Confessions of a Supply-Side Liberal

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Quartz 49—>Will Narendra Modi’s Economic Reforms Put India on the Road to Being a Superpower?

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Link to the Column on Quartz

Here is the full text of my 49th Quartz column, “Why you really want India to join the US and China as a superpower" now brought home to supplysideliberal.com. It was first published on June 13, 2014. Links to all my other columns can be found here.

I kept my working title as the title of this companion post, since it better reflects the content of the column.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© June 13, 2014: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2015. All rights reserved.

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Iraq joined Syria in civil war and Ukraine’s crisis persisted this week. And yet let me argue that this week’s most important geopolitical news is the economic program of India’s new prime minister, Narendra Modi.

Any increase in the chances for a full-scale supply-side transformation of India’s economy is cause to cheer for many reasons. First and foremost, faster economic growth in India would lift hundreds of millions of people out of dire poverty. But its geopolitical significance should not be underestimated. India is the only nation that rivals China in its population–and is on track to surpass China’s population. As I wrote in a previous Quartz piece, “Benjamin Franklin’s strategy to make the US a superpower worked once, why not try it again?”:

The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States. … if China has 1/4 the per capita GDP, but four times as many people, its total GDP will be the same size. …  Power corrupts. So … it should surprise no one that the US has done some bad things as a superpower. Yet I am convinced that the combination of Chinese nationalism and “Communist” oligarchy—or the combination of Chinese nationalism with some tumultuous future political transition in China—would lead a dominant China to behave much worse than the US has.

I believe a future in which India joins China and the US as a superpower would be a safer world than one in which China and the United States are the only superpowers. News of Chinese saber-rattling over territorial disputes has become a commonplace in the last few years. Here is a recent example. And the 25th anniversary of the Tiananmen Square Massacre is a reminder of the ugliness of China’s politics now and the tough road China has ahead even in the best-case scenario in which it does become more democratic.

Narendra Modi’s own past is a reminder that India has its own political ugliness. He is the only person to ever have been denied a US visa based on a law designed to punish foreign officials for “severe violations of religious freedom,” since as the head of the Indian state of Gujarat, he failed to stop a Hindu vs. Muslim riot that left more than 1,000 people dead.

Yet, India has been a functioning democracy since 1950, with genuine handoffs of power between different political parties since 1977. And both the religious tensions Modi fatally mishandled and the welfare state he now challenges point to the orientation of Indian politics primarily toward domestic issues, rather than territorial disputes with neighboring countries. What ideological gap exists between the Indian electorate and the US electorate would be narrowed further if further economic liberalization in India is successful. So I do not worry about what India might do as a future superpower the way I worry about what China might do.

What does India’s new government plan to do to make the Indian economy as big as possible, as fast as possible? One key element of the policy address by India’s president Pranab Mukherjee earlier this week, reflecting the prime minister’s agenda, is to make making agricultural markets more competitive, so that farmers can get a better price for their crops. The Wall Street Journal explains:

Subsidies and make-work schemes discourage farmers from concentrating on maximizing yields. Under the Agriculture Produce Marketing Committee Act, they are required to sell produce to monopolistic middlemen. As a result, much of India’s harvest rots before it gets to consumers, further driving up food prices.

The policy address outlines the rest of Modi’s agenda:

  1. “Minimum government, maximum governance;”
  2. “basic infrastructure such as roads, shelter, power and drinking water” in rural areas;
  3. helping farmers to farm better in order to raise yields;
  4. pursuing irrigation projects;
  5. more use of massively open online courses (MOOCs) for education with the most bang for the buck;
  6. toilets for everyone;
  7. garbage collection;
  8. making sure girls receive an education and are protected from violence;
  9. encouraging groups of states within India to cooperate on economic development;
  10. combating corruption with “transparent systems and timebound delivery of government services;”
  11. trying to eliminate “obsolete laws, regulations, administrative structures and practices;”
  12. digitization of government records;
  13. “Wi-Fi zones in critical public areas” and broad-band in every village;
  14. social media as a way of getting feedback about how government is doing;
  15. “rationalisation and simplification of the tax regime to make it non-adversarial and conducive to investment, enterprise and growth” including reducing taxation of saving and investment by shifting toward a value added tax;
  16. reducing red tape to “enhance the ease of doing business;”
  17. providing workers with “access to modern financial services;”
  18. creating “dedicated freight corridors and industrial corridors” as attractive destinations for investment;
  19. more airports and upgraded seaports;
  20. 100 newly developed cities;
  21. allowing more foreign investment in making military equipment to make this sector more efficient.

