Joel Mokyr on Tech, Innovation and Economic Growth

Joel Mokyr, a Northwestern University economist and author, in a WSJ op-ed:

There is nothing like a recession to throw economists into a despondent mood. Much as happened in the late 1930s—when there was a fear of so-called secular stagnation, or the absence of growth due to a dearth of investment opportunities—many of my colleagues these days seem to believe that “sad days are here again.” The economic growth experienced through much of the 20th century, they tell us, was fleeting. Our children will be no richer than we are. The entry of millions of married women into the workforce and the huge increase in college graduates that drove post-1945 growth were one-off boons. Slow growth is here to stay.

What is wrong with this story? The one-word answer is “technology.” The responsibility of economic historians is to remind the world what things were like before 1800. Growth was imperceptibly slow, and the vast bulk of the population was so poor that a harvest failure would kill millions. Almost half the babies born died before reaching age 5, and those who made it to adulthood were often stunted, ill and illiterate.

What changed this world was technological progress. Starting in the late 18th century, innovations and advances in what was then called “the useful arts” began improving life, first in Britain, then in the rest of Europe, and then in much of the rest of the world.

Thai Baht Hits 5 Year High

The Wall Street Journal/Dow Jones reports today:

A rush of cash into Thailand has sent the baht to its highest level in more than five years, making it Asia’s top currency in 2013, as investors clamor for deals in the fast-expanding Southeast Asian economy.

Fund managers also have been pouring money into shares, driving the benchmark SET Index to a 19-year high this week as fund flows have jumped to their highest levels in 44 weeks, according to data provider EPFR Global.

The roughly 5% rally in the emerging-market currency this year is especially surprising, and in contrast to neighboring currencies of Indonesia, Malaysia and Singapore that have been falling on renewed jitters over Europe’s banking system. That would normally prompt investors to also yank money out of Thailand.

And:

Late Wednesday in New York, the dollar bought 29.135 baht, down from 29.266 baht late Tuesday.

Some of My Favorite Email Newsletters

2013 01 12 email

Last fall I began using email newsletters* to keep abreast of the day’s biggest business and economics stories.

Since I’ve been spending a lot of time in class, mostly away from news sites, I’ve come to appreciate these daily email compilations. Here are a few I like:

  • Reuters Counterparties. This “curated snapshot of the best finance news and commentary” is a stand-alone Reuters Web site edited by Felix Salmon and Ryan McCarthy. You can sign up for the daily newsletter by selecting Counterparties here.
  • Quartz, the new-ish business news site, has a good roundup called the Quartz Daily Brief. (The site hasn’t been loading properly for me for a few days, but you should be able to find the newsletter via the home page.)
  • The Marketplace Newsletter includes links to the well known radio show‘s most most-viewed articles, provides a mid-day update on the markets, and has links to its various episodes.
  • The Bloomberg Most Popular daily email contains just that — the site’s most popular stories of the day. You can sign up here.

In addition, I like two newsletters that don’t focus exclusively on business journalism, but that are generally informative:

*Yes, email newsletters! Remember those? Good ol’ email: Still the Web’s killer app?

(Image via Wikipedia.)

Notes from Tonight’s Presidential Economic Advisers Forum

Here are my Tweets, in reverse chronological order, from the Presidential Economic Advisers Forum 2012, which took place at Columbia University here in New York tonight.

On hand were Mitt Romney’s Senior Economic Adviser, R. Glenn Hubbard, and Jeffrey Liebman, who holds that position under President Obama.

Columbia president Lee Bollinger made some introductory remarks. Reuters’s Chrystia Freeland moderated, and the panelists included Joseph Stiglitz, Sharyn O’Halloran, and Michael Woodford.

My overall impression: Both advisers were, naturally, measured in their remarks. Those familiar with the business and economics arguments involved in the presidential race probably won’t find much surprising here. But it may be interesting to see how the campaigns continue to frame the issues.

The U.S. Economy and the Presidential Election

Update 2: I’ve replaced the final chart with one that shows long-term real GDP growth per capita.

Update 1: I’ve corrected the debate kickoff time, below.

The U.S. economy is, of course, at the center of this year’s presidential race.

As the first 2012 presidential debate approaches tonight (it begins at 8 p.m. 9 p.m. eastern), pundits and voters — not to mention, ahem, business journalism students — have been examining U.S. economic issues and the positions taken by President Obama and Mitt Romney.

To sum up: Romney and his team say that Obama’s economic policies have failed to adequately lift the U.S. economy out of the 2000-2009 recession.

Among other data, they point to the ongoing high unemployment rate, which is currently at 8.1 percent:

Obama’s critics also note the U.S.’s slow economic recovery in terms of real GDP.

The American economy expanded by just 1.3 percent during the second quarter this year:

2012 10 02 us gdp

In the debate tonight, Romney will also likely focus on the U.S. deficit. He says Obama would need to employ tax increases to pay down the debt in the years to come.

Obama and his supporters, meanwhile, have been pointing out just how severe the “Great Recession” was. They say the recovery is happening (albeit slowly).

The recession was, indeed, the worst downturn since the Great Depression in terms of unemployment and GDP.

Here’s the GDP data for the last few years a look at long-term per capita real GDP growth from the 19th century through 2009. Check out the dip after the Great Depression and the downturn after 2008:

2012 10 03RealGDPperCapita

(Graph via the excellent VisualizingEconomics.)

Team Obama notes that private sector jobs have been on the rise for 30 straight months.

The president will likely point out this evening that the auto bailout saved more than one million jobs.

As it happens, in my business seminar class, we recently discussed notions of the economic consensus. While many economists have many different opinions, there’s actually a lot that most agree on.

