11-01-2003 09:22									#361
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USA is the best place to live.

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	11-01-2003 12:19									#362
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nuff said.

	11-01-2003 12:51									#363
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We love Britney.

Last edited by Ted Striker on 11-01-2003 at 22:33

	11-01-2003 16:34									#364
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"Right, but if you are only capable of exchanging 10% of your economy, wouldn't (edit: the external value of the )currency be irrelevant for most of the economy?"

Dan's intuition is reasonably on the money. Ultimately you have to choose whether to point the monetary gun at domestic inflation or the external value of the currency. On of the main reasons the dominant paradigm for OECD countries is floating exchange rates with domestic monetary policy aiming at an inflation target is that imports and exports as a proportion of gdp are too small to justify the other case.

Be careful though......it still isn't irrelevant by any means.

	11-01-2003 20:48									#365
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PPPs are far better for comparing across economies though - why Germany saw nearly 14% growth in real dollar terms over the last year, but as over 13% of it was due to the appreication of the € I doubt very much if the Germans feel in the middle of a huge boom.

Also remember that the vast majority of currency transactions have nothing to do with the economy as it is measured by GDP, for example only 10% of currency transactions relate to either trade or direct investment - the rest is mainly to do with portfolio investments and speculative trades (neither of which are measured by GDP).

Here is a description of the D-P functions used to calculate potential output. (it's quite a long article however).

The information doesn't include the following OECD countries: Mexico, South Korea, Czech Republic, Hungary, Luxembourg, Poland, Slovakia and Turkey for the simple reason that the OECD does not publish D-P data for them.

Here is the non-trend adjusted data for those countries:

GDP per head as PPPs in 1991 & 2001, EU average=100

Mexico: 36%, 36%
South Korea: 50%, 62%
Czech Republic: 58%, 59%
Hungary: 48%, 52%
Luxembourg: 159%, 190%
Poland: 27%, 39%
Slovakia: 48%, 47%
Turkey: 29%, 23%

	11-01-2003 23:21									#366
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quote: Originally posted by el freako PPPs are far better for comparing across economies though - why Germany saw nearly 14% growth in real dollar terms over the last year, but as over 13% of it was due to the appreication of the € I doubt very much if the Germans feel in the middle of a huge boom. Also remember that the vast majority of currency transactions have nothing to do with the economy as it is measured by GDP, for example only 10% of currency transactions relate to either trade or direct investment - the rest is mainly to do with portfolio investments and speculative trades (neither of which are measured by GDP). Here is a description of the D-P functions used to calculate potential output. (it's quite a long article however). The information doesn't include the following OECD countries: Mexico, South Korea, Czech Republic, Hungary, Luxembourg, Poland, Slovakia and Turkey for the simple reason that the OECD does not publish D-P data for them. Here is the non-trend adjusted data for those countries: GDP per head as PPPs in 1991 & 2001, EU average=100 Mexico: 36%, 36% South Korea: 50%, 62% Czech Republic: 58%, 59% Hungary: 48%, 52% Luxembourg: 159%, 190% Poland: 27%, 39% Slovakia: 48%, 47% Turkey: 29%, 23%

1. You still haven't said what question you are trying to answer. I think this affects what corrections you want to make to your statistics.

2. As long as there is free trading of currency, it doesn't matter if 10% of goods are exported. If a hamburger costs 10$ in Japan, than it's worth 10$. As long as yen and dollars are freely traded. Ice is worth more in the Sahara than in the Arctic.

3. Sure there is a volatility of exchange rates. That is a seperate issue though.

	12-01-2003 02:50									#367
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GP, this discussion is all about complex interactions between monetary policy, real and nominal output, and asset prices, often drawn out over years.
You want a simple real-time connection? Wake up and smell the coffee, there's no such thing in economics.

	12-01-2003 03:04									#368
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quote: Originally posted by Sten Sture I would disagree that the Fed was a cheerleader for the internet bubble because they were pleased with productivity growth. If we agree that the dotcom companies and their ilk were a negligible piece of the economy, then equating an economy wide phenomenon - rising productivity - with the little tiny piece that is/was the internet would be a mistake.

