FQ.07.21: Favorite Quote for This Week

Productivity isn't everything, but in the long run it is almost everything.  A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.
—Paul Krugman

Comments

[Bob]

Quote from a confirmed doomsday economist?

[Steve]

Hi Bob:
Yes, even Krugman is indirectly admitting that doomsday isn't inevitable for our grandkids. I picked that one on purpose; helps set the stage for my next article.

[PseudoNoise]

I'm not sure what specifically you are referring to when you say "doomsday". The last doomsday debate I remember was social security, and Krugman was definitely on the "not doomsday" side of that one.

http://www.truthout.org/docs_05/010305F.shtml

OTOH, on distribution of wealth, the trends are definitely not going the right way. The majority of workers have not seen proportional return on recent increases in productivity.

http://delong.typepad.com/sdj/2006/07/the_pattern_of_.html

[muirgeo]

http://tinyurl.com/3b5u2f

Yep when a lot of the increase comes from mom's having to work I'm not so sure its a good measure of anything. Bobby kennedy said it best.

Quote: "Too much and for too long we seem to have surrendered personal excellence and community value in the mere accumulation of material things. Our gross national product now is over 800 billion dollars a year, but that gross national product, if we judge the United States of America by that, that gross national product counts air pollution, and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic squall. It counts Napalm, and it counts nuclear warheads, and armored cars for the police to fight the riots in our city. It counts Whitman's rifles and Speck's Knifes and the television programs which glorify violence in order to sell toys to our children. Yet, the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play; it does not include the beauty of our poetry of the strength of our marriages, the intelligence of our public debate for the integrity of our public officials. It measures neither our wit nor our courage neither our wisdom nor our learning, neither our compassion nor our devotion to our country it measures everything in short except that which makes life worth while. And it can tell us everything about America except why we are proud that we are Americans."
Remarks of Robert F. Kennedy at the University of Kansas, March 18, 1968.

[Jason]

muirgeo,

What indicators do you consider valid measures of national well being instead of GNP/GDP?

[muirgeo]

Jason,

The economist Magazine does a good job of ranking well being of citizens in different countries. Also the Gini Index seems to correlate well to a country and its citizens well being.

http://tinyurl.com/2frhmh

[Jason]

muirgeo,

GDP still seems to be an important indicator in those rankings http://tinyurl.com/5zjr9 . Is divorce rate really that reliable of an indicator? It's easy for that figure to become distorted especially in countries with high rates of unmarried couples living together. Overall, the results appear reasonable although I have problems with the methodology.

I don't think the Gini coefficient is an effective indicator at all. Would you say that the quality of life in the US, UK, and China have steadily eroded while things have improved remarkably in France in the last 25 years? In terms of Gini, Ireland is tied with Egypt and Indonesia. http://tinyurl.com/3yc9fq
http://tinyurl.com/e2lrp

I don't understand why so many obsess over "distribution of wealth" to the detriment of almost everything else. It would be like me saying, "this year's marathon was unjust! The distribution of running times is going in the wrong direction. The fastest runners got faster at the expense of the slower runners."

[Kevin]

Krugman used to say intelligent things -- years ago when he was still an economist.

[John F. Opie]

Hi -

This is probably the only intelligent thing that Krugman will be remembered for...

[muirgeo]

I don't understand why so many obsess over "distribution of wealth" to the detriment of almost everything else.

Posted by: Jason

The whole point Jason is that economies or GDP DO NOT have to be negativly effected by fairer distributions of wealth. Ditributions of wealth ARE effected by the rules we should be deciding democratically.

I don't obsess over the distribution of wealth. I obsess over the wealthy controling the rules that result in upward distribution and transfers of wealth for them at the expense of the middle class. I also obsess over monied interest who undermind our markets and our democracy to further tilt the distribution of wealth in their favor.

I don't get why some people DON'T obsess over Robber Barons, Economic Royalist and War Profiteers yet you get all upset if we give a kid a "free" school lunch.

[Andy]

Muirgeo:

"I obsess over the wealthy controling the rules that result in upward distribution and transfers of wealth for them at the expense of the middle class. I also obsess over monied interest who undermind our markets and our democracy to further tilt the distribution of wealth in their favor."

