For How Long Was the U.S. the World’s Largest Economy?

A solid century. According to conventional wisdom (i.e., Maddison, whose estimates should always be taken with a pinch of salt), British and American per capita GDPs (PPP) were rather similar, with Britain’s being slightly higher, until Britain fell clearly behind during the years immediately after the two World Wars, thanks, presumably, to its socialist and laborist policies of the time. Bob Allen confirms U.S. real wages were slightly higher than British throughout the 19th century (at least, by his method of measurement), however, Allen presumes the British profit share of income was higher. The population of China, the largest economy in the world in the early 1850s, was around 430 million, standard error 50 million (a contemporary source lists 396 million; trust these statistics only as much as you trust contemporary Chinese statistics) at the time, and only fell the following decade and a half thanks to the Taiping Rebellion. The population did not significantly change throughout the rest of the 19th century. According to Robert Allen, real wages in London in the 1900s were some four and a half times higher than those in Beijing. Assuming this reflects a GDP per capita (PPP) difference, and that the per capita situation was roughly the same as in the U.S. (which is fairly reasonable), the U.S. economy surpassed the Chinese sometime (see U.S. population figures) in the early 20th century, probably by 1908. The significance of labor force participation, population pyramids, and the rent share of income is probably sizable here, but is rather difficult to ascertain. The assumption that they all even out in the end is a somewhat dubious, though not completely unreasonable one. However, the general pattern-that the U.S. economy surpassed China’s in the early 20th century, very likely by 1910-remains very sound. In the case of the U.K., for which population figures are readily available, the case is much clearer. The U.S. surpassed the British economy sometime in the early 1850s, certainly by 1855, and almost certainly by 1854, even if it did have a lower GDP per capita (PPP) at the time.

Edit: a study confirms British GDP per capita was higher than American until 1880, when it reached approximate parity, and that the divergence became larger in America’s favor 1899-1906 and 1920-1926.

Curiosities

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1. If the CIA did the Kennedy assassination, Lee Harvey Oswald, a guy with a background leading any rational person to conclude the CIA and FBI must have been keeping a close eye on him from 1959 onward, would have been the last person the CIA would have come up with to blame the assassination on to keep the public eye away from its role in the assassination. Rather, it would have been a heck of a lot more convenient for it to blame one of Oswald’s Black or Hispanic co-workers, as they would not have had anywhere near the illustrious background Oswald had.
2. The fact there is any doubt about the timing of the shots which wounded and killed John F. Kennedy is a sad testament of the state of technology in 1963. If Obama was assassinated by three gunshots today, there would be zero doubt about the timing of the shots which killed him, as everybody today has mobile devices with cameras and microphones. There were plenty of cameras covering the events at Dealey Plaza at 12:30 PM on November 22, 1963. There were zero microphones.
3. The whole pretext behind the 2003 Iraq attack was obviously self-contradictory. If Saddam really did have stockpiles of Weapons of Mass Destruction (much less nuclear weapons), there would be no conceivable way the war would be a success, as U.S. casualties would be massive. Everybody knows North Korea has stockpiles of WMDs. Yet, I’ve never heard any (serious) cheerleading for restarting the Korean War, precisely because of this fact!

North Korea: Bright Hope for Tomorrow

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In all my encounters with data connected to economics, I have found only two guarantees of national minimum RGDP per capita: distance from the equator and economic complexity of exports. North Korea has solid marks in both for a country of its standing.

The fact that the North Korean economy is all too often underrated is obvious. From an outside glance, North Korea does not look or act like a country that has the per capita income of Kenya or the Ivory Coast, but like one that has the per capita income of Honduras. Indeed, despite the lack of consumer electric lights, North Korea’s electricity consumption per capita really is almost the same as that of much-better-lit Honduras.

Compare the real North Korea with the North Korea of Africa: Eritrea. Do you really think they have the same growth potential or even similar actual RGDP (PPP) per capita? I certainly don’t. Over 97% of Eritrea’s exports are products of primary industry. At the very best (which is extremely unlikely), Eritrea’s future is little better than that of Nicaragua. Despite the local dictator’s pretenses of supporting national independence and aidless growth, Eritrea is a country mired in economic stagnation, poverty, government debt, and a surprising amount of neocolonial dependence on its former colonizer. Like those of Somalia and Libya, Eritrea’s future looks grim, violent, and anarchic. Though Erik Reinert heaps numerous accolades and statements of hope upon Africa’s North Korea:

, they are best reserved for the real North Korea: Eritrea has little to offer to the world except a steady stream of illegal migrants to its former colonizer.

