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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Front Beach who wrote (20122)	9/7/1998 1:59:00 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

SP-- I am very particular about comparisons, I even compare $/Mark moves only within a bull trend, for me the internal dynamics completely changes when we compare two events in different time series.. 1873- 1929 or even 1987 are different points in my five cycles of economic developement, the way an Oil tanker changes course and the way a little 12 meter boat changes direction is one example, 1873 and 1929 were different kind of economies to compare present global integrated economy with 1929 or events of 1873 is kind of streching imagination a little too long, I know that we had electricity in 1929 we also had telephones and even TV than but the full economic potential of these products was not being extracted.. ''''GDP per Capita Angus Maddison (1995) has constructed estimates of real GDP per capita for the world from 1820 to 1992. His estimates are best thought of as Laspeyres purchasing power parity estimates in 1990 international dollars. That is, they: ú Compare income levels across countries not using current exchange rates, but instead trying to change one currency into another at rates that keep purchasing power constant ("purchasing power parity"). ú Value goods in relative terms using the prices found in a country in the middle of the world distribution of income ("international"). ú Calculate a value for 1990 GDP per capita in the United States equal to U.S. current-dollar GDP per capita in 1990 ("1990 dollars"). ú Do not take explicit account of the benefits of the introduction of new goods and new types of goods, but instead calculate GDP per capita in the past by valuing the commodities produced in the past at recent prices--and not making any correction for the restricted range of choice enforced by limited production possibilities ("Laspeyres"). All of these save the last is reasonabl--is in fact a way of proceeding vastly preferable to the alternatives. I will return to the last of these later. But first I want to extend Maddison's estimates backward before 1820. If you plot the rates of world population growth against Maddison's estimates of world GDP per capita, you find a very high and significant correlation between the two from the early nineteenth century until roughly World War II. After World War II the demographic transition has begun to take hold in large parts of the world, but before World War II the higher is world GDP per capita, the faster is population growth--with a 1 percentage point per year increase in population growth associated with an increase in average world GDP per capita of $1,165 (with a t-statistic of 7.4 and an adjusted-R2 of 0.84). If you are enough of a Malthusian to believe that this tight relationship before World War II is not coincidence but instead reflects a near-linear dependence of the rate of human population growth on the margin between actual production and bio-cultural subsistence, then you can use the fitted relationship between population growth and Maddison-concept GDP per capita to backcast estimates of world GDP per capita before 1820. An alternative (preferred by Maddison) is to assume that GDP per capita was constant in Asia and Africa from 1500-1820, grew at 0.1 percent per year from 1500-1820 in Latin America and Eastern Europe, and grew at 0.2 percent per year from 1500-1820 in Western Europe (an estimate that Maddison attributes to Simon Kuznets (1973)); this alternative could then be backcast further by assuming that pre-1500 GDP per capita was constant at near-Malthusian bio-cultural subsistence. I prefer the first alternative (and have used it). But I also report estimates using the second. New Goods A large proportion of our high standard of living today derives not just from our ability to more cheaply and productively manufacture the commodities of 1800, but from our ability to manufacture whole new types of commodities, some of which do a better job of meeting needs that we knew we had back in 1800, and some of which meet needs that were unimagined back in 1800. How much has this change--the fact that we make not just the same goods, but new goods and new types of goods--enhanced our material prosperity? Nordhaus (1997) provides perhaps the most eloquent and sophisticated argument that standard measures--like those of Maddison--that do not take explicit account of these factors grossly understate the rate of economic growth over the past two centuries. I know that I at least would be extremely unhappy if I were handed my current income, told that I could spend it on goods at current prices, but that I was prohibited from buying anything that was not made before 1800. Yet Maddison's procedures would implicitly take such a reduction in the range of goods I could purchase as having no effect on my real income or real material standard of living. But by how much has our power to make new things--not just the same things more efficiently--amplified our material prosperity? In at least some models of growth in which the set of goods that can be produced expands, the correct measure of real output is proportional to the product of purchasing power (income divided by the average price of a good) and the number of goods that can be produced. As best as I can determine, about three-quarters of world expenditure today is spent on commodities that simply did not exist back in 1800. So I (somewhat arbitrarily) use this to assign an additional fourfold multiplication to output per capita since 1800 in addition to the increases in output per capita calculated by Maddison. But since this--large--extra adjustment is not to everyone's taste, I also report the "ex-Nordhaus" series without the "new kinds of goods" adjustment. Conclusion The outcome of this set of calculations is thus seven series: Kremer's (1993) estimates of population; three estimates of GDP per capita (my preferred estimate, the constant-before-1500 estimate, and the ex-Nordhaus estimate); and three estimates of total world real GDP (capita (my preferred estimate, the constant-before-1500 estimate, and the ex-Nordhaus estimate). They are reported in the table below: Average World GDP per Capita (1990 International Dollars 1000000 92 $ Gross GDP-.01 1875 429$ -568 billion $ 1930 1115$ -2103 billion $ 1987 4800 $ -22531 billion $ 1998 6000 $ -41000 billion $'s''''' Now you can see from above that the only time we can compare are 1987 and 1998-- in terms of size of the economy and per capita GDP- that may be comarison of a economy which was still not globalised but had size similarities, if you agree with the premises of my argument I will take it further-- A huge Oil tanker takes time to stop, today our world economy is not going to slip into oblivion, the technologies unlike 1929 and even 1987 are not mature and finding economic application, even in Russia the talk is of cutting tax reducing regulation not increasing it even the commies are talking market based policies, so markets as a whole need to be seen in true perspective and true time cycle.. 1987 we did not have CSCO INTEL MSFT the way we have them today-- take out DELL NOK INTC MSFT CSCO the 1987 market componenents like Oils, commodities Banks have aleready seen a 50% decline in values, it is only the 90's integrative technology which is holding the market at these levels otherwise I tell you on 1987 components basis we are living thru worst correction than ever.. Just a thought may be you can improve on it..