Life has never, ever been this good!

A couple of years ago, a 700-page book that very few people read (not me!) was discussed by a whole lot of people (including me, of course!)  I am deeply  impressed with the ability of those who can read that kind of a lengthy work.  I think it is harder for a reader to go through those pages than it is for the author.  Imagine being the editor for such a book; phew!

This time, it is another 700-pager: The Rise and Fall of American Growth.  The book has a subtitle too: The US Standard of Living Since the Civil War.  I wonder why this was not the favorite beach read for millions of Americans, who instead preferred to play Pokémon Go ;)

Anyway, first from the author, Robert J. Gordon, who is a highly respected academic:

Can future innovations match the great inventions of the past? Will artificial intelligence, robots, 3D printing and other offspring of the digital revolution do for economic growth what the second industrial revolution did between 1920 and 1970? The techno-optimist school of economics says yes. I disagree.
The rise in the U.S. standard of living from 1870 to 1970 was a special century -- and won't likely be repeated.

BTW, what a clear statement upfront, right?  I wish more people would write like that!

Gordon adds:

Growth over the next quarter century will resemble the slow pace of 2004–2015, not the faster growth rate of 1994–2004, much less the rapid rate achieved between 1920 and 1970.

700 pages to back up that argument.  That is some serious scholarship, which is what I would expect from a respected academic at one of the elite research universities.  I wish the teaching universities would abandon their pretentious pursuit of intellectual onanism.  But, I digress.

The NYRB has a review essay, whose author, William Nordhaus, too is a highly respected academic.  He too leads off with clarity, (along with a humorous note that "at nearly eight hundred pages it weighs as much as a small dog"):

The message of Rise and Fall is this. For most of human history, economic progress moved at a crawl. According to the economic historian Bradford DeLong, from the first rock tools used by humanoids three million years ago, to the earliest cities ten thousand years ago, through the Middle Ages, to the beginning of the Industrial Revolution around 1800, living standards doubled (with a growth of 0.00002 percent per year). Another doubling took place over the subsequent period to 1870. Then, according to standard calculations, the world economy took off.
Gordon focuses on growth in the United States. Living standards, as measured by GDP per capita or real wages, accelerated after 1870. The growth rate looks like an inverted U. Productivity growth rose from the late nineteenth century and peaked in the 1950s, but has slowed to a crawl since 1970. In designating 1870–1970 as the special century, Gordon emphasizes that the period since 1970 has been less special. He argues that the pace of innovation has slowed since 1970 (a point that will surprise many people), and furthermore that the gains from technological improvement have been shared less broadly (a point that is widely appreciated and true).

Nordhaus highlights a point that Gordon makes in his book:

A consistent theme of this book is that the major inventions and their subsequent complementary innovations increased the quality of life far more than their contributions to market-produced GDP…. But no improvement matches the welfare benefits of the decline in mortality and increase in life expectancy….

Yes, this is something that we far too often forget when we are obsessed with economic growth and whether we have the latest Iphone model.  Our lives have never, ever, been so good with long and healthy lives.

Such optimism comes naturally to the wealthiest guy on the planet, who also reads a whole lot of books in his downtime.  Bill Gates found the book to be "a fantastic read, and well worth the time" and writes:

How do you calculate the value of millions of pages of free information at your fingertips? ... In the future, GDP may not grow as fast as it did in the past—or, for all we know, it may—but that alone doesn’t tell you whether people’s lives are going to get better.

Gates makes an important point:

And I should add that Gordon limits his scope, understandably, to the U.S. But you can’t read his book without thinking about the billions of people around the world for whom a quality of life equal to the America of 1970 would be a vast improvement.
Learning about the speed at which the U.S. was able to spread innovations—from sanitation to electricity—makes me more hopeful about what is possible for the world rather than less hopeful about what is in store for America. 

Indeed.  For hundreds of millions of people around the world, it would be a dream life to live like how the typical white American lived in 1970.  I wish people--especially the Berniacs and Trumpsters--would adopt such a global view.  

I will end it with the optimist's words:

When it comes to choosing a side in the debate between optimism and pessimism, my money is on the incredible forces of technological progress at work every day. Although the book is called The Rise and Fall of American Growth, I am confident that “fall” will not be the final word in America’s story.

If only the ultimate pessimist would read the book, or at least Bill Gates' review!

Source

Build a better mousetrap, and ... wait, are you allowed to do that?

The mousetrap is a metaphor, of course.  I don't want you to think that the next gazillions are to be made from a better mousetrap ;)

One of my favorite charts is from The Economist.  Incidentally, implementing austerity measures at home, I did not renew the subscription to the magazine newspaper.  I have also canceled the cable connection, which means my favorite television channel is also gone.  Woe is me!!!