The entire ICT sector isn't a tiny little piece, and most of the productivity accelerating has exactly been emanating from that area.

quote: When the Fed was talking about productivity gains, they were talking about just in time inventory management, electronic communication and documentation, financial modeling, production optimization, eliminating middle management paper pushers, etc. Not about a couple of books being sold below cost on Amazon.

None of those things you mentioned above are new, many were even part of the Japanese bubble, and yet the acceleration occured after the mid 90's.
And sorry, I just don't buy the theory that was because companies suddenly discovered how to apply these new technologies and methods in a better way.

quote: Rising productivity and low inflation allowed the Fed to keep rates lower than they would have been.

Only if the supply of capital increases. Otherwise real rates should have been higher all else being equal, because the ROI increases.

quote: The investment stampeed toward hypergrowth companies would have been significantly worse if the Fed had tightened. Take a look at the performance difference between the Barra Growth and Barra Value components of the S&P between 95 and 00. Is it any wonder that investors were using Value as a source of funds and buying Growth? Taken to its logical extreme the highest returns would occur at the highest growth rates. Money went to tech because tech had performance momentum. If the Fed had tightened then the old line value companies would have felt the majority of the wrath of the markets while the tech companies continued to outperform since they were perceived to be relatively immune to the economic cycle. That would have led to a disaster many times the magnitude of the current situation.

Think so? I'd rather believe that higher interest rates would have held firms back from borrowing in order to repurchase stock.

	12-01-2003 03:11									#369
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About using P/E, maybe this isn't a good tool to value firms individually but proved very reliable to indicate stock market bubbles. At the least I'd say it's very curious how P/E has consistently been skyrocketing before a stock market crash occured.

	12-01-2003 03:50									#370
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quote: Originally posted by GP 1. You still haven't said what question you are trying to answer. I think this affects what corrections you want to make to your statistics.

Mainly I was seeing how much the statements of the EU's 'sluggish' and 'sclerotic' economy was real and how much was 'anti-hype'.

quote: Originally posted by GP 2. As long as there is free trading of currency, it doesn't matter if 10% of goods are exported. If a hamburger costs 10$ in Japan, than it's worth 10$. As long as yen and dollars are freely traded. Ice is worth more in the Sahara than in the Arctic.

You are misunderstanding me, only around 10% of the trades that decide the value of a currency relate to value-added as recorded in GDP.
To make an analogy it would be like trying to estimate the value of Brazil's agricultural output by taking the total tonnage of agricultural produce and multipling it by the price of coffee (which probably accounts over 10% of Brazil's agricultural output) for per ton.

quote: Originally posted by GP 3. Sure there is a volatility of exchange rates. That is a seperate issue though.

Not really, either you agree that exchange rates are not very good for comparing economies using GDP or you agree that the EU's real growth is currently around 14% - you have to have to either believe one or the other.

	12-01-2003 04:23									#371
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quote: Originally posted by el freako Not really, either you agree that exchange rates are not very good for comparing economies using GDP or you agree that the EU's real growth is currently around 14% - you have to have to either believe one or the other.

I prefer to believe the latter.

Maybe you guys have been beaten to death with such data but take a look at this Eurostat table and note how the gap between the EU and the US has actually been narrowing in PPS GDP/capita terms since the mid 90's, the period the suchcalled productivity miracle started.
That's supported by this table which shows the EU even caught up with the US, in terms of GDP/capita per worked hour.

Of course you can doubt the reliability of these stats but I see no reason to trust the data from US agencies more than Eurostat.

	12-01-2003 05:50									#372
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BFD. Do we need to go through all of this comparative GDP pissing contest again?

The whole point is that US Productivity gains averaged 1.5% from the '70s through '91. '92 forward we're averaging something north of that (or we aren't). This is indeed a productivity miracle (or it isn't), and contains a lot of what Sten detailed.

	12-01-2003 05:56									#373
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I think every econo thread I've ever read has had the GDP and productivity pissing contests in them.

My two cents says that the 90s were a technological revolution.