Nor does Cuba have anything like the economic base of North Korea, and neither does its economic future look much brighter than that of the Dominican Republic. Though it has a well-educated population and a solid medical system, it looks like it never exited its past of naive comparative advantage in primary industry and inherently related “neocolonial dependency”.

In contrast, if North Korea is dependent on any country, it is on China, on which the rest of the world is understandably dependent as well (though, considering geographic distance and their own development, to a much lesser extent). An economic collapse in China would cause economic privations in North Korea, but no substantial change in its economic complexity which, despite the terrible shocks of the 1990s, is between that of Mauritius and Greece -both of which went great economic distances in the twentieth century.

Now, considering the level of malnutrition in the real North Korea, and the fact only a small percentage of the population has regular access to electricity, I wouldn’t be surprised if it turned out that the CIA RGDP per capita estimate is, in fact, a reasonable one. Physically, North Korea looks like a lower-middle income country with unusual gaps in its development fabric; the primary variables missing are consumer sovereignty and any distraction from the constant emphasis on military preparedness at any cost. There’s no point in building up any civilian consumer electricity network, after all, if the assumption is that the West and the Capitalist Occupation Regime could blow it up at any time or that it would quickly need to be dismantled for use of national protection. Indeed, even in the U.S., which never saw any battlefield action on its own soil for decades, civilian consumer electricity was rationed during the Second World War. Indeed, North Korea basically looks like an Asian version of the U.S. if it had never exited the Second World War. The country has a deserved reputation very much like that of Sparta. Kenya and the Ivory Coast could never acquire a nuclear weapon. North Korea could, and did. And, as with the actual post-WW II U.S., a post-Juche boom (after a sharp and brief recession) is perfectly possible in North Korea, even in the framework of a centrally-directed economy. Were it to turn to free-market capitalism, or even implement a more consumer-friendly version of its present economic system, North Korea’s RGDP per capita would quickly rise to the level of Honduras, and, over the next few decades, continue ascending to the level of Mauritius. There is absolutely nothing but royal ideology preventing North Korea from achieving the RGDP per capita of the 1980s Soviet Russia within the next four decades. If the real Soviet Russia could achieve post-1980 Mexican per capita RGDP by the early 1980s, so can North Korea by a simple redirection of resources from military to civilian purposes. The Korean people are generally more intelligent than the Russian, so by letting Korean genius shine, North Korea could rise to middle-income levels even within the rubric of a totally government-controlled economy.

In short, there is a good empirical case behind Scott Sumner’s contention that the fastest-growing economy of the 21st century will most likely be North Korea. North Korea, being an unusually economically-complex, yet, unusually poor country, is very much like Japan in the mid-19th century-just waiting for its opening to the West to shine.

Note: While a totally planned economy can be great at getting a country from lower-middle-income to upper-middle-income, it has never been shown to get one from third world to first. For that, some capitalist framework is required in order to encourage Hayek’s use of knowledge in society and the selective pruning and planting of Mises’s economic calculation. But neither of these is really necessary for a “poor” country of intelligent people to achieve Mexican living standards.

Graph of The Day

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FreshPaint-6-2015.03.03-08.19.48
http://research.stlouisfed.org/fred2/graph/?g=12Qv

This graph effectively proves much of the per capita income growth between 1962 and 1990 in the United States was nothing more than a result of the changing age structure and female entry into the workforce (resulting, presumably, from increasing automation of household tasks). It also explains some of the unemployment boost the U.S. had in the 1970s and confirms my suspicion that a lot of the crime boost in the 1960s and crime decline in the 1990s may have simply been due to the changing age structure of the population. My other explanations for the crime boost and decline in the U.S. from 1945 to today include changes in imprisonment, increasing availability of contraception, and the hollowing-out of the inner city. Changes in welfare policy may have also been a factor.

Scott Sumner made a similar point about the importance of age structure just as elegantly a few weeks ago.

Two Ways To Save a Screenshot in Windows 8.1

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Yesterday, I saved the screenshot shown in yesterday’s post by emailing it to myself using the Windows 8.1 Share charm, then cropped it with the Photos Metro App. So far as I know, there are two ways to save a screenshot on a tablet in Windows 8.1 without an Internet connection:

1. The way Microsoft recommends. Press the Windows button and the Volume Down button at the same time (Windows button first, though by no more than a couple seconds). The screenshot will be saved to the Pictures folder.