Where was I?  Yes, one of my favorite charts.  This one:

For the longest time, the world's economy was dominated by two countries--India and China.  Which is also why people from the rest of the world wanted to get to India and China.  And then things changed.  In a hurry.  Other people got rich.  And now China is also rich. India too is getting rich.  The middle class in India now leads a life that is far more luxurious than the emperor's life that Akbar's was.  How rich are we, and how fast was this transformation?

Two centuries ago, the average world income per human (in present-day prices) was about $3 a day. It had been so since we lived in caves. Now it is $33 a day—which is Brazil’s current level and the level of the U.S. in 1940. Over the past 200 years, the average real income per person—including even such present-day tragedies as Chad and North Korea—has grown by a factor of 10. It is stunning. 

Before we complicate the story with colonialism and white supremacy, we do need to wonder why the rapid rise to wealth did not happen in India or China, and why it began in Europe, right?

The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. 

How well phrased, right?  I have always been a big fan of the author of that commentary--Deirdre McCloskey.  It was in graduate school that this began when I read McCloskey's The Rhetoric of Economics.  A scholar of the highest caliber.

McCloskey continues:

By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. From Luther’s reformation through the Dutch revolt against Spain after 1568 and England’s turmoil in the Civil War of the 1640s, down to the American and French revolutions, Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.

We often fail to recognize and appreciate life today, like how McCloskey presents it:

Look at the magnificent plenty on the shelves of supermarkets and shopping malls. Consider the magical devices for communication and entertainment now available even to people of modest means. Do you know someone who is clinically depressed? She can find help today with a range of effective drugs, none of which were available to the billionaire Howard Hughes in his despair. Had a hip joint replaced? In 1980, the operation was crudely experimental.

It has been a magical transformation, in merely two centuries.  McCloskey is everywhere, because of a new book that is coming out.  From a commentary at Reason:

Hear again that amazing fact: In the two centuries after 1800, the goods and services made and consumed by the average person in Sweden or Taiwan rose by a factor of 30 to 100—that is, a rise of 2,900 to 9,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments. It was caused by massively better ideas in technology and institutions. And the betterments were released for the first time by a new liberty and dignity for commoners—expressed as the ideology of European liberalism.

 It is such an enrichment that has made possible our daily complaints about the cable company, cellphone signal being weak, gluten, ... So, pause for a moment and be thankful that you live now and not two hundred years ago ;)

And, thank the freedom(s) that you have.

Foaming at the mouth

Don't worry, I am fine.  I am not foaming at the mouth.  At least, not yet!

Even students apparently know that; earlier today a student came by for a chat and said he is now too busy to read my blog posts every day.

I know what you are thinking: how can anybody be so busy that they can't read my blog, right? ;)

"Do you really have a quiet life in Eugene like you write in the blog?" he asked.

Life in the ashram is quiet and peaceful.  "Nobody to bug me, and I don't bug others" I replied.

So, foaming at the mouth is not me.  Certainly not this "steady Eddie" as the friend refers to me sometimes.

But, nature can sometimes foam at the mouth, it seems.  Photos of volcanic eruptions, like the latest one in Chile, certainly do feel like nature is furious.

And then there are times when we humans make nature foam.  Literally!

Caption at the source:
Froth from Varthur Lake spilled on the nearby road on Monday

That's no special effects, dear reader! :(

Like a washing machine that has had too much detergent put in it, Varthur lake – one of the largest lakes in the city – started to sprout out white froth, at least five feet high, on Monday.

 I wonder how far away from this lake is the residence of the debating partner.  Maybe he is foaming at the mouth after witnessing it in real time!

Environmentalist Yellappa Reddy said the froth was due to washing machine detergents, which flowed into the lake with the raw sewage let in. “These detergents have high concentration of phosphates, which leads to lowering of the biological oxygen demand and chemical oxygen demand of the lake. This will cause aquatic life in the lake to die slowly,” he said. An officer in the Karnataka State Pollution Control Board said the froth was formed due to the reaction of detergents and toilet cleaners with warm water.

How much environmental impacts will it take for people in the old country to metaphorically foam at the mouth and demand cleaner air, water, and land?  But then, perhaps they are happy with the Faustian Bargain of economic growth at any cost.

Narendra Modi loves the Chinese model. Heck, any anti-democratic model!

A couple of days ago, after reading a news item that half of India's rivers are polluted, I tweeted about it.  A high school friend from India replied, with his characteristic sarcastic brevity, "just half?"

