The New Kaldor stylized facts

Kaldor published some stylized facts about growth in the sixties and growth theorist went about explaining them. They’re done now. Professors Jones and Romer came up with a new set of growth facts (h/t Kling). I will spend my career hearing theories that explain these new facts. Yeah!

Two UC Davis econ profs are cited.

Also, in that paper is my original dissertation idea:

The interaction between institutions and idea flows is easy to illustrate in familiar contexts. For example, until 1996, opponents successfully used the local permit process to keep Wal-Mart from building stores or distribution centers in Vermont. This kept powerful logistics ideas like cross-docking that Wal-Mart pioneered from being used to raise productivity in retailing in the state. Such nonrival ideas must have been at least partly excludable. This is why Wal-Mart was willing to spend resources developing them and why competitors were not able to copy them. All this fits comfortably in the default model of endogenous discovery of ideas as partially excludable nonrival goods.

Looking at the macro (state-level) data, I couldn’t find the relationship suggested in the bolded section. There’s great data on Walmart’s spread out of Arkansas after its founding. If anybody’s interested in this stuff, I can pass on citations, etc.

Are there “good” governments?

I’m actually with Will Wilkinson when he talks up “liberaltarianism” and I support a reasonable social safety net. I’m one of those people that thinks rising GDP indicates increasing interdependence, that that is a good thing and that self-sufficiency is the road to poverty. Today Wilkinson suggests a reason why liberaltarianism might be a non-starter:

[I]t’s easiest to get people to face up to tax increases if they don’t have the sense that they’re paying more just so the special interests of the winning coalition can get more.

Isn’t the conditional phrase an empirical fact about governments?

This reminds me of my dad and the Church. Even after all us kids grew up and he stopped going to church, he gave money to them every week. The Church does a lot of good things for people — disaster relief, poor assistance, etc — but a couple years ago my dad stopped giving. His primary reason: he thought his money was primary going to paying off molested children; it wasn’t going to help poor people. He didn’t want to subsidize corruption.

I don’t want to subsidize corruption either.

Costs of the stimulus

Most criticism of the fiscal package have centered on its impotence: consumption smoothing agents will make it moot or it’s effects won’t be seen in time to make a difference. So we’ve all been talking about multipliers. There’s a possibility, though, that the stimulus actually does harm:

Stimulus plans that bailout the financial and auto sector will influence innovation and reallocation. Reallocation may particularly suffer if the stimulus plans lock in factors in low-productivity sectors and activities. Market signals suggest that labour and capital should be reallocated away from, for example, the Detroit Big Three and highly skilled labour should be reallocated away from the financial industry towards more innovative sectors. Halted reallocation will also mean halted innovation.

Not only are we saddling future generations with debt, but we may be making them poorer than they might otherwise have been. Economic efficiency is generated through sectoral reallocation and efficiency creates growth. Even small reductions in efficiency have huge effects in the long run. For example, suppose the fiscal stimulus solidifies the expectation that big firms are too big to fail. This will cause too many resources to be allocated to big, established firms where innovation isn’t as hectic. Even if this has a small growth effect — let’s say it reduces growth rates by 0.3% — it only takes a generation for this swamp out the size of the additional debt created by the stimulus package.

As we saw in the global warming debates, this point is almost impossible to get across. Future growth is particularly intangible for most people.