There is always a big gap between government promises and government performance. But this list of initiatives is remarkable for what it doesn’t emphasize. There is not much in the way of direct handouts. By contrast, I learned at a“Cashless Society” workshop, sponsored by New York University’s Urbanization Project, that under the previous Indian government, when government officials came to take the biometric measurements to make it possible to establish identitywithout needing an identity card, people were happy to cooperate because they see government officials coming to town as a sign that some new handout, subsidy, or goody is on the way.

Most of the things Modi’s government is promising are things that, if delivered, will foster the quantity and quality of private economic activity. To give just two examples, more toilets would not only reduce the number of girls who get raped while going out to the fields to relieve themselves, it would save those girls a lot of time every day that they could devote to their schoolwork. And pushing the educational system heavily in the direction of massively open online courses could speed India toward the kind of low-cost, effective education that ace management guru Clay Christensen and his coauthors predict is the future of education everywhere in the world.

The policy address by the new Indian government is also relatively sophisticated in realizing the obstacles to rolling out new policies. It recognizes that, as a practical matter, many things that need to be done for economic development need to be done at the level of Indian states or groups of Indian states, rather than at the national level. If some states are more willing to work with the national government to foster economic development than others, those states can move ahead faster, and hopefully at some point, citizens of the remaining states will insist on policies like the successful policies of neighboring states.

In a previous election, Modi’s Bharatiya Janata Party (BJP) began using the slogan “India Shining.” If the new Indian government is able to implement even half of its policy agenda, and subsequent Indian governments continue to push further along the road of supply-side improvement, it won’t be long before “India Shining” is no longer just a slogan. It will be an accurate description of the world’s newest superpower.

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Important Note: Thirumaran makes the case in these storified tweets that Narendra Modi has been given a bad rap for his performance during the Gujarat riots in 2002. What I say in my column about that incident is based entirely on the Wall Street Journal article "Why Narendra Modi Was Banned From the U.S." I would be glad to hear reactions to Thirumaran’s additional perspective. 

Populations of the Most Populous Nations. I found the population figures in Wikipedia’s “World population” for the most populous countries very interesting.

China: 1,364,970,000

India: 1,245,280,000

United States: 318,201,000

Indonesia: 247,008,052

Brazil: 201,032,714

Pakistan: 186,709,000

Nigeria: 173,615,000

Bangladesh: 152,518,015

Russia: 143,657,134

Japan: 127,180,000

I hadn’t realized that the US was the third most populous nation. All of Europe, including 110,000,000 in the European part of Russia, is only listed at 742,000,000. The reason it makes sense to focus on population figures is that catch-up economic growth up to the cutting-edge level of income per capita is much easier than the economic goal of the US of pushing income per capita to levels the world has never seen before for any large nation. 

I was clued into India being headed for beating out China in overall population by Thomas Piketty’s Capital in the 21st Century. It is a fat enough book that I am only partway through. And I am glad I am reading it on a Kindle. 

Filed under fullcolumns growth clay

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Tyler Cowen: Regulations Hinder Development of Driverless Cars

Here is a key passage from Tyler Cowen’s 2011 piece on driverless cars that applies to a lot more than driverless cars:

The point is not that such cars could be on the road in large numbers tomorrow, but that we ought to give the cars — and other potential innovations — a fair shot so that a prototype can become a commercial product someday. Michael Mandel, an economist with the Progressive Policy Institute, compares government regulation of innovation to the accumulation of pebbles in a stream. At some point too many pebbles block off the water flow, yet no single pebble is to blame for the slowdown. Right now the pebbles are limiting investment in future innovation.