Talking about pollution, working on highlighting the damage to the natural environment, and actively engaging to protect it, might sound as valid democratic activities to us here in the US.  Every plant and animal and river and lake and mountain seems to have a group or two championing the cause openly and loudly.  Which is what I expect in a democracy, even when I disagree with them.  If we can have the NRA and the Chamber of Commerce, then why not the other organizations too?

It can be frustrating, no doubt, to have all these people yelling and screaming about their favorite issues all the time.  But, the alternative is far worse.

There are countries that are not willing to accommodate the multiple and competing interests and claims.  Especially the ones that don't agree with the government's bottom-line.  At an extreme is North Korea.  But, along that continuum of gradual change, a change from conditions here in the US to North Korea, lie a bunch of countries.  A whole range of them.  And, many of them seem convinced that the Chinese approach is better than the American one.  Unlike in the US, what if the troubling voices are silenced?

With every passing day, it appears that India's Narendra Modi's government is moving farther away from an American-style democracy--however screwed up it might be--towards a Chinese model.  The latest example:

Stating that acceptance of foreign contributions by Greenpeace India has prejudicially affected the public and the economic interest of the country in violation of the Section 12 (4)(f)(iii) and Section 12(4)(f)(ii) of the FCRA, the government said the act also amounted to violation of the conditions of grant of registration certificate. Accordingly, the Central government has suspended the registration of the organisation, including its branches and units, under the FCRA, for six months beginning Thursday.

I like how the government makes explicit "the public and the economic interest of the country."  The "Make in India" slogan shall not be compromised!

Have I violated the rule? ;)
"Use of the 'Make in India' logo is strictly prohibited without permission of DIPP"

India being a complex labyrinth of rules and regulations that are meticulously implemented by the "Ramamrithams" that this blogger caricatures and tortures, the following is no surprise:

The suspension order faulted the NGO for shifting its office and activities from Chennai to Bengaluru and also replacing 50% or more of its executive committee members without approval or intimation of the home ministry.

How dare somebody move their office from Chennai without the government's approval!

Greenpeace, I am sure, took quite a few line-in-the-sand approaches that were against "the public and the economic interest of the country."  It is not the only one either:

Activist groups working against coal-fired power plants and other infrastructure projects have accused Prime Minister Narendra Modi of diluting environmental rules and making it easier for businesses to buy land and set up factories. Modi came to power a year ago with the promise of reviving Asia’s third largest economy and break business bottlenecks.

Dissenting opinions and movements are, well, dissenting and not supportive.   In a democracy, we learn to live with opinions that don't agree with ours.  I know it all too well--it seems like I am always on the dissenting side, at my work and even otherwise.

In a democracy, we don't work to silence dissent.   But then, China is no democracy and that is the model that appeals to quite a few these days, Modi included.

As economic growth slows, is India losing its way?

Asks the Economist.

It seems like the debate didn't do much to change the overwhelming opinion:

As I have noted more often that I would like to:

It used to be said about Argentina that if ever the government could do the worst thing at the wrong time, well, the leaders made sure they didn't waste that opportunity and, thus, for decades, the country has terribly underperformed.  In the years before WWII, Argentina was thought of as the next and Rostow felt so convinced by the data that he pronounced that the country was ready for one huge but delayed takeoff.  Instead of taking off, it has been a series of North Korean launches, it seems like!

India is not that far behind Argentina in that respect.  In the post-recessionary world, with Europe in one heck of an economic mess of its own, and with the US over-expended, one would have thought that India would have capitalized on the opportunity.  After all, unlike China, which relies way too much on foreign demand while severely restricting internal consumption, India has a robust internal demand for goods and services and can, thus, insure itself against the vagaries of foreign trade.  But, the country is so keen on going the Argentine route.  

It seems like there is a new scandal or a new low from the dysfunctional government headed by a prime minister who has never been elected to the parliament via the popular vote.  Talk about the obsession to snatch defeat from the jaws of victory!

Soon it could be back to the Hindu rate of growth, along with the traditional "chalta hai" atttitude.

Even worse, people could get so pissed off that they could make this mad-man their next prime minister, who will then have only a restricted visa to visit the US similar to how Ahmadinutjob can merely visit the UN building?

China and India in the global economy? Spot them if you can!

Do you see the two countries of India and China in the graphic below?

Your eyes aren't deceiving you!

Even after we adjust for purchasing power parity, China's per capita income barely cracks into the top 100, at #92.

Ecuador, which was a wonderful experience at tourist prices that even I could afford, is ahead of China!

So, why are we then so obsessed with economic growth rates in India and China?  Perhaps because we are always looking for some boogeyman?

Meanwhile, reports about India's economy are getting gloomier by the day.  The Times of India says that "India may become first 'fallen angel' among BRIC countries."

