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Having read the whole paper again today, I guess I remain confused by it.

I might be wrong, but your opening statements suggest the subject is geopolitical rivalry, which is great, because it is indeed one of the biggest issues the world has currently, but then tea leafs are read based on GDP per capita, a measure indicative of, but not even necessarily the best on, the wealth of citizens.

If GDP per capita was significant for geopolitical competition, US would have considered Luxembourg, Singapore or Qatar etc. global competitors. I would have thought GDP is far more relevant, since it relates to what an expenditure of X% of a nation’s GDP on their military, foreign aids, R&D or infrastructure development etc. would mean. Throughout history, the issue is the capability and capacity of countries “throwing their weight” around, for good or for bad, don’t you think?

In other words, not only is the paper reliant on the Maddison estimates, which are rather different to World Bank’s or IMF’s and hence potentially questionable in terms of accuracy and utility for informing policies and trends, the paper examines and concludes from a parameter that is at best tenuous to geopolitical competition.

The US is hostile to and wants to “contain” China because the issue is who is going to be the king of the mountain internationally. While currently their GDP are similar (certainly in PPP terms), if China continues to maintain just 2/3rd of what they achieved over the past 30 years (i.e. 6% pa rather than c9%) while US remain at 2%, it would take only 18 years for China’s GDP to be twice as big as that of the US (or greater than US and EU combined). You know the power of compound growth, and a low GDP per capita suggests structural ceiling, if any, for China’s GDP is likely to be distant - I hope this answers your question to me about China’s growth in our discussion yesterday.

For the avoidance of doubt, I am not saying GDP is the only measure relevant to geopolitical competition. Innovation (e.g. patent filings, number and quality of PHDs), availability of asymmetric tools (e.g. hypersonic missiles vs aircraft carriers), level, efficiency and effectiveness of national investments, educational and career backgrounds of politicians etc. are all relevant, to name just a few.

The fact remains it will become very noticeable, soon enough, if not already, that China has overtaken US geopolitically – a reality many in the US find difficult to accept, given their exceptional position over the past 150 odd years, which led the Anglo-Saxon if not the Western world to adopt various exceptionalistic narratives with religious fervour, e.g. that the American political system is the best (as implied throughout your paper), despite contrary to facts and logic.

So what is counterfactual or illogical? Is it not ironic for a country to accuse another of being “belligerent” and dangerous to international orders on a daily basis, while the accuser 1) is the one with c800 military bases around the world, 2) has a military expenditure that is more than the next 10 spendiest combined, 3) waged numerous wars causing the death of circa 1 million over the past 4 decades, and 4) regularly sending warships to the coast of the other in the name of defending freedom of navigation while freedom of navigation is what the other relies on as the biggest trader in the world?

And it is not as if the US has nothing else worth focusing on - the bottom 50% of Americans have not seen their economic circumstances improved for over 4 decades, and 40% of Americans don’t have $400 in the bank for emergencies today. The sad thing, is that many of those who have nothing and hence most vulnerable believe, wrongly, that they have nothing to lose by electing morons.

US exceptionalism is of course also why, realising that China has no intention to follow US’ developmental and political path anytime soon, US is turning on China on a bipartisan basis.

Why am I saying all this? With Covid, you have demonstrated that you are able to filter out noise and nonsense to get to the crux of the matter, and communicate in such a way that makes perfect sense to any who has the chance to read what you wrote. I think if you would apply your outstanding talents on this topic, you could again make the world a better, safer place!

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Thank you. You are right that maybe the thesis should be more clearly explained.

I am introducing a framework to put bounds to future GDP for different countries. That’s it.

If GDP is population and GDP per capita, and both are predictable within ranges, then gdp is predictable within ranges.

That explains the growth of Europe after ww2 in a way that doesn’t require some magic thinking.

It predicts TW and SK will have a growth slowdown.

It puts an upper bound to China’s GDP, and even a broad timeline for their slowdown.

Etc

In that regard, it is a geopolitical tool, but its prediction is not that China will be below the US in terms of GDP. It will surely pass it because its population is 4x bigger and GDP per capita will likely be higher than 25% of the US GDP per capita.

I’ll talk much more about China and this topic in an upcoming article.

And as you say inequality is not at all a focus of the article.

Thanks for working with me on this!

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Strange numbers: Cuba's GDP per capita is 1/6 of the US, but has the same life expectancy. Italy's GDP per capita is 62% of the USA, but life expectancy is 4.5 years higher. Cuba has a similar human development index as the USA, but needs just one planet, not seven or more as the USA (and other industrialized countries). Maybe it's time to look at the well being instead of the GDP. It's the ecology, stupid!

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I cannot fathom how people still think life expectancy, aggregated across an entire nation of differing lifestyles, genetic components, and cultures, is a useful metric.

There are literally dozens of factors in life expectancy that tell you absolutely nothing about well being. Health outcomes as measured by life expectancy don't tell you about the quality of those lives. A remarkably productive investor who smokes, drinks, and regularly eats steaks and pizza will undoubtedly have a lower life expectancy than a middle class farmer on a modest, cautious diet composed of a variety of food, without either the means or will to smoke, drink, or take drugs. It tells you nothing, without controlling for a large variety of other factors.

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Interesting. Yet, I am not sold why the GDP per capita is such a good measure. In the end, its the GDP of a country divided by the population, right? Resulting in an average value. However, distribution of capital/wealth differs strongly between those countries. Shouldn’t that be included somehow in the analysis? What could be learned from a comparison of median GDP per person instead of an artificial average?