The lesson here is the one I emphasized in my post yesterday, “Clay Christensen, Jerome Grossman and Jason Hwang on the Agenda for the Transformation of Health Care”: allowing experimentation with innovations that at first seem like lower quality ways to do things (except for their cost and convenience) is crucial to many of the economic transformations that will do the most to improve overall standards of living. Needing a path through what seems at first like lower quality is exactly what Clay Christensen means when he says that an innovation is “disruptive.” Driverless cars provide a wonderful example. Ultimately, driverless cars will be much safer than human-driven cars, since it is unlikely that the overall skill and care of human drivers will dramatically improve from where it is now, while computers and sensors for cars can continue to get better and better and better. But we will get to those driverless cars that dominate human-driven cars in all respects (except for those who find driving recreational) if right now we allow driverless cars on the road that are better than human-driven cars in some respects and worse (within reason) in other respects.

I am saying that, because they are likely to ultimately be much safer that driverless cars should be allowed even if at first they are somewhat less safe, but in fact the relevant situation is more like this. At some point driverless cars will have a good safety performance in small-scale tests, but there will be some uncertainty about how they will do in substantial numbers in real world situations on the road. Even if at that point they would in fact have a better safety record if allowed on the road, opponents will argue that the uncertainty about how they will do means they should be banned. Such a ban—and its counterparts in other domains—are a very effective method to  slow down technological progress.     

Filed under clay growth

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Schumpeter: Digital Disruption on the Farm | The Economist

It is always good to see real-world examples of technology shocks. Here are some key excerpts from this article:

Farmers can be among the most hidebound of managers, so it is no surprise that they are nervous about a new idea called prescriptive planting, which is set to disrupt their business. In essence, it is a system that tells them with great precision which seeds to plant and how to cultivate them in each patch of land. …

Prescriptive planting is catching on fast. …

The benefits are clear. Farmers who have tried Monsanto’s system say it has pushed up yields by roughly 5% over two years, a feat no other single intervention could match. The seed companies think providing more data to farmers could increase America’s maize yield from 160 bushels an acre (10 tonnes a hectare) to 200 bushels—giving a terrific boost to growers’ meagre margins. …

Farmers might be expected to have mixed feelings about the technology anyway: although it boosts yields, it reduces the role of discretion and skill in farming—their core competence. However, the bigger problem is that farmers distrust the companies peddling this new method. They fear that the stream of detailed data they are providing on their harvests might be misused. Their commercial secrets could be sold, or leak to rival farmers; the prescriptive-planting firms might even use the data to buy underperforming farms and run them in competition with the farmers; or the companies could use the highly sensitive data on harvests to trade on the commodity markets, to the detriment of farmers who sell into those markets.

I view aggregate technology shocks as primarily representing the steep part of an S-shaped adoption curve for a technology. As such, most aggregate technology shocks should be predictable in advance if the natural logarithms of [(market share/ (1 - market share)]  for promising techniques are graphed against time. (Such graphs are something Clay Christensen and coauthors recommend to predict the future course of disruptive innovations. Watch for my post on Clay Christensen, tomorrow morning, at half-past midnight EDT.)

 

Filed under growth clay

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Drew Hinshaw: Nigeria Produces Half the Electricity of North Dakota-for 249 Times More People

I have heard distressing, yet fascinating, stories from a colleague who has spent time in Africa about how folks in Africa often act like the “Homo Economicus” of our theories, but without the benefit of adequate property rights to keep things on track. One example I found vivid is the routine theft of wire from power lines in order to sell the copper. So I was interested to read Drew Hinshaw’s Wall Street Journal article linked above about electricity in Nigeria. I particularly noticed these passages which help make vivid the kinds of problems that can face a poor country trying to get richer:

The quest to turn the lights back on in Nigeria is pitting some of the country’s richest men against rusted power lines, pilfered electricity and grenade-lobbing saboteurs. …

Half of Nigeria’s electricity is stolen or lost on quarter-century-old power lines. Companies have taken on the job of installing electric meters and bringing bills to the hundreds of thousands of Nigerian households that run wires to nearby electrical poles, without paying. …

Nigeria will need to lay fresh pipelines to tap its gas reserves—the world’s eighth largest—to fuel those turbines. One problem: Saboteurs lurking in the swamps keep throwing grenades under what few gas pipelines exist in an attempt to extort protection money from Nigeria’s government. …

When Mr. Elumelu’s staff first walked into the plant last November—they weren’t given access until it was purchased—they discovered technicians weren’t wearing safety goggles or even shoes. Some crawled into the innards of deadly gas turbines wearing flip flops.

