Daniel Davies and Alex Tabarrok objected to the graphs of GDP I included in this post on The Great Stagnation. Specifically, they didn't like the fact that the hypothetical lines I drew reflect constant linear growth rather than constant percentage growth. I.e., I didn't compound the growth when i drew those lines. They're right that the latter is a better measure of trend (it's what is used in almost all statistical analyses), so here's a new graph that takes that into consideration.
This graph shows the actual GDP per capita growth (circles) for the US, OECD, and entire world. The lines that begin in 1974 reflect what GDP per capita would look like if it had continued to grow at the 1960-1973 rate*. Note that a "Great Stagnation" hypothesis would expect significantly weaker growth post-1973, not the same amount and certainly not more. So the fact that the US was above the trend line until the early 2000s provides fairly strong evidence that if we're in a Great Stagnation it's more recent than Cowen argues, and doesn't correlate with stagnating median incomes all that well. In fact, the US does better than either the OECD or the globe, if "better" is defined as "closest to 1960-1973 trend", although the OECD trend line is quite a bit steeper**.
Anyway, just wanted to make sure I didn't leave the impression that my main point (about distribution) relies on faulty extrapolation.
*Specifically, I regressed a year counter on the log of GDP per capita (constant dollars, via WDI) from 1960-1973. The coefficient estimate represents the average growth in GDP per capita per year during that period. I then took that coefficient estimate and added it to 1973's GDP per capita to get 1974's predicted point, added the same constant to the predicted 1974 to get the predicted 1975, and so on.
**Of course the US is a big part of both OECD and world economies; if you removed the US from those groups the US would likely look still better in comparison. Although in the OECD's case, they added some countries during the series (e.g. Mexico, Slovakia) with lower per capita GDP than more established industrialized countries.
- ► 2013 (95)
- ► 2012 (129)
- IR Nerdcore - Tinker, Tailor, Soldier, Spy
- S&P Fires Shot Across the Bow
- Trouble in Egypt
- Regulatory Regret
- Capital Is Political
- If Hitler was on the $20 Bill, How Would the Jews ...
- The Importance of Learning from Crisis
- Sunday Afternoon Video
- Nye on European Power
- Basel Is Political
- Political Science Invented the Interwebs
- Trade, Exchange Rates, and Public Opinion
- Schelling and the Euro
- Who Doesn't Love a Grand Theory Debate?
- Over-Regulation Isn't Surprising
- Who Gets Optimized?
- The BIS Misses Monetary Moral Hazard
- The IMF Is Political, Not Technocratic
- Anonymous Goes After the Fed
- Eichengreen Podcast
- The Irony of TGS
- Krugman vs. Krugman
- The Politics of Housing Is Salient
- Follow-Up on TGS Graphs
- The Next Trade Spat?
- Creditor-Debtor Politics
- Re: That EMU Stealth Bailout
- The World's Central Banker
- *The Origins of Political Order*
- There Is No Great Stagnation, Only Great Redistrib...
- Too Big to Fail
- China's Growing Pains
- The International Forex Network, 1998-2010
- On Blanchard on Capital Flows and the IMF
- Basel Politics Nothing New
- Actually, Let's Not Start a Trade War With China J...
- The Politics of Stealth Bailouts and Plausible Den...
- The World's Central Banker
- ▼ June (40)
- ► 2010 (478)
- ► 2009 (521)
- ► 2008 (134)
- ► 2007 (142)
Wednesday, June 8, 2011
Posted by Kindred Winecoff at 10:25 PM . Wednesday, June 8, 2011