Do you believe in miracles?

Tyler Cowen doesn’t, at least not any more. In a provocative NY Times piece today, Tyler says, “sustained, meteoric growth in emerging economies may no longer be possible”. He points to 4 culprits, Automation, Global Supply Sources, Wider Economic Gaps, & Aging Populations.

There is some interesting academic work on the possibility that eventual global convergence is not a sure thing, even if countries ADOPT ALL THE “RIGHT” POLICIES

Here’s Howitt and Meyer (JMCB 2005), “a country may have only a finite window of opportunity in which to raise its skill levels to those required for R&D, failing which the country will remain trapped in implementation or stagnation even if it adopts the same policies and institutions as the world’s technology leaders.”

Yikes!

Even the ever-green prescription of “free-trade” may lead to divergence rather than convergence.

Here’s Bajona and Kehoe (RED 2010), “In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence….Divergence can occur for parameter values that would imply convergence in a world of closed economies.

Double Yikes!!

In my own research with Norman Maynard (trans-dimensional Bayesian mixture modelling alert!!), we find that in the 1950s and 1960s and most of the 1970s, there were two distinct groups in the global distribution of cross-country income, and there was a high degree of mobility from the poor to the rich group. Since the second age of globalization began in the 1980s, a new distinct group of super-rich countries has formed, the gaps between the poor group and the richest group have grown, and inter-group upward mobility has become a rarity.

Can I get a triple yikes?

Economics, as ever, is truly the dismal science.

7 thoughts on “Do you believe in miracles?

  1. Pingback: On the prospects for emerging economy upward mobility

  2. “eventual global convergence is not a sure thing, even if countries ADOPT ALL THE “RIGHT” POLICIES”

    There are few ‘sure things’. Wouldn’t it still be a good idea for more countries to at least attempt to adopt better policies? Suppose, for example, that many countries never actually catch up, but better policies keep them only a decade behind? They will have much better lives than if they follow the examples of North Korea, Zimbabwe and Venezuela by either lagging ever farther or actually moving in the opposite direction.

    All these are interesting possibilities in theory, but I’d hate to see them used as a justification for countries not even trying.

  3. I’m trying to understand Bajona and Kehoe 2010–am I correct in saying that the study only looked at two theoretical extremes: that of a completely closed autarkic system, and that of a completely free and open system? After all, they do say toward the end that in-between models that incorporate tariffs and degrees of liberalizations could be a potential future study.

    If so, I wonder how useful this study is–after all, these two extremes are not at all present in any meaningful sense anywhere in the world. Or is the implication supposed to be that there is definitely a tendency toward divergence when economies are closer to being theoretically open?

  4. Pingback: Capitalist Imperialism, Mainstream Economics Edition | Kurukshetra

  5. Pingback: Our Gothic Year | Cherokee Gothic

  6. Yes, I do believe in miracles and I feel for this we need to have determination, I have that with doing Forex trading, it’s one of the best business I have ever came across while what makes this better is connection to my broker OctaFX, it’s a miracle company itself. They have achieved 11 awards in just 4 years, so that’s nothing sort of a miracle for such a newish company and has really helped new comers achieved results like never before!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s