Those workers had also lost track of turbine parts, rendering the massive machines unusable. All told, the station produces just 160 megawatts—half the wattage the company assumed when it bought the place.

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Matt Ridley, Michelle Klein and Rob Boyd on Population Size and Technology: Why Some Islanders Build Better Crab Traps

In this ungated Wall Street Journal article, Matt Ridley gives a nice report on research by Michelle Klein and Rob Boyd on the idea that higher effective population size leads to better technology.  The important idea that higher effective population size leads to better technology is also reflected in

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Josh Barro: We Need a New Supply Side Economics—Here Are 8 Things We Can Do

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Josh Barro

Noah Smith and Christopher Cordeiro tweeted that Josh Barro’s column "We Need A New Supply Side Economics — Here Are 8 Things We Can Do" sounded like ideas I would favor. They are right. 

I fully agree with Josh’s lead-in:

Demand stimulation remains the right goal today, but it’s not going to be the right goal forever. …

We’re going to need a new supply side economics that encourages people to work, invest and innovate.

Some of Josh’s proposals cost money, for which he proposes more progressive income taxes as a revenue source (as his 8th point). I have proposed tapping the resources of the rich in a different way. I want to  finance an expansion of the nonprofit sector (see the links in "The Red Banker on Supply-Side Liberalism"). To get there politically, I enunciated the principle of "No Tax Increase Without Recompense." So I cannot go along with Josh’s proposal raise income taxes at the upper end in a conventional way. (Also see the Twitter discussions "Daniel Altman and Miles Kimball: Should We Expand Government or Expand the Nonprofit Sector?" and "Daniel Altman and Miles Kimball: Is It OK to Let the Rich Be Rich As Long As We Take Care of the Poor?") The expansion of the nonprofit sector that I propose will help the poor tremendously in many ways beyond the dimension Josh is focuses on. 

More generally, I think it is better to build progressivity into the spending side of the government’s activities—including transfers—than into the tax side. Instead, I think Josh’s proposed enhancements of programs to direct more resources toward the poor can also serve as ways to compensate the poor for increases in increases in taxes on externalities such as carbon dioxide emissions and the consumption of soft drinks and junk food that affect the behavior of all those around us through not-fully-conscious social influences

Here is Josh’s list, minus the income tax increase, with my comments:

1. Invest in smart infrastructure, ideally without building much.

Yes! Noah and I have an column on infrastructure investment. And I agree with Josh that it is a bad habit to get into to think of infrastructure investment as a demand-side thing. We need to keep in our sights getting supply-side benefits from the infrastructure investments that we make.  

I would emphasize government support for basic research in the same breath as infrastructure investment. Indeed, I think there is even more supply-side benefit to be had from government support for basic research than from additional infrastructure investment. 

2. Reform means-tested entitlements without soaking the poor.

Josh wants to phase out aid to the poor more slowly with higher income, in order to avoid discouraging people from working hard and avoid discouraging people from building their careers through education and other means. This is great, but it will cost the government more money. I would like to reward healthy eating and not contributing too much to global warming across the whole population, as well as rewarding the poor for working hard and getting an education. That combination can finance itself.    

3. Move the deregulatory agenda down to the state and local level.

This is one of Josh’s points that I think needs to be shouted from the rooftops. Here is the full text of what he said on this point:

In the 1970s, the big deregulation fights were properly at the federal level. Then the government deregulated airlines and trucking. Though technological change, regulation has become less important in broadcasting and telecommunications. Bank deregulation has been a mixed bag over this period; people talk about it as a cautionary tale, but some of the deregulations (such as ending the limit on savings account interest and allowing interstate banking) have served consumers very well.

The big federal regulatory fights that remain are in mostly areas where the federal government properly uses a heavy hand: banking and securities, and environmental protection.

The next round of big deregulation fights should be at the state and local level. Governments impose pro-incumbent regulations on a variety of industries from barbering to interior design to medicine to restaurants. These rules raise incomes for existing practitioners, but they make it difficult for new practitioners to enter the fields, and they raise consumer prices.

State and local governments should stop doing this.