#1 was widespread adoption of desktop computers that sped up common tasks by miles.

#2 was the Internet which allowed for a global knowedge base and sped up information-oriented tasks

Both of these factors are very profound and are only rivaled by things like the telephone and railroads.

	12-01-2003 06:18									#374
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Now there's gonna be a couple of posts about #1 and #2 happening in Europe as well as the US, which of course everyone will agree with. Then some Euros will try to compare our productivity growth with theirs and see that it's now pretty comparable, and they'll discount the miracle blah.

But this will be beside the point, since we're talking about the US breaking out of a productivity growth slump, not Europe losing its luster (at least from this side of the pond). Even half a percent greater productivity growth per annum for the US is great news.

That said, 2002 and 2003 aren't looking good for Europe in a head-to-head.

	12-01-2003 06:28									#375
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DanS


Actually I haven't been following most of the current posts, I didn't realize the debate was a US vs. Europe productivity piss fest.

But I did see the exchange rate argument somewhere again.

I thought we were in the middle of record productivity gains. (Reason: everyone got laid off so everyone is doing the work of 3 people right now).

	12-01-2003 06:45									#376
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" Actually I haven't been following most of the current posts, I didn't realize the debate was a US vs. Europe productivity piss fest."

Colon and ef started it! And even if they didn't, it was a pre-emptive strike on my part!

"But I did see the exchange rate argument somewhere again."

Well that's somewhat new. This is an interesting area.

"I thought we were in the middle of record productivity gains."

Well '01 wasn't that hot, IIRC. But productivity growth was resilient through the recession, which is rare.

Last edited by DanS on 12-01-2003 at 06:53

	12-01-2003 06:55									#377
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quote: Well that's somewhat new. This is an interesting area.

Well, I think I recall that Roland has brought up the exchange rate idea every thread since '99.

	12-01-2003 07:01									#378
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Not in the broadest context. More in the unsustainability of the current account deficit. Of course, he's mentioned that the Dollar was overvalued.

	12-01-2003 07:03									#379
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I'm pretty positive it was regarding productivity and GDP per capita specifically, though.

	12-01-2003 07:05									#380
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Maybe you're right and I just ignored it.

My view of it is that the currency conversion GDP should be used as a reality check on the PPP numbers. I am somewhat skeptical of how fine-grained the 5x GDP PPP factor for China is, or what it really tells us, for instance.

Last edited by DanS on 12-01-2003 at 07:17

	12-01-2003 07:08									#381
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Well, after the first one, it all turns into noise to me.

	12-01-2003 07:34									#382
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DanS is probably correct in saying that the US productivity has improved since the 1974-95 period, indeed since the mid 1990's european productivity has slowed so that they have 'met each other coming the other way'.

Now faster productivity growth is nice, it leads (eventually) to higher real wages - but what is interesting is that whilst the US underwent it's productivity 'miracle' it seemed to lose it's previous 'jobs miracle' - this can clearly be seen by the fact that the underlying rate of growth in the US has not improved since the 1970's and 1980's (it's still around 3% a year).
Meanwhile Europe is undergoing it's largest rise in employment and labour-force participation since comprehensive records began in the early 1960's - however it is also undergoing a slowdown in productivity growth, this is very much like what happened in the US in 1974-90.



Here is some of the background data comparing the 1979-90 cycle to the 1990-2000 one:

United States:
Labour force participation: 70.5% in 1979, 76.3% in 1990, 75.3% in 2000
Employment: 66.4% in 1979, 72.0% in 1990, 71.3% in 2000
Employment growth: 1.7% in 1979-90, 1.3% in 1990-2000
Hours worked growth: 1.7% in 1979-90, 1.3% in 1990-2000
Hours worked per person aged 15-64: 0.7% in 1979-1990, -0.1% in 1990-2000
Productivity (GDP per hour): 1.2% in 1979-90, 1.9% in 1990-2000
Trend GDP (using D-P function): 3.1% in 1979-90, 3.0% in 1990-2000