In contradicting the idea of Robber Barons, I think Steve says it best:

"Unfortunately for the “trickle-down” straw man, real-world risk-taking just doesn’t work that way; in fact, it’s just the reverse: Innovators and entrepreneurs risk their money (and others’ money) up front—paying it out to vendors, workers, landlords, utilities, etc.—long before they ever become “enriched” by new customers who purchase their new product or service (or become impoverished by overestimating the size of the new-customer base). Lower marginal tax rates not only create more capital to fund risk-taking, but also give more people an incentive to take a risk. The (possibly non-rich) risk-taker’s money first flows out to the non-rich; the subsequent profitable inflow of money to (or subsequent declaration of bankruptcy by) the risk-taker happens later. The former situation—profitability instead of bankruptcy—is by far the better result for all concerned: risk-taker, workers, vendors, etc. In any case, “Trickle Down” is a politically-inspired fictional reversal of the way the real world works for the innovators responsible for the growth of our economy."
- Straw Man #3 at
http://tinyurl.com/2tfn4p

[muirgeo]

Jason,Andy,

Let me restate myself. I have no problem with capitalism and wealth. But the point to me is that if we are improving society then ideally the working middle class should either be getting richer or having more leisure time as productivity increases. If that's not happening then something is wrong. And from the numbers I'm seeing the average American family is working harder with almost no increase in financial security while the majority of our productivity increase goes to a small minority at the top.

You can't believe that's a good thing or simply a result of market forces can you? Other countries prove it untrue. Many European countries enjoy similar earnings but have far more time off and never have to worry about health insurance. Quite simply they have better qualities of life because the productivity pie is shared more equitably.

And please...this is nothing about socialism. It's about fairness and democracy.

[Bob]

Very difficult to compare the U.S. and Western Europe. Our history is much younger than theirs' for one and the cultures are decidedly different.

Muriego, Bluebloods and aristrocrats make the rules there. It's true and no different than the powerful people here. Not much in the way of entrepreneurship, either.

No to worry, though. If the Dems get the White House, you'll get your single payer health insurance.

BTW, I'd like to send the French a bill for protecting their sorry you know what.

[Jason]

muirgeo,

Thank you for keeping blog like this, Cafe Hayek and others interesting. Otherwise, things might degrade into boring self-congratulatory preaching to the choir. I disagree with most of your posts, but they make me reflect upon and refine my positions.

If "distribution of wealth" debates focused more on helping the poor as opposed to restraining the wealthy from "obscene profits," I'd be more sympathetic. When I hear something along the lines of, "poor people are suffering, look at this stat on how the top 1% are making so much money," my initial reaction is to attribute envy not altruism to the comment. I know it's usually a mistake to impugn motive, but I sense destructive malice and that's why I become upset. Some suggested policies seem to be built upon spite without regard to economic results and irregardless of achieving pareto-efficient gains (minimum wage vs. EITC, higher marginal rates despite evidence that low rates lead to higher long-term tax revenue).

Look back at the Economist quality of life index. Ireland is on top and its corporate taxes are some of the lowest in the EU. US isn't that far back at 13 (add back in the divorce penalty and the US jumps up to 5 or 6). How much is all that free time worth to the French and Germans when they trail the US in QoL and per-capita GDP. Also, it's one thing to have free time, it's another when the government essentially mandates it.

Going back to Krugman's quote, I concur. I believe productivity is almost everything and those in the top 1% or 10% don't get and stay there by stealing or looting the poor. You claim you're not proposing socialism but your implications wreak of Marxism. Wealth is built by allocating resources to most productive endeavors. Many proposed and current government policies subvert this mechanism and make almost everyone worse off.

[muirgeo]

Jason,

I pretty much agree with the Krugman quote too. But I think we can raise productivity, protect the environment and more equitably share the productivity growth while improving markets, democratic represent ion and minimizing government.
The solution is insisting on open and honest government and separating money from politics. Money in politics is not speech its bribery and it results in unequal representation and access.