In the interest of promoting interstate commerce, the federal government should pre-empt many of these regulations. For example, states should be forced to allow a broad scope of practice for nurse practitioners so they can serve as independent primary care providers. This would reduce doctors’ incomes, but it would reduce the cost of health care, raise patients’ real incomes and help to control government expenditure.

What I have said on this topic can be found in my post

4. Deregulate America’s most overregulated industry: real estate.

Here, Josh is on the same side as Matthew Yglesias, who wrote the book on this issue: The Rent is Too Damn High. I am part of the cheering section for their efforts. Given the fraction of household budgets spent on housing, this is a huge issue.  

5. Reform intellectual property — by weakening it. 

I endorse this idea in my link post "The Wonderful, Now Suppressed, Republican Study Committee Brief on Copyright Law." I also muse on how much protection is necessary in my post "Copyright." Wonderful, amazing new things will happen if we shift to less restrictive intellectual property rules. And if we overshoot in a way that undercompensates creators, that can easily be fixed later. It is high time we experimented with more fluid rules. 

Given the pace of innovation and the rate at which things become obsolete, one change that almost certainly a winner is to shorten the term for patents and copyrights. The only place this seems problematic is in retaining adequate incentives for the development of new drugs. There, combining a shorter period of exclusivity with the government paying for half of the cost of drug trials would probably keep just as much innovation while still helping the government budget, since the government pays for drugs as part of Medicare now.  

6. Improve education, somehow.

I have written a fair amount about education. Improving education will be an ongoing theme for me. Here is a link to my sub-blog on education, and here are some of the most important posts:

7. Admit more high-skill immigrants.

More open borders is something I am passionate about. But I would not limit it to high-skill immigrants. Helping the poor who are currently in other countries is also important. Here are some of my more important posts in that vein:

Filed under growth longrunfiscal

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Expert Performance and Deliberate Practice

K. Anders Ericsson

I wanted to back up some of what I have been writing about deliberate practice with more academic references. It matters because the evidence indicates that human capital accumulation can be dramatically improved by getting to best practice about practicing skills. K. Anders Ericsson is one of the foremost academic experts about deliberate practice. Here is an excerpt from his "Expert Performance and Deliberate Practice":

The recent advances in our understanding of the complex representations, knowledge and skills that mediate the superior performance of experts derive primarily from studies where experts are instructed to think aloud while completing representative tasks in their domains, such as chess, music, physics, sports and medicine (Chi, Glaser & Farr, 1988; Ericsson & Smith, 1991; Starkes & Allard, 1993). For appropriate challenging problems experts don’t just automatically extract patterns and retrieve their response directly from memory. Instead they select the relevant information and encode it in special representations in working memory that allow planning, evaluation and reasoning about alternative courses of action (Ericsson & Lehmann, 1996). Hence, the difference between experts and less skilled subjects is not merely a matter of the amount and complexity of the accumulated knowledge; it also reflects qualitative differences in the organization of knowledge and its representation (Chi, Glaser & Rees, 1982).  Experts’ knowledge is encoded around key domain-related concepts and solution procedures that allow rapid and reliable retrieval whenever stored information is relevant. Less skilled subjects’ knowledge, in contrast, is encoded using everyday concepts that make the retrieval of even their limited relevant knowledge difficult and unreliable. Furthermore, experts have acquired domain-specific memory skills that allow them to rely on long-term memory (Long-Term Working Memory, Ericsson & Kintsch, 1995) to dramatically expand the amount of information that can be kept accessible during planning and during reasoning about alternative courses of action.  The superior quality of the experts’ mental representations allow them to adapt rapidly to changing circumstances and anticipate future events in advance.  The same acquired representations appear to be essential for experts’ ability to monitor and evaluate their own performance (Ericsson, 1996; Glaser, 1996) so they can keep improving their own performance by designing their own training and assimilating new knowledge.

Below are some references. You can find a lot more by googling “Ericsson deliberate practice.” 

References:

Read more …

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Quartz #28—>Benjamin Franklin’s Strategy to Make the US a Superpower Worked Once, Why Not Try It Again?

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Link to the Column on Quartz

Here is the full text of my 28th Quartz column, ”Benjamin Franklin’s strategy to make the US a superpower worked once, why not try it again?” now brought home to supplysideliberal.com. It was first published on August 12, 2013. Links to all my other columns can be found here.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© August 12, 2013: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2014. All rights reserved.

