Nobel Laureates speak
By Arnold Kling
The Wall Street Journal asks a series of questions to a number of Nobel Laureates in economics. On one question, whether the global income distribution will be more equal 50 years from now, several of them say “yes,” because they are optimistic about China and India. I guess they model the future by extrapolating the last ten years forward.
UPDATE: He’s not a Nobel Laureate, but Brad DeLong does some arithmetic and projects out growth rates for China and India.
China’s labor productivity is now growing at roughly 6% per year. If that rate can be sustained – and if the Chinese economy becomes and remains integrated enough for us to be able to speak of it as a single entity – China’s labor productivity will be comparable to today’s America sometime before 2050. And India? If the growth rates of the past 15 years continue, and if India remains united, its labor productivity in 2050 will be comparable to that of Spain today.
However, many of those same economists see poverty in the underdeveloped world as the biggest economic challenge.
On the question of which sphere of life requires the most limitations on market forces, Kenneth Arrow says,
because of both quantitative importance and depth of implication, the field of health policy requires (and gets) the most limitation of market forces.
On the other hand, Vernon Smith answers,
None, because “markets” are about recognizing that information is dispersed in all social systems, and that the problem of society is to find, devise and discover institutions that incentivize and enable people to make the right decisions without anyone having to tell them what to do. The idea that market forces should be limited stems from a fundamental error in beliefs about markets. This is the wrong question.
For Discussion. Can you explain what Smith means?