2. For people who feel superior to using anything but the touchscreen on a tablet with only three buttons (like me), there is an alternative:

a. Make sure the Fresh Paint Metro App (by Microsoft) is installed on your computer.
b. Open Fresh Paint.
c. Switch to whatever you intend to screenshoot (do NOT close the Fresh Paint app by dragging down or by clicking on the X in the right-hand corner-instead, use the charms to get back to the Start screen or swipe from the left).
d. Swipe to charms. Click on Share. Make sure you see a “Share a screenshot of…” in the Share charm. If you don’t, maneuver there using the drop-down menu.
e. Still in the Share charm, click on Fresh Paint.
f. Click Share.
g. Switch to the Fresh Paint Metro App. You will see the screenshot in your Paintings (if you don’t, close and re-open the Fresh Paint Metro App). Click on it. Click inside the grayed-out area or the background when you’re finished rotating or shrinking your screenshot.
h. Click the floppy disk icon to save your screenshot where you want.

An example of a screenshot made using this method.

An example of a screenshot made using the second method.

Oil Price Moderate to High by Historical Standards

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Bob Murphy pointed this out a few months ago on his blog (link not available due to unresolved search engine-related issues), but I thought I’d try to make the point a different way:
oilpricewagescreenshot
Barrels of Oil which could be bought with an Average Hour of Production and Nonsupervisory Worker Earnings

And people wonder why first-world growth was so much slower after 1973. Good thing I brought my keyboard, mouse, and USB jack with me to plug into my tablet while in Russia, as these enable me to compose posts much more quickly.

Windows 8.1: The Bad

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In order to keep up with goings-on in the U.S. while I’m in Russia (where I’m writing this from), I bought a $60 WinBook TW700 tablet (on which I’m writing this) equipped with full Windows 8.1 in mid-January of this year (like it or not, Windows 8.1 is currently the only non-mobile OS with the full backing of Microsoft as of the time of writing). I think it has the greatest variety of ports for a tablet of its price range, with a MicroSD slot, a Type D HDMI port, a micro USB charging port, and a full-size USB 2.0 port. The screen’s pretty decent, too, although there’s under six gigabytes of useable disk space out of the box, forcing me to block the installation of all Windows updates but Windows Defender malware definitions to conserve disk space. So far, without using a keyboard or mouse, I’ve been able to post multiple blog comments, watch a couple of hour-long YouTube videos, and even check five check boxes in the Windows 8.1 File Explorer (one of the hardest things to do without a mouse in Windows 8.1). I found the separately sold tablet folio to be very useful for protecting the screen from damage.

As I’ve used this tablet for a month now, I think I am able to judge well the merits and demerits of Windows 8.1. This post shall focus on the demerits.
*In XP, Task Manager is used to kill unresponsive apps. In 8.1, Task Manager is the first app to become unresponsive. Instead of killing unresponsive apps, it is used to kill Modern UI apps. Even attempting to kill unresponsive apps with the 133 kilobyte XP task manager failed, as 8.1 does not appear to allow any new programs to open until issues with the unresponsive one have been resolved.
*”Closing” Modern UI apps (by dragging down) does not actually mean closing them.
*There being no easy way to shut down the OneDrive Sync Engine Host without a registry hack.
*OneDrive (which cannot be uninstalled easily) bans literally at least 85% of the Internet (also, links to it and uploading of the same content more than once). Yes, these policies are effectively enforced. Even if they’re not meant to be. So there’s never really a reason to use OneDrive for personal use, despite Microsoft’s aggressive promotion of it (see above). Dropbox has similar, though much less broad and more vague policies. Google Drive has infinitely more sensibly-written and explicit policies, suggesting a greater willingness to listen to reason (this doesn’t mean they always do so; just listen to some of Thunderf00t’s complaints about YouTube policy enforcement).
*The LoveSummerTrue mousepad (a requirement in some cases; e.g., moving forward/backward without arrow keys in some video players, scrolling quickly in File Explorer and Control Panel, mousing over to find menus on some websites, dragging some items in some websites) is not built-in.
*8.1 File Explorer and Control Panel are terrible for touch. Checkboxes and scrolling are the worst.
*Modern UI only being able to serve a very limited purpose in desktops and laptops, with many (most?) Modern UI apps being unnecessary for large screens attached to computers with 4+ gigabytes RAM. Most desktop and laptop users do not even open one Metro app per day.
*The default calculator not having a quick way to convert square units.
*Having to go through some hoops to truly remove the default apps from the hard disk (Uninstall just won’t do; you’ll also have to delete some hidden folders and change folder ownership). Default apps include Health and Fitness, Games, Zune X-Box Music, and Mail+Calendar+People.
*I found the learning curve to be excessively steep due to omnipresent Mystery Meat navigation. I’d never have guessed where the Show Desktop button is without intoxication, excessive concentration, or Googling. Neither would I have known how to move or remove Modern UI apps. Or fill half the screen with one app and the other half with another. The charms are quite difficult to purposefully pull up on a desktop without some experience, but are much easier to pull up (while actually meaning to) on a tablet.
*The Windows Mobile and Windows RT/Full Version Windows App stores not being the same thing. Mobile Windows apps are unavailable on Windows for tablets and desktops. That’s just insensible.
*Related to the previous point, fewer and less feature-filled apps (for why, see above).
*No way to view exact percent battery left in Modern UI without installing a quite cruddy third-party app.
*OneNote requiring constant connection to the Internet.
*No free Office Online Modern UI apps (other than OneNote). Office Online is available for free on live.com. But why isn’t it available as a set of Modern UI apps in the Windows store?
*The tabs in the latest version of Internet Explorer for Desktop are too small when there are more than about five of them.
*Internet Explorer for Modern UI not supporting extensions. What’s up with that?
*The toxic rule that only the default web browser is allowed to have a Modern UI mode. The fact other browsers are allowed to be default does not change the fact this is a clear anti-competitive business practice, since Internet Explorer for Modern UI was always the best-established Modern UI web browser. That rule successfully killed Firefox for Modern UI, which was shaping up to become the best Modern UI web browser up until 2014.
*No screen sharing in the Modern UI Skype App (this is part of an issue mentioned above, but shouldn’t Microsoft have some respect for what it owns?).
*The Windows app store having a more-than-decent amount of questionable apps (including a questionable “UC Browser”).