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Ben Franklin was one of the greatest grand strategists in American history. He “had the vision of the Great Power of the New World” as refugees from the Old World poured in, writes Conrad Black in his page-turning, tour-de-force Flight of the Eagle: The Grand Strategies That Brought America from Colonial Dependence to World Leadership. Franklin then followed up that vision with brilliant diplomacy and sponsoring, along with George Washington, the constitutional efforts of Madison, Hamilton and Jay. 

The flow of immigrants to America was crucial not only in the initial rise of America as a credible power in the world, but also in dealing with the stain of slavery: the North would have been unable to defeat the South in the Civil War if the North had not had a three to one advantage in population because of its greater ability to attract immigrants.

Ratio of Per Capita GDP: China/US

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In the rest of the 21st century, America faces another grand-strategic challenge: the challenge of China. Since Deng Xiaoping’s economic reforms were introduced in December of 1978, China’s economy has been growing at a ferocious pace. As former Treasury Secretary Larry Summers put it, at Chinese growth rates, “In a decade, an individual goes from walking to having a bicycle; in another decade to a motorcycle; in another decade or two to having an automobile.” Yichuan Wang explains in “How China’s poorest regions are going to save its growth rate,” the reason the Chinese economy can grow so fast is that it is in the midst of “catch-up growth”: that is, it can copy technologies that have already been researched and developed better than other countries. As shown in the graph above, China went from a per capita GDP (income per person) less than 1/50 of the US level to per capita GDP of roughly 1/6 the US level in the 30 years from 1980 to 2010. It will not be easy for China to get all the way to the US level of income per person, but with half-decent economic policies, it should have no problem getting to half the US level of income per person.

The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States. Indeed, as the graph below shows, the US now has less than a quarter the population China has (the extreme measures China has taken to hold down its population growth since 1979 through its one-child policy have stabilized the ratio of US to Chinese population in recent years). Multiplying per capita GDP by population yields total GDP, so if China has 1/4 the per capita GDP, but four times as many people, its total GDP will be the same size. More generally, if China gets to a larger fraction of US per capita GDP (see graph above) than the US population as a fraction of China’s population (see graph below), then China’s total GDP will be bigger. Although per capita GDP is what matters for people’s standard of living, total GDP is crucial for the ability of a country to wage war—or more importantly, to deter other countries from waging war against it. Power corrupts. So even though idealism has had some effect on US foreign policy (as Black details), it should surprise no one that the US has done some bad things as a superpower. Yet I am convinced that the combination of Chinese nationalism and “Communist” oligarchy—or the combination of Chinese nationalism with some tumultuous future political transition in China—would lead a dominant China to behave much worse than the US has.

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Data source: Populstat and Census

What can be done to maintain US power relative to China? The worst answer would be to try to inhibit China’s economic growth. Berkeley economics professor and influential blogger Brad DeLong’s rhetorical question says it best:

Does it really improve the national security of the United States for schoolchildren in China to be taught that the United States sought to keep them as poor as possible for as long as possible?

An excellent answer is to do everything possible to foster long-run growth of per capita GDP in the US. At a minimum, this includes radical reform of our system of K-12 education, removing the barriers state governments put in the way of people getting jobs, and dramatically stepped-up support for scientific research. And both the US tax system and the balance in its government spending between (a) mailing people checks in direct government transfers and (b) investments in raising the productive capacity of the economy by, say, keeping roads and bridges in good repair. But when all is said and done, economic growth at the frontier of high living standards is simply harder than catch-up economic growth. So, short of some disaster for China that we should not wish on them, the ratio of China’s per capita GDP to US per capita GDP is bound to go up.

Fortunately, to add to the pro-growth policies listed above, there is another way to increase the size of the US economy that would be remarkably easy: expanding the United States economy—with all of its power to make people richer than they are in most other countries—to encompass a larger share of the world’s people. In the 19th century, many Americans felt a “manifest destiny” to expand the land that the US encompassed—westward, all the way to the Pacific. But in a modern economy, it is human beings and their skills (and the factories and machines their saving makes possible) that are the key to national wealth, not land.

