Comments on: Weekend Roundup

By: Benkyou Burito

Benkyou Burito — Thu, 11 Feb 2010 16:29:22 +0000

Also I missed your second question, “Do you think that China’s economy would be growing so fast without such a high savings rate?”

Yes it would. It’s economy is growing because loosening trade restrictions (primarily on FDI and labor) have allowed untapped labor to be put to use. Nationally, much of their savings is a result of trade imbalance, but the growth of the economy is a result of their factors being allowed to move out towards the perimeter of their PPF.

Their GDP would still be skyrocketing even if they spent all their new income on casinos and Happy-meals. Go the Shanghai and you’ll see that this is exactly what they are doing (also Louis Vouttan handbags). But for most Chinese there isn’t any meaningful way to spend about 9% of their income or their reliance on nature is so critical that the utility of savings as a hedge against flood necessitates it.

By: Benkyou Burito

Benkyou Burito — Wed, 10 Feb 2010 22:12:44 +0000

Steve- Until just recently the overwhelming majority of Chinese (about a billion of them) 100% of their income is immediately spent on sustenance.

Pulling the conclusions of ( http://www.allbusiness.com/trade-development/trade-development-finance-banks/5844421-1.html )I would agree with the authors that Positive Growth in Income leads to Positive Growth in rate of Savings. Another way, they are able to buy all the food they need now and there isn’t much else for most Chinese to buy, so they save it. Corollary is that the rise in savings rate is a result of their growth in GDP not the other way around.

But to answer your question directly, A rise in savings rate results in a drop in aggregate demand. A drop in aggregate demand results in a drop in employment. A drop in employment results in a further drop in aggregate demand.

Or do you attribute rate of employment in the short and medium term to something other than demand for goods?

By: Steve Reilly

Steve Reilly — Mon, 08 Feb 2010 12:16:34 +0000

Benkyou,

“If it is good for an economy to have its cash in use as opposed to sitting in savings, wouldn’t a tax that motivates people to spend more now rather than wait until later be a benefit?”

Why is it better for an economy not to have a large savings rate? Do you think that China’s economy would be growing so fast without such a high savings rate?

By: Benkyou Burito

Benkyou Burito — Sun, 07 Feb 2010 04:05:36 +0000

If it is good for an economy to have its cash in use as opposed to sitting in savings, wouldn’t a tax that motivates people to spend more now rather than wait until later be a benefit?

A tax policy that motivates someone to hire now, rather than wait, would be a benefit right?

Is this a case of contra / freedom-fighter? It’s a distortion if you don’t like it but an incentive if you do?

By: dave

dave — Sat, 06 Feb 2010 22:20:55 +0000

oi professor. i am almost finished with your book. i was hoping to attempt a mental digestion before i constructed a response note, but i am prone to distraction and thought i had better get one out while the poker is still hot.
first: high praise. thank you for your excellent and thorough reasoning, your wit, and your ability to simplify the problems that require more math than i want to tackle.
second: ive got a thorn in my paw. chapter 6 asserts a claim that the beliefs one goes around repeating are the ones not really believed. while i find that makes perfect sense, it doesn’t seem to wash with the honest truth seekers situation you present in chapter 8.
i know you believe that two plus three makes five because you also believe that two and three exist.
i believe that any number divided by zero remains unchanged.
=]

cheers! thanks again for your excellent book. have you ever thought of creating a childrens version?

By: GregS

GregS — Sat, 06 Feb 2010 07:27:45 +0000

Dr. Landsburg
Can you get some of your books into the audiobook market? A friend of mine asked me for some audiobook recommendations, and I was disappointed that I couldn’t recommend any of yours. I would have. But none of them are available at the i-Tunes store.