Liability Markets?

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Currently, the U.S. government issues Treasury bonds, which are liabilities for itself and assets for the private sector. But what if it did the reverse? What if it regularly issued assets for itself and liabilities for the private sector in the form of tradeable revenue bills sold on the open market? The bills would effectively be very low-interest loans. As the IRS is a much more powerful collection agency than any bank, only those borrowers most prone to seeking low interest rates above all else would ever consider accepting Revenue Bills. Currently, the closest real-world equivalent to my proposed Revenue Bills system in the United States are Federal student loans. Currently, the way for the Federal Reserve to lower interest rates and curb inflation is for the New York Fed to buy more Treasury bonds. But what if it instead issued new offerings of my proposed Revenue Bills? By doing so, it could temporarily boost inflation while lowering interest rates, and even offer nominal negative rates if need be (though this would surely result in an insolvent Fed). Crowding out via higher interest rates could occur in reverse. My only question is, why, except for a substantial expansion of its student loan programs, had the Federal Government not done this in the aftermath of the 2008 recession? Under this system, the government could at last become the lender of last resort.

I also wonder why there is not a functioning and thriving market for liabilities like there is a market for assets, or at least any that I’ve heard of.

The Great Stagnation: U.S. Employment Gains and Losses

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My last post dealing with the Great Stagnation pointed out a number of U.S. economic trends. However, it did not discuss changes in the composition of the labor market. This post will rectify this omission.

employmenttrendsline
http://research.stlouisfed.org/fred2/graph/?g=VCv
employmenttrendsarea
http://research.stlouisfed.org/fred2/graph/?g=VI6
The fastest (or second-fastest)-growing private-sector occupation category, before and after 1973, in the U.S. is (no surprise) Education and Health Services. Its growth was very closely related with that of the ever-mysterious Other Services up until the 1990 recession, when Education and Health Services showed itself to be utterly recession-proof. Education and Health Services jobs are typically high-skilled, but medium-paid. In recessions, the first-hit occupation categories are Professional and Business Services and Trade, Transportation and Utilities. The third-fastest-declining occupation category, both before and after 1973, was Information Services. This is probably due to the declining scarcity of information. Unskilled nondurable and durable goods manufacturing has, as has been noted by practically everyone commenting on it, been shipped off to Asia (first Korea, Thailand, and Indonesia, then China, Vietnam, and Bangladesh), though nondurable manufacturing employment was clearly on the decline before the rise of Asia. This deindustrialization has led to increased unemployment among the unskilled and the unionized. Professional and business services jobs are generally skilled jobs which have below-average unionization rates. Their growth thus exacerbates income inequality. Leisure and Hospitality jobs are typically low-paid, and their employment is fairly fast-growing. The percentage of construction jobs has stayed remarkably constant. There are not nearly enough job-creators in the financial industry. Income inequality within occupations has clearly risen, as well, as earnings for production and nonsupervisory workers in finance (where they have grown the most) have still been lower than GDP growth.