So in the 21st century, we should view claiming more of the world’s people—not more of the world’s land—as the key to national wealth, and therefore, national power. And all we have to do to claim more of the world’s people for the US, is to open our doors to immigration, as the US did in the 18th and most of the 19th century. Ben Franklin knew that America would become a great nation because people from all over the world would eagerly move to America. The key to maintaining America’s preeminence in the world is to return to Ben Franklin’s visionary grand strategy of making many more of the world’s people into Americans.

Before the American Revolution, Franklin said that America “will in another century be more than the people of England, and the greatest number of Englishmen will be on this side of the water.” With a quarter-millennium of additional experience beyond what Franklin had seen, we know that America’s melting pot can make people from anywhere in the world (not just England) into Americans at heart within two generations. And we know that, together with all the other elements of this unbelievable American system, Franklin’s grand strategy for the rise of America worked once. It can work again to keep America on top.

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Update: Steve Sailer has an interesting post pointing out the importance of birth rates, as well as the immigration rates I emphasize in the column. In order to keep an open mind, before reading Steve Sailer’s post, I recommend reading my post "John Stuart Mill’s Argument Against Political Correctness." In his post Steve also points out that Ben Franklin favored English immigration over German immigration. 

Ezra and Evan’s Flag. I was very pleased to see Ezra Klein and Evan Soltas flag the column, and intrigued by the way they boiled it down:

KIMBALL: The Ben Franklin strategy to a U.S. renaissance. “The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States…An excellent answer is to do everything possible to foster long-run growth of per capita GDP in the US. At a minimum, this includes radical reform of our system of K-12 education, removing the barriers state governments put in the way of people getting jobs, and dramatically stepped-up support for scientific research…The key to maintaining America’s preeminence in the world is to return to Ben Franklin’s visionary grand strategy of making many more of the world’s people into Americans.” Miles Kimball in Quartz.

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Benjamin Franklin’s Strategy to Make the US a Superpower Worked Once, Why Not Try It Again?

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Here is a link to my 28th column on Quartz "Benjamin Franklin’s strategy to make the US a superpower worked once, why not try it again?"

Update: Steve Sailer has an interesting post pointing out the importance of birth rates, as well as the immigration rates I emphasize in the column. In order to keep an open mind, before reading Steve Sailer’s post, I recommend reading my post "John Stuart Mill’s Argument Against Political Correctness." In his post Steve also points out that Ben Franklin favored English immigration over German immigration. 

Ezra and Evan’s Flag. I was very pleased to see Ezra Klein and Evan Soltas flag the column, and intrigued by the way they boiled it down:

KIMBALL: The Ben Franklin strategy to a U.S. renaissance. “The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States…An excellent answer is to do everything possible to foster long-run growth of per capita GDP in the US. At a minimum, this includes radical reform of our system of K-12 education, removing the barriers state governments put in the way of people getting jobs, and dramatically stepped-up support for scientific research…The key to maintaining America’s preeminence in the world is to return to Ben Franklin’s visionary grand strategy of making many more of the world’s people into Americans.” Miles Kimball in Quartz.

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Quartz #26—>The Government and the Mob

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Link to the Column on Quartz

Here is the full text of my 26th Quartz column, "The US government’s spying is straight out of the mob’s playbook," now brought home to supplysideliberal.com. It was first published on July 4, 2013. Links to all my other columns can be found here. My preferred title above better represents my broader theme: what governments need to do to foster economic growth.

I pitched this column to my editors as an Independence Day column. I am proud of our American experiment: attempting government of the people, by the people, and for the people. This column is about the principles behind that American experiment, from an economic perspective. 

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© July 4, 2013: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2014. All rights reserved.

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Reading Ben Zimmer’s “How to talk like Whitey Bulger: Mobster lingo gets its day in court“ in the International Herald Tribune provided by the hotel during my recent stay in Tokyo reminded me of my litany of the basics the government must provide to make anything close to market efficiency possible:

  1. blocking theft,
  2. blocking deception, 
  3. blocking threats of violence.

Let me give two examples of what I have written in this vein. The first is from “So You Want to Save the World“:

If someone’s overall objective is evil or self-serving, the only way what they do will have a good effect on the world is if all their attempts to get their way by harming others are forestalled by careful social engineering. It is exactly such social engineering to prevent people from stealing, deceiving, or threatening violence that yields the good results from free markets that Adam Smith talks about in The Wealth of Nations—the book that got modern economics off the ground.

