GDP growth of humanity over the very long run
ourworldindata.orgAnd if you ask a person in the 18th century if we could grow GDP 30+ folds while increasing various folds also the world population he would say... you are going to finish all the Earth resources and die before you even get to a tenth of that!
It's just to say: 1. productivity is always very misunderstood by people (hence Malthus); 2. poverty is better fought with growth, not re-distribution of wealth
Redistribution has very little effect on growth except at extreme levels.[0]
Over the last 20 years the U.S. economy has grown 25% but the income for the bottom quintile has stagnated.[1][2]
I would agree growth is probably the best medicine for the third world but the IMF shows it's not at odds with redistribution.
I would strongly disagree that we can solve poverty in the 1st world using growth. We have two options for replacing the $7,000 the bottom quintile missed out on in the last 20 years because of rising inequality. We could redistribute $7,000 to the bottom quintile or grow by 25%. Redistributing $7,000 is doable. I don't know of any policies, or even any set of policies that would increase the size of the economy by 25%. This is even more insurmountable given that in recent history the gains from growth have not been distributed equitably. We would need to see an order of magnitude more growth, an increase in the economy of 250%-500% before the poor would be substantially better off.
[0] - https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf [1] - https://research.stlouisfed.org/fred2/series/A939RX0Q048SBEA [2] - https://www.census.gov/hhes/www/income/data/historical/famil...
Redistribution has very little effect on poverty, even at extreme levels.
The growth over the last 20 years is much less than before, which is a likely cause of the increasing inequality. In a zero-sum economy, trade tends to concentrate wealth.[1] Growth is plausibly strong enough to counteract this, and historically, is overwhelmingly correlated with falling inequality.
Policy is much weaker than growth at doing anything. I personally favor progressive taxation and a basic income, and I think we can continue to improve the effectiveness of policy, but governments (and humans generally) don't have so much freedom in economic matters as is often supposed.[2][3]
Free trade doesn't cause growth (as ten thousand years of history prior to 1800 shows) but it may be a necessary condition for it.
[1] http://nbviewer.ipython.org/url/norvig.com/ipython/Economics... [2] https://plus.google.com/+CarlLumma/posts/T2fdtAHtU9W [3] https://plus.google.com/+CarlLumma/posts/fWhcsTxvZVM
Bottom quintile is a very vague term. Is it individual income of family income ? What is the breakdown of young population v/s > 40 year olds in this ?
Income remaining stagnant or going down for bottom quintile is not really a problem. When you look at the economy over decades what truly matters is the quality of life people could afford at that time compared to 20 years back despite being in the same quintile. That is going consistently up thanks to the efficiency brought in by the growth. A focus on redistribution might help the bottom quintile temporarily but it would hurt the efficiency of economy by moving the money from private hands to government hands. This hurts not just the poor people but also the middle class and rich.
The third link takes you there which has definitions for the term family, as well as population breakdowns. The United State Census Bureau presents them.
I linked to a paper by the IMF where they could not find any evidence that redistribution hurt growth.
To my knowledge GDP captures changes in efficiency. If we become more efficient we produce more stuff. What efficiency changes do you think are invisible to GDP but make the poor's life significantly better?
If you want to look at things from a humanitarian perspective, then sure, let's talk re-distribution. But it should be in form of education and competitive markets (free milk quotas, anyone?). I struggle with the idea of making war to make peace (aka "democratization"). I also struggle with domestic re-distribution through "citizen income", because it makes life worst for all that pay taxes and those that are not "citizen" (foreigners, immigrants, etc.).
If we want to help the "poor", then we should make things more competitive, starting with relaxing immigration policies as much as possible...
> I also struggle with domestic re-distribution through "citizen income", because it makes life worst for all that pay taxes and those that are not "citizen" (foreigners, immigrants, etc.).
It has very little real effect on middle income taxpayers who both pay for and receive it, because in the middle range the benefit cancels the tax.
And the consequence for immigrants is hugely advantageous to nearly everyone. The problem we have today is that we have a large number of undocumented immigrants, which consume the capacity we have to absorb immigrants and therefore reduce the number of documented immigrants we can reasonably accept.
Something that makes it economically infeasible to be an undocumented immigrant would allow us to accept that many more documented immigrants through official channels and give them the basic income, thereby allowing much the same people to immigrate, modulo the few criminals who can't pass the background check and we don't want anyway. And then they're above board and don't have to live in the shadows, which is clearly much better for them. But meanwhile it allows us to affirmatively choose how much immigration we want instead of having people who break the law choose for us.
The issue is far for being so white and black.
Not all the growth come from free markets. More efficient use of resources and the discovery of new technologies come from improving our knowledge. Sometimes this is done by business, sometimes no.
Also, there are economic theories (even mainstream economic theories) that express the view that some kind of redistribution is necessary for keeping the engines of growth working.
As a free market guy, I don't think free market ideas are anti-redistribution. They are against redistribution through the coercive power of government as moral principle and utilitarian argument.