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I hear you. No metric is perfect. The question is rather: is it informative? And for all the reasons explained, I think it is.

Median is useful when you want to pay attention to inequality and wealth distribution rather than economic potential of a country.

I have PLENTY written about inequality, unpublished yet. I will!

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Looking forward to that one!

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Good question. While GDP is a coarse average I don’t believe it’s artificial and it does scale (you could calculate it for your family). Obviously capital/wealth distribution is a factor but it’s also a product of GDP. Countries are a lot like startups in that they can bootstrap themselves. Capital will always find an opportunity for growth anywhere in the world. Japan is a good example of a smaller country that was able to grow its GDP without the raw material advantages of larger countries (another type of capital).

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FWIW I agree with your central thesis. If you start from a low base, it's a lot easier make the numbers look good from there.

Humans always copy what works (eventually, sometimes takes them a while to catch on).

Intelligent copying involves improving on the original idea or process. But copying is very different from creating, so it will be interesting to see where China goes from here.

I wonder how many economists follow or subscribe to your posts. I haven't seen any sign of one, so it raises the question of why not?

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We talked about it in Economics classes in grad school, but not enough. And more importantly, none of it appears to filter into the broader conversation. Hence the article.

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I must say I find your statement:

"In this light, the story of Chinese growth becomes much more banal. China’s economy is nothing special. The only thing that’s special about China is that there are a lot of Chinese people."

quite remarkable.

As they say, there are lies, damned lies and statistics - if you had plotted the growth factor of GDP or GDP per capita (preferably in PPP terms since we are talking about people and society) over the past 40 years, would "Chinese growth" in relation to other countries Asian or otherwise still look "banal" to you?

Leaving that aside, fact is they have lifted c800 millions out of poverty over the past 40 years, as your chart shows, and unlike India e.g. have made huge advances in education, healthcare, infrastructure and industrial capabilities that are now, in many areas, world class. Such growth and improvement for so many over such a short time is unprecedented in the history of mankind - are you sure your personal political belief/prejudice isn't clouding your view and judgment?

Also why isn't size critically important? 1) It is one thing to have the wherewithal to stablise and enrich 10 million, another to do the same for a billion, wouldn't you say? 2) In terms of trade or international relations, or impact to the world in the future, why doesn't size matter tremendously?

I appreciated your articles on Covid, but like others have indicated, it seems you have a rose-tinted view about the West in general, and US in particular. Numerous trends indicate this is likely to be an Asian century - history is likely to show the past 150 years is but an aberration in thousands of years.

I trust you are sold on the invincibility of democracy, problem is in reality US is no more a democracy than China is communist, given US is really a plutocracy, while China has been striving to be a meritocracy (do look up Daniel A Bell and/or Kishore Mahbubani if you disagree). Not only that, Churchill wisely and famously said democracy is the worst form of government except the others that had been tried, but he couldn't have seen why China's rise is no accident, you can.

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Thank you for your perspective, Londoner.

Everybody is biased, by definition in ways that are hard to introspect about. I’m surely biased towards the West, but I want to believe not in the blatant way you suggest. For example, I have praised the Eastern management of COVID for the entire length of the pandemic.

I personally love China. I’ve visited it and found it fascinating. Its history and contributions to the world are amazing.

These things can—and should—be dissociated from an economic analysis of the country though.

China is one of many countries in the East, and I find the story of the government’s exceptionalism troubling.

I did graph China. Twice. In charts 1 and 10. If you look at these charts, the story is one of many. They grew more than India but leas than Thailand or Malaysia on a per capita basis.

And a lot of that growth is just catch up, which is the entire point of the article. If China had caught up as well as Malaysia, it would be about twice as rich.

You mention the lift of 800M out of poverty. This is one of the best stories of success in mankind (big because it’s a country with a huge population). The question is: whose success?

Mao suppressed the country’s growth, and their growth only started after Deng Xiaoping opened the country TK the world.

The more recent the reopening, the more global the prod was on reopening, and the faster the catch up.

Would another government have grown as fast? We can’t know. But based on these comps, we can gather that another government would have opened up much earlier and grown faster.

Another way to put it: China could have been Taiwan, but instead it’s just China. And without their population size, their growth story would be one of a middling Asian tiger.

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Tomas many thanks for your response - having looked closer, I fear you are relying on a dataset that is not suited for the present discussion, perhaps even your analysis / forecast, given your opening statement is whether US should fear China catching up, economically.

As far as I can tell, the Maddison figures are usually only used for their ancient figures/perspective, for no better reason than because he was the only scholar who did extensive research to figure something like that out. See e.g. https://en.wikipedia.org/wiki/Maddison_Project or

https://www.gapminder.org/data/documentation/gd001/.

For gdp or gdp per capita data during the past few decades, one would have thought most would use World Bank or IMF figures. If you do so, you will find they do not support your observation based on the Maddison numbers. You mentioned Malaysia, see

https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?locations=MY

and

https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?locations=CN

showing that since 1990 Malaysian gdp per capita grew by 2.6x, while China's grew by 12x!

The corresponding Maddison figures are 3.0x and 4.4x, which probably led you to your conclusions of Chinese growth being "banal" and "standard".

It would appear the IMF and World Bank data are not very dissimilar: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

IMHO, even if China is to continue to progress leaps and bounds economically, US still has nothing to fear - it is not in China's interest or DNA to "contain" US, despite "containing China" now being US official, bipartisan policy, But that is separate issue/story.

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Thanks for looking into it.

I traced back the data.