The second is from ”Leveling Up: Making the Transition from Poor Country to Rich Country“:

The entry levels in the quest to become a rich country are the hardest.  The basic problem is that any government strong enough to stop people from stealing from each other, deceiving each other, and threatening each other with violence, is itself strong enough to steal, deceive, and threaten with violence.  Designing strong but limited government that will prevent theft, deceit, and threats of violence, without perpetrating theft, deceit, and threats of violence at a horrific level is quite a difficult trick that most countries throughout history have not managed to perform.

How to talk like Whitey Bulger: Mobster lingo gets its day in court“ describes the example I have in mind when I write about “threats of violence”:

Charging “rent” is extorting money from business owners under the threat of violence.

I have thought about whether I should include actual violence in the list, but decided that, with only a few exceptions, the motivations for violence boil down to either theft or being able to provide some credibility for one’s threats of violence.

Deception covers a wide range of destructive activities. The idea that the free market requires tolerance of corporate deception is itself a big lie. Even routine secrets have a measure of deception to them, and as Sissela Bok demonstrates in her book Secrets: On the Ethics of Concealment and Revelation, the ethical justification for keeping secrets is much trickier than many people think.

Blackmail presents an interesting case that doesn’t quite fit my litany: the threat to reveal deception is used to distort the deceiver’s behavior. But there is an element of deception in such a revelation, since the selective revelation of one person’s secrets and not the secrets of others makes the person whose secret is revealed look much worse than if all secrets were revealed. I think I would fare very well if the day ever came that Jesus predicted when he said:

For there is nothing hidden that will not be disclosed, and nothing concealed that will not be known or brought out into the open. (Luke 8:17)

But I have no doubt that if someone revealed all of my secrets, while everyone else got to keep theirs, I could be made to look very bad.

The possibility that threats of selective revelation of secrets could be used by members of the government to blackmail others—or to deceive the public about the relative merits of different individuals—is the most serious concern raised by government spying. That is why I join Max Frankel in advocating that government spying be overseen not by judges in their spare time, but by a dedicated court whose judges can develop special expertise, with lawyers who have high-level security clearance given the task of representing the interests of those whose communications are being monitored, whether directly or indirectly. Frankel said it this way in his New York Times editorial ”Where did our ‘inalienable rights’ go?“:

Despite the predilections of federal judges to defer to the executive branch, I think in the long run we have no choice but to entrust our freedom to them. But the secret world of intelligence demands its own special, permanent court, like the United States Tax Court, whose members are confirmed by the Senate for terms that allow them to become real experts in the subject. Such a court should inform the public about the nature of its cases and its record of approvals and denials. Most important, it should summon special attorneys to test the government’s secret evidence in every case, so that a full court hears a genuine adversarial debate before intruding on a citizen’s civil rights. That, too, might cost a little time in some crisis. There’s no escaping the fact that freedom is expensive.

If modern technology makes it harder to keep secrets in general, I think that is all to the good. People usually behave better when they believe that their actions could become known. (See for example this TedEducation talk by Jeff Hancock, “The Future of Lying,” which reports evidence that people are more honest online than offline.) Those overthrowing tyrants may benefit from secrecy in putting together their revolutions, but tyrants need secrecy even more. So a general decline in the ability to keep secrets is likely to be a net plus even there.

Above, I pointed out the fundamental problem of political economy:

… any government strong enough to stop people from stealing from each other, deceiving each other, and threatening each other with violence, is itself strong enough to steal, deceive, and threaten with violence.

Although it pains me to say so, the literature on economic growth (see for example Pranab Bardhan’s Journal of Economic Literature survey article ”Corruption and Development: A Review of the Issues“) argues that centralized corruption by a strong but evil state can yield better economic outcomes than decentralized corruption by many local mob bosses or warlords. Nevertheless, I believe the elimination of tyrants and the progress of democracy throughout the world will be one of the most important contributors to human welfare in the coming decades. May those of us who enjoy the blessings of democracy be willing to make the sacrifices that could be necessary to help others enjoy that blessing. And may all nations add to democracy all of the other restraints on government necessary to make government our servant rather than our master.

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