I think private charity is far more effective in helping people in need. The government redistribution is merely a ploy to steal our wealth in the name of fighting poverty. I am totally surprised to see the amount of money US government wasted on Iraq war for which no one ever got punished.
Redistribution and charity are very different things. Redistribution comes from the idea that societies have goals, and that those goals are better served by thinking about where to spend resources instead of leaving it to blind markets.
I can see that you think of the government as 'them' instead of 'us', instead of something that we do as a society. We differ there.
Also, it worries me that you think (maybe I'm reading you wrong here) that is the spending of money, of all the things, what is the main problem with the war on Iraq.
We do disagree on the definition of redistribution. I do not accept that government=society. I also do not accept that society should have any goals and I would put individual liberty over everything else.
I do think spending money on Iraq war was bigger problem for Americans.I think you are referring to destabilization of middle east as another problem. We have essentially borrowed money from our children to simply waste it or rather on creating even huge problems for our children.
Well, if you got hold of how to bootstrap societal growth or end poverty, please, share if with the world. Everybody is looking for this secret and all the obvious answers seem to be wrong.
Anyway, concentration of wealth seems to reduce growth. No idea what way causation points, but your advice against redistribution look very naive.
0. When many of the world's resources will be depleted in a multi-decade timeframe, there is a problem. I want humanity to last millions of years.
1. Fortunately, longer schooling and birth control has reduced the rate of growth in the model of Malthus. This is dumb luck, not divination from GDP.
2. Please remember that we won WWII and went to the moon in the periods with highest marginal tax rates. Growth is probably highest with higher rates of taxation and government investment in R&D.
3. Learned people are consistently and dramatically underestimating the capacity of Earth's "limited" resources to support a growing population.
Like all models, incorrect but useful, I think that the most useful model to view "value" and GDP is as a crude approximation of the human input that goes into making something or making it useful. Natural resources are only useful if humans exert effort to extract and refine them, services are only useful if some humans exert effort to save other humans more effort, manufacturing is only useful if the effort exerted is repaid in improved productivity or utility gained, etc. Once you abstract away from monetary units to say that we're all trading units of human effort at varying degrees of efficiency, it's clear that GDP growth and "the ability of limited resources to support a growing population" is dependent on the growth of both the amount and the efficiency of human capital rather than physical resources. I'd take Ehrlich's wager [0] at any point in the future. [0] https://en.wikipedia.org/wiki/Simon%E2%80%93Ehrlich_wager
The Earth has finite resources, and is replenishing them more slowly than we're using them. You're making the argument that withdrawing exponentially increasing amounts from our sizable savings account is just fine, thank you on the assumption that it will never run out.
This is a clear failure in understanding of the exponential function.
Or it could just be a disagreement that it is an exponential function on a longer timescale.
BS. Per person GDP did not grow 30+ fold.
A hunter gather lifestyle from 10,000 years ago takes ~0.5-5$/day in food assuming everything else [ed: produced 10,000 years ago] has zero value. US Per capita GDP = ~125$ / day. Actual growth per year is on the order of 0.04% / year
PS: Remember meat more than 1$/lb. For much of human history per capita GDP by todays measurements was actually dropping.
> assuming everything else has zero value
Ah, so if you ignore almost everything, you have a point. Like, for example 99% of the people on the planet. Because there is no way a hunter-gatherer system could support our population.
Not to mention I for one think not dying of the common cold has quite a lot of value.
No, I am dramatically understating the value of the average person from 10,000 years ago not the other way around.
Child care for example has actual value which is part of current US GDP. A bow, tent, or clothing constructed using methods from 10,000 years ago has real world value today. But, I am calling all that 0 and just looking at food.
Also, this is per capita GDP, having more people does not mean peoples standards of living automatically increases.
PS: The common cold was not an issue back then as the population was to low to spread it around. In fact a large chunk of diseases only showed up as population density increased.
True of communicable diseases to a great extent, but not, for example, diseases of aging or birth defects.
WRT your PS about meat prices, I did some engineering back of envelope estimates with a million grams per ton and a ton of post-green revolution rice costing about three hundred bucks in 1990 (or so google says) and about 4 calories per gram of carbs, the world GDP "always" being $300 per person before the industrial revolution, and ended up with something around ten thousand calories of rice per person per day. Some googling indicates the green revolution plus industrialization plus factory farms has temporarily quintupled grain production per acre, well, absolute best case anyway. So assuming world productivity was solely focused on rice ag (cheapest calories there is... right?) then every human on the planet consumed 2000 calories per day of rice and absolutely nothing else happened. That sounds very unlikely. I'm not entirely sure people can live long term off absolutely nothing but heavy manual labor and 2000 calories or less of rice per day, for vitamin and mineral deficiency reasons if nothing else.
Generally when you're doing data analysis and some textbook curve pops out, that's a very strong indication you've screwed up your data, not that you've actually discovered anything. Far more likely despite attempts at short term correction the value of a supposedly fixed standard 1990 international dollar inflated exponentially over the past century or so, on a long enough scale. Once that correction is made, the data could be re-run to gather actual, useful results. Or rather than using inflation adjusted counters, just pick a valuable commodity like gold. Supposedly an ounce of gold has represented a year of labor from the dawn of trade up to the invention of steam powered mine pumps. A graph vs gold price might be useful. Or a hybrid of gold/oil for more recent stats.