Somebody better inform the politicians about these!

Consumer spending fuels growth. Really? Think again!

So, ... buried in the news report about a rise in consumer spending is this:

Most consumers spent more of what they earned and saved less. The saving rate dropped to 3.7% of after-tax income in February. That was the lowest level since August 2009. It had averaged 4.7% for all of last year.

Americans are also taking on more debt. Consumer borrowing increased from November through January by the most in a decade for a three-month stretch. Yet the increases were driven almost entirely by auto and student loans. Credit card debt decreased in January and remains well below pre-recession levels.

Dales cautioned that at some point, consumers won't be able to draw further on their savings. Further job gains are needed to boost consumers' income.

Hmmm ... job growth has stagnated, and consumers are taking on more debt.  Isn't this a cause for worry, rather than for the stock market to go up?  What the heck am I missing in this picture?

There is at least the old reliable Robert Reich who makes sure that I am not coming across as an idiot:

Fed Chief Ben Bernanke – who doesn’t have to face voters on Election Day – says the U.S. economy needs to grow faster if it’s to produce enough jobs to bring down unemployment. But he leaves out the critical point.
We can’t possibly grow faster if the vast majority of Americans, who are still losing ground, don’t have the money to buy more of the things American workers produce. There’s no way spending by the richest 10 percent – the only ones gaining ground – will be enough to get the economy out of first gear.

Even more worrisome is this: the increase in student loan debt.  Students are borrowing more and more hoping that a college degree will transform into well-paying jobs.  But, that, too, is a mirage on many fronts for most students!  The trillion-dollar debt means:

as more people go to college and assume bigger loans for education, they may take longer than previous generations to hit key milestones such as buying a house or getting married, U.S. officials and economists say. It could take longer for heavily indebted graduates to save money for a down payment on a home, or it could be harder for them to qualify for mortgages.
Rohit Chopra, student-loan ombudsman for the Consumer Financial Protection Bureau, said student debt could ultimately slow the recovery of the housing market. "First-time home-buyers are a substantial part of the housing market," Mr. Chopra said in a speech at the banking conference in Austin. "Instead of saving for a down payment, these borrowers are sending big payments every month."
Student debt is a burden not just for recent college graduates in their 20s but also parents, who often co-sign their children's student loans, as well as midcareer professionals who opted to go back to school during the sluggish recovery.

 Meanwhile, we are well on our way to think of debt as from the cradle to the grave:

new research shows a trend that’s even more troubling than Americans going into hock to pay for a college degree: Apparently, some parents are taking out five-figure loans to finance private school tuition for K-12 kids. Yes, student loans even to pay for kindergarten.

How washing machines liberated women

A few years ago, I was pleasantly shocked to find washing machines in homes in India.  Shocking because it is after still a country with unreliable power supplies, and inadequate water supplies.  But, pleasant because it was a reflection of how much women were liberating themselves from the traditionally defined rigid roles.  And it is this liberation from the time-consuming and low-productive chores that is essentially the story of women, and the story of economic progress itself.  I often remark in my classes, which begin tomorrow, that the story of economic progress is also a story of the changing roles for women.  And when we discuss demographics, I tell them we might as well forget men.

Hans Rosling makes a wonderful case for this:



My favorite example from India is not even the washing machine as much as the elimination of the "aattukkal."  It is, as the writer here describes in a fantastic essay, "the traditional stone-grinder, to grind the dough for idli and dosai."  The traditional cooking involved a whole lot of grinding, and the "aattukkal" was the big grinder for huge volumes, and which also required water.  The "ammi" was the small grinder, primarily for dry grinding.

The grinding work--yes, literally a grinding work--took up at least two hours every day.  And, yes, this was a task for the women.  About forty years ago, my mother was liberated from these chores thanks to machines.  A small mixer, which could do both dry and wet grinding, the "Sumeet," was one heck of an addition to the kitchen.  My mother, always a careful and diligent worker, put that to excellent use and maintained it well enough to get more than twenty years of service from that machine.  I bet she alone knew how valuable it was in her life.

But, the attukkal was still in use--after all, the mixer couldn't handle large loads of wet grinding. 

And that too changed when another machine entered the kitchen, and it completely eliminated the need for an attukkal.  With the machine, mother could simply dump the soaked rice into it, press start, and go about her other household chores.  Or, simply sit down and read a magazine.  Even after all these 35 years, she uses that same machine.  Mother knows how to treat machines well, and they respond equally well to her tender loving care, it seems. 

What a liberation is has been for women even within my life time!  There is still a long way to go for many of the women on this planet.  But, we ought to pause for a moment and celebrate what we have achieved thus far.