4 ms·

Care to elaborate why this would be the case? I mean, it sounds great and I know the usual arguments that economy is not a zero-sum game, but this sounds way to

by sgift 16y ago

Care to elaborate why this would be the case? I mean, it sounds great and I know the usual arguments that economy is not a zero-sum game, but this sounds way too much like "Hey, it works great in the short run and for one country - let us all do this and hope that it works in the long run!" to me.

fauigerzigerk 16y ago
Do you really believe that making better stuff more productively is something that only works for one country in the short run? Sure, there are always factors like exchange rates and interest rates that skew the whole thing a little bit one way or the other, but the reality is that Germany is not cheating, they are simply better and them being better does not cause others to fail, it just highlights that fact. If other nations became more productive, the German current account surplus would shrink and the global productivity level, by implication, would be higher than now. My argument rests on a simple assumption: Higher productivity equals greater wealth. This can of course be questioned on a philosophical level, but not on the basis of mainstream economics.
- sgift 16y ago
  > Do you really believe that making better stuff more productively is something that only works for one country in the short run? I don't, but I believe someone has to buy this production or increased productivity doesn't help anyone. Your assumption sounds correct, but isn't the base of Germany's economic growth in the last years: Germany didn't increase productivity (at least not by a significant margin), but decreased wages (compared with it's neighbors). And this decreased wealth.
  - fauigerzigerk 16y ago
    Inflation adjusted wages in the US are pretty much unchanged for over a decade as well. Yet, the US has a massive current account deficit whilst Germany, a welfare state, has a current account surplus even with China, a low wage export oriented economy. So wages cannnot possibly be the reason for their success. I don't deny at all that there are many short term effects and flucuations that have nothing to do with productivity. But we're talking about the different speeds of European economies and those different speeds correlate very well with different levels of productivity. And look at the Greek stock market. The biggest non financial companies there are a Coke bottling company and the lottery. The biggest German listed company (I believe) is Siemens, which makes high tech industrial equipment like power plants or health care equipment. The Chinese want that. They need energy, they don't want to play in the Greek lottery and they can bottle their own Coke. That's the reason for the two speed economy.
- seertaak 16y ago
  > Higher productivity equals greater wealth I agree with your argument -- IIUC you're invoking comparative advantage. But the two concepts above are fundamentally different. Wealth is a stock, while productivity is a flow multiplier (e.g. A(t) in Solow model: http://en.wikipedia.org/wiki/Solow_residual http://en.wikipedia.org/wiki/Solow_residual). Saying "equals" is a bit adventurous, IMHO. Probably a bit pedantic, but then you do stress that that statement is on the basis of "mainstream economics".
  - fauigerzigerk 16y ago
    Right. Higher productivity _causes_ greater wealth is what I wanted to express.
seertaak 16y ago
Comparative advantage: http://en.wikipedia.org/wiki/Comparative_advantage http://en.wikipedia.org/wiki/Comparative_advantage

by sgift 16y ago

fauigerzigerk 16y ago

Do you really believe that making better stuff more productively is something that only works for one country in the short run? Sure, there are always factors like exchange rates and interest rates that skew the whole thing a little bit one way or the other, but the reality is that Germany is not cheating, they are simply better and them being better does not cause others to fail, it just highlights that fact. If other nations became more productive, the German current account surplus would shrink and the global productivity level, by implication, would be higher than now. My argument rests on a simple assumption: Higher productivity equals greater wealth. This can of course be questioned on a philosophical level, but not on the basis of mainstream economics.

sgift 16y ago
> Do you really believe that making better stuff more productively is something that only works for one country in the short run? I don't, but I believe someone has to buy this production or increased productivity doesn't help anyone. Your assumption sounds correct, but isn't the base of Germany's economic growth in the last years: Germany didn't increase productivity (at least not by a significant margin), but decreased wages (compared with it's neighbors). And this decreased wealth.
- fauigerzigerk 16y ago
  Inflation adjusted wages in the US are pretty much unchanged for over a decade as well. Yet, the US has a massive current account deficit whilst Germany, a welfare state, has a current account surplus even with China, a low wage export oriented economy. So wages cannnot possibly be the reason for their success. I don't deny at all that there are many short term effects and flucuations that have nothing to do with productivity. But we're talking about the different speeds of European economies and those different speeds correlate very well with different levels of productivity. And look at the Greek stock market. The biggest non financial companies there are a Coke bottling company and the lottery. The biggest German listed company (I believe) is Siemens, which makes high tech industrial equipment like power plants or health care equipment. The Chinese want that. They need energy, they don't want to play in the Greek lottery and they can bottle their own Coke. That's the reason for the two speed economy.
seertaak 16y ago
> Higher productivity equals greater wealth I agree with your argument -- IIUC you're invoking comparative advantage. But the two concepts above are fundamentally different. Wealth is a stock, while productivity is a flow multiplier (e.g. A(t) in Solow model: http://en.wikipedia.org/wiki/Solow_residual http://en.wikipedia.org/wiki/Solow_residual). Saying "equals" is a bit adventurous, IMHO. Probably a bit pedantic, but then you do stress that that statement is on the basis of "mainstream economics".
- fauigerzigerk 16y ago
  Right. Higher productivity _causes_ greater wealth is what I wanted to express.

seertaak 16y ago

Comparative advantage: http://en.wikipedia.org/wiki/Comparative_advantage http://en.wikipedia.org/wiki/Comparative_advantage