Parent comment says GDP, not GDP per person.
"you are going to finish all the Earth resources and die before you even get to a tenth of that!"
Its fun to watch the debate about the "before" clause, as if the precise fraction or integer matters in the long run, when the real problem is nobody wants to face the reality of chopping off the entire "before" clause.
Once we stop economically extracting cheap oil energy, resulting in a roll back of the green revolution productivity gains, in a couple years at best its game over for about 95% of present humanity. Good thing the supply of cheap oil is infinite, right?
Good summary.
For readability I recommend a logarithmic graph, it helps to bring out the structure of the graph more. Not as dramatic maybe for people who are not used to reading graphs, but I hate to see a graph that is just a thin line stuck to the bottom followed by a sudden upward rocket. Not very readable to my eyes.
Optimist: Look how good things are getting, we're only a few generations away from universal prosperity!
Pessimist: Look how good things have been, we're clearly only a few generations away from this prosperity bubble bursting.
How much of this comes at a cost of people being unhappier?
Back in the time of hunter gatherers, humans "worked" for a few hours a day. The rest of the time was spent socializing and in leisure. It is fair to say they were happier compared to, let's say, an African American debt-laden minimum wage worker in the US today.
Do we really need economic growth?
Are parents for whom 1/3 of their children die as infants happier than those with children who live to adulthood?
(Modern USA infant mortality is less than 0.6%)
Loss and grief are part of life. Your parents will die. Your grandparents as well. You either die young or live long enough to see some of your own generation die before you. If you are really "lucky", you see all of your friends die.
Death is a part of life. Everyone hopes that they outlive all their children, but even if you do not, tragedies during your life do not mean that your entire life was unhappy.
We're not measuring this as a binary value happy/unhappy. Not all losses are equal. Your children dying before you is worse than most other losses.
In our culture. That might not be the case in every culture. Some cultures even practiced infanticide, others practiced child sacrifice. Surely it cannot universally be the worst thing or such practices could never exist.
Well, except that people got sick and had very limited medical treatments, and their lifespans were shorter. How do you weight that?
Also, how do you weight the absence of toys and creature comforts?
The point about toys and creature comforts is hardly important enough to address. Do you honestly think kids are happier with a motorized car than they are with a hand-stitched doll?
Your point about people being sick is valid, but not to the extent that you think. Firstly, it is not wise to suggest that hunter-gatherers were physically worse off than us. They got a lot of exercise, and were in all likelihood better physically. Secondly, the shorter lifespans statistic is an artifact of increased childhood mortality. Once you discount the child mortality, they had lifespans very similar to ours. Without all the diseases of affluence that we have, mind you (diabetes, for example).
Taking away a kids phone and giving him a doll will likely elicit a violent response, but cool on you to decide what brings people happiness.
That's inane. You'd be happy with a million dollars in your bank account but a billionaire would be pissed in the same situation.
I think it's important to look at war, disease, hunger, and displacement, in some order.
GDP might actually be one of the worst ways to measure collective well-being.
And it might also be one of the best measures of aggregate economic activity for a large region, which could also be considered a good measure of............?
defining well-being, and then measuring it, is as pointless as defining happiness, and then measuring that. happiness is a notoriously unreliable indicator of anything. it's based on an individual's perception of his/her state. there are cultural differences. there are differences by station in life. and worst of all, there are differences per individual based on everything from the season to their age to what they ate, read or did 5 minutes prior to measurement.
i use infant mortality as an objective measure of any society's success. that's because everyone in the world can agree that dead babies are a bad thing. and the data is objective and easy to measure. it is, in a sense, a better indicator than GDP. the recent example of China is probably the best example of this. For decades after the cultural revolution, China was able to decrease infant mortality, without similar increase in GDP per capita (which came later).
That would be because GDP is not a measure of collective well-being.
Can you back this statement up, please?
GDP measures vodka purchased by alcoholics; it measures chemotherapy; it measures bombs killing civilians; it measures bubble malinvestments; it measures settlements in police brutality suits; it measures daycare but not caring for your own kids.
And most importantly, it measures the velocity at which these things occur.
So?
Isn't a society that can allow itself better alcohol, expensive medicine, better weapons, has more liquid cash, pays more in brutality suits (and pays them at all, to this matter), and spends more on daycare objectivelly better and more well-off than a society that doesn't have these things?
Its quite interesting to see how latin america gdp fall down during the 1500s (is the only region to do so, I think)
And how asia is pretty much being the richest region in the world(but the largest, so maybe its a matter of proportions)
I assume that the latin american dip is the Europeans beginning their invasions and looting of the meso-american civilizations
Probably is not so much the looting as the fall in the population. Millions of people died from contact with the diseases from Europe (20 millions by some estimates).