Disaster, Ethnic Hatred, Plague, and Poverty. paperback ed. New York: Atlantic Monthly Press, 1994.

All He “Could See Was Cows and Farms” in “Virginia’s High Tech Corner”

(p. A18) . . . government attempts to rejuvenate regional economies have a mixed track record, in the U.K. and elsewhere.

Stuart S. Rosenthal, an economics professor at Syracuse University, remembers driving through Virginia in 1997 and seeing a sign saying, “You are entering southwest Virginia’s high tech corner.”
“And all I could see was cows and farms,” he said. Recent employment data shows that aside from one pocket, little has changed.

For the full story, see:
ALISTAIR MACDONALD. “U-Turn in the U.K.: Big Spending Cuts.” The Wall Street Journal (Fri., OCTOBER 15, 2010): A18.
(Note: ellipsis added.)
(Note: the online version of the article is dated October 14, 2010.)

China’s Continued Growth Requires Reliance on Private Enterprise

(p. A21) No country in the modern world has managed persistent economic growth without considerable reliance on private enterprise and decentralized private markets. All centrally planned economies failed to achieve sustained development, including the Soviet Union before its collapse, China before market reforms began in the late 1970s, and Cuba since Castro’s revolution in the late 1950s.

China’s private sector has led its dominance in textiles, electronics, and other consumer and producer goods. It’s followed the model of the “Asian Tigers”–Hong Kong, Singapore, South Korea and Taiwan–and relied heavily on exports produced with cheap labor. In the process, China has accumulated enormous reserves, as Taiwan, Japan and other rapidly growing Asian economies did in past decades.
Poorer countries like China need not get everything “right” to grow rapidly through exports to richer countries. They need only have some strong sectors that use world markets to fuel overall growth. Japan’s rapid growth from the 1960s-1980s was led by a highly efficient manufacturing sector. Yet at the same time Japan also had a large and inefficient service sector, and an agricultural sector that was riddled with subsidies and inefficient incentives.
Similarly, China’s economy still has a glut of state-owned enterprises (SOEs) with excessive employment and low productivity. Their importance has fallen over time, but Chinese economists estimate that they still control about half of nonagricultural GDP. One crucial example is the state-controlled financial sector that makes cheap loans to other large, inefficient and unprofitable state enterprises. China’s economy also suffers from extensive price controls, restrictions on migration, and many other structural barriers to efficient growth.

For the full commentary, see:

GARY S. BECKER. “China’s Next Leap Forward; The jump from middle-income to rich status is much harder to achieve than the ascent from poverty. But there are plenty of reasons to believe China’s growth prospects remain strong.” The Wall Street Journal (Weds., SEPTEMBER 29, 2010): A21.