Here’s an interesting 2009 blog post from Harvard economist Greg Mankiw called “News Flash: Economists Agree.”

A few points from his post:

Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)

Obama will say taxes need to be raised on the very wealthy; as part of the supply side argument, Romney will argue that tax cuts for most voters are the way to go.

How about this one? I doubt Obama will mention this as he criticizes Romney for outsourcing jobs:

The United States should not restrict employers from outsourcing work to foreign countries. (90%)

And here’s one for Romney:

A large federal budget deficit has an adverse effect on the economy. (83%)

That’s it for now. More on some of these topics in future posts, I’m sure.

Two Economics-Related Stories Worth Reading: the iPhone Economy and the Emergence of Dual Gilded Ages

Two economics-related stories I suggest checking out:

1) This New York Times story by Charles Duhigg and Keith Bradsher, which was the toast of Twitter yesterday, is worth a read.

It’s called “How the U.S. Lost Out on iPhone Work.”

You’re probably familiar with many of the concepts here — higher labor costs and fewer engineers in the U.S., China’s nimble and powerful manufacturing capacity and supply chain integration, etc. — but this piece weaves things together quite nicely.

2) This piece, by Chrystia Freeland, was in the print edition of today’s IHT.

It’s a look at the ideas behind economist Jim O’Neill’s new book, “The Growth Map: Economic Opportunity in the BRICs and Beyond.”

As Freeland writes:

In the 19th century, the Industrial Revolution and the opening of the American frontier created the Gilded Age and the robber barons who ruled it. Today, as the world economy is being reshaped by the technology revolution and globalization, the resulting economic transformation is creating a new gilded age and a new plutocracy.

The two forces are intricately related. Indeed we are living through slightly different gilded ages that are unfolding simultaneously. The West is experiencing a second gilded age, while the emerging markets, as Mr. O’Neill and others have documented, are experiencing their first gilded age.

(Emphasis mine.)

Thailand rice pricing: analysis from the FT and Forbes

The FT and Forbes have recently run stories on Thailand’s controversial plans to pay farmers above-market rates for rice.

In short, farmers say the price hike is a necessary for them to make a fair wage.

Exporters say their margins are already thin, and that by making Thai rice more expensive, the government will price the commodity out of the global market.

(Thailand exports 30 percent of the world’s rice, so there are global and regional concerns about food costs, as well.)

The FT‘s Beyond BRICS blog reports:

Rice is more than just another commodity: for 3bn people it is a vital part of their daily diet, and when prices hit over $600 a tonne, or some 50 per cent above their 10 year average, they start to worry.

The 10-year average for Thailand’s benchmark 100 per cent grade B white rice is around $400 a tonne but today it is selling for $619 a tonne. That is partly because Thailand, the world’s biggest exporter, has said that it would pay its farmers Bt14,800/tonne – equivalent of about $800/tonne in the export market, in a move aimed at boosting the incomes of rural farmers.

Questions of the sustainability of the project have centered around the depth of Thailand’s pockets – it supplies about a third of the global trade of 30m tonnes annually – and its political resolve, but supply side economics are also going to play a role.

Earlier, Forbes weighed in:

Governments in Asia always keep a close eye on food staples like rice. The domestic price of rice matters, and so does the amount of rice available on global markets. This is why all eyes are on Thailand, the world’s largest exporter. Its government plans to start buying rice from farmers next month at a generous premium to market prices. Some reckon this will set off another rally in world rice prices. Others argue that a bust is more likely, given ample stocks. Either way, it’s another reminder of how agricultural subsidies distort commodity markets.

(All emphasis mine.)

Bloomberg talks to Thailand’s Dep. PM about interest rates and growth

Bloomberg reports today that:

Thailand’s five-week old government signaled it wants the nation’s central bank to stop raising interest rates as Prime Minister Yingluck Shinawatra seeks to stoke growth in Southeast Asia’s second-biggest economy.

“I did not agree with high interest rates to handle inflation if it’s not demand-pull inflation,” Deputy Prime Minister Kittiratt Na-Ranong said in an interview in Bangkok today. Yingluck’s administration has pledged to almost double the minimum wage in parts of the country and buy rice from farmers at above-market rates after winning the July 3 election with support from lower-income voters.

Off topic: Analyzing the US federal deficit and GDP to debt ratio

I wanted to point out two excellent resources for explaining some of the macroeconomic issues related to the debt ceiling standoff in Washington at the moment.

The first is a dispassionate piece from FactCheck.org that examines U.S. federal spending versus income. The current problem is represented in this graph:

2011 07 20 outlays revenues

The red is outlays — or spending — and the blue is revenues. Not a pretty picture.

(Interestingly, on the one hand, the gap between spending and revenue is especially big now. But on the other hand, running a significant deficit has been the norm since the 1970s.)

To summarize the piece: For the last several years we have had increased federal spending due to the stimulus package, banking bailout, and Social Security and Medicare payouts. In addition, military costs are up due to post-Sept. 11 wars.

At the same time, federal revenues are down partly due to reduced income tax receipts because of the Bush tax cuts. And the recession has meant less revenue from corporate taxes.

Read the whole thing.

And second, I suggest listening to the most recent episode of NPR’s “Planet Money” podcast. It’s called “How Much Debt Is Too Much?”

2011 07 20 debt to gdp

Harvard economist Ken Rogoff discusses historical rates of sovereign debt and examines various countries’ GDP to debt ratios. This is a measure of the total value of nations’ economies compared to how much they owe.

What do you think this ratio is for three countries in the news of late: Greece, Italy, and the U.S.?

Listen to the show to find out. The figures may surprise you.

(Image: Global debt to GDP ratio, via Wikipedia.)