European Union:
Labour force participation: 67.2% in 1979, 67.6% in 1990, 70.1% in 2000
Employment: 63.8% in 1979, 62.5% in 1990, 65.3% in 2000
Employment growth: 0.5% in 1979-90, 0.5% in 1990-2000
Hours worked growth: 0.0% in 1979-90, 0.1% in 1990-2000
Hours worked per person aged 15-64: -0.7% in 1979-1990, 0.0% in 1990-2000
Productivity (GDP per hour): 2.3% in 1979-90, 2.0% in 1990-2000
Trend GDP (using D-P function): 2.4% in 1979-90, 2.3% in 1990-2000

Japan:
Labour force participation: 71.7% in 1979, 74.1% in 1990, 78.2% in 2000
Employment: 70.2% in 1979, 72.6% in 1990, 74.2% in 2000
Employment growth: 1.2% in 1979-90, 0.3% in 1990-2000
Hours worked growth: 0.8% in 1979-90, -0.8% in 1990-2000
Hours worked per person aged 15-64: -0.1% in 1979-90, -0.9% in 1990-2000
Productivity (GDP per hour): 3.2% in 1979-90, 2.3% in 1990-2000
Trend GDP (using D-P function): 3.9% in 1979-90, 1.7% in 1990-2000


bear in mind that a straight comparison between GDP and productivity growth rates in the US and those in the EU and Japan will probably result in an understating of EU and Japanese growth by 0.3% to 0.5% a year, this is due to the different methods used for calculating inflation (and thus growth).

Last edited by el freako on 12-01-2003 at 07:50

	12-01-2003 12:16									#383
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Freako,

1. Instead of just dumoping the statistics, how about making your point?

2. wrt the corrections you are using, I still suspect that volatility is a different issue (but I'm not that heavy on what you are doing). If its not a seperate issue, you should be able to time average things or something to show that your corrections just affect volatility rather than claiming Saharan ice= Arctic ice.

	13-01-2003 00:26									#384
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Anyone every wondered how much natural altruism is required to support a voluntary (i.e. Libertarian) taxation system?

It seems to me that Prisoner's Dilemma situations create a real problem for voluntary tax systems, just like they do for other "voluntary" codes of conduct. That is unless we can expect a high degree of altruism from the citizens. If not, then "hello Hobbes!"

I've been arguing this in another thread, but GP keeps asking me to post on this one (perhaps Berzerker fears to tread here).I'm assuming you all know what I'm talking about re: PD since the standard of this thread seems to be pretty high.

	13-01-2003 00:30									#385
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Hi Agathon,

This is the most educated thread in all of Apolyton by light years.

These guys all talk over my head with specific statistical measures, but any sort of knowledge level is welcome. And it's also a nice change of pace to have some short general idea level posts to break the monotony of the statisical arguments which can be pretty dry.

You seem a couple of steps ahead of me in terms of intelligence so if I can post here, I'm sure you will have no problems.

	13-01-2003 00:35									#386
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quote: Originally posted by Agathon Anyone every wondered how much natural altruism is required to support a voluntary (i.e. Libertarian) taxation system? It seems to me that Prisoner's Dilemma situations create a real problem for voluntary tax systems, just like they do for other "voluntary" codes of conduct. That is unless we can expect a high degree of altruism from the citizens. If not, then "hello Hobbes!" I've been arguing this in another thread, but GP keeps asking me to post on this one (perhaps Berzerker fears to tread here).I'm assuming you all know what I'm talking about re: PD since the standard of this thread seems to be pretty high.

Oh...don't post the same crap. We've all done the natural rights one to death. Talk some Nash Equilibrium if you want to get geeky on the Game Theory. That will get me off.

	13-01-2003 00:36									#387
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quote: get me off

Ohhhhh oohhhhh I just saw an outlier on your equilibrium chart...ohhh..


Ya, I'd have to agree, there are about 10 Lib-related threads hanging around here.

	13-01-2003 00:37									#388
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aaaaah.

	13-01-2003 00:41									#389
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It is not that natural to invoke PD, which is most often a 2-player game. It is just a bog-standard free rider problem.

	13-01-2003 00:43									#390
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Did somebody let you out of the Community section?