Technology as king?

Over the holidays I had a little peek at “the Universe in a nutshell” by Stephen Hawking.  Early on in the book he states that it is technology, not political systems or economic dogma, that has led to the vast improvement in living standards in modern times.

Now to a large degree, economists agree with this idea (here, and here).  Technological progress increases the usability and availability of resources, expanding choice and satiating desires.

However, the creation of technology also relies on the political and economic system of the day.  An environment that rewards and promotes progress is likely to experience more “technological advancement” than one that doesn’t.  As a result, there is a trade-off between technology and types of social structures – and issue that does involve political science and “economic dogma”.  Just because technology is a closer link in the chain towards higher living standards does not mean that other elements are inconsequential.

Furthermore, the social structure of a group does influence living standards – in so far as it influences happiness.  The belief that better technology will increase happiness is just that – a belief.

Poverty and violence in Africa

A recent article on VoxEU discusses the link between poverty and violence in Africa. It’s a tricky topic because there are good arguments to be made for causation in both directions and the direction of causation matters hugely for aid policy. Read more

Happiness, policies, and economics

It is good to see the Frog Blog discussing happiness and policy – as fundamentally the goal of policy should be to promote the highest social happiness, not necessarily to promote the largest GDP number.

The article that Frog links to can be found here, and on Saturday there was an article in the paper by Chris Worthington on the subject as well. However, I get the feeling that Mr/Mrs/Miss Frog interprets this policy implication a little differently to me (and both are different to this previous post) – lets discuss.

Read more

Growth and happiness

The Standard was at Joe Stiglitz’ talk in Wellington last week and was particularly interested an audience member’s question about growth. The question is whether economists focus too much on growth, to the detriment of human happiness. It’s an interesting and worthy question, but not one that hasn’t been considered by economists. There are two important issues around GDP: first, whether it’s a good measure of growth and, secondly, whether growth is particularly important. Read more

The birth rate vs the growth rate

Stats NZ reports a marked increase in the NZ birth rate. There are three ways to view this: first, you could use it as Quest does to suggest that maths and equations are stupid and we should just trust the politicians’ instincts. Unfortunately for Quest, there is no statistical evidence for that position 😛

The Standard claims that an increasing fertility rate is a signal of the good economic times brought about by the Labour government. This connection seems a bit results driven to me. Particularly so when the correlation between per-capita GDP and fertility is strongly negative worldwide. It may be the case that Labour’s policies have encouraged people to have children, but that’s hardly the same as signalling a rosy future for the NZ economy.

Finally, one might ask what economic theory has to say on the issue. While the theory on growth economics has a patchy empirical record, it does have an explanation for the negative correlation between fertility and GDP per capita. Essentially, higher fertility rates mean that the resources of the economy have to be spread across more people. Those people do create value but, since productivity has decreasing marginal returns, they don’t create as much extra capital as they consume. Thus, higher birth rates lead to an increase in GDP, but a lower GDP per capita in the long run. So perhaps the increased birth rate doesn’t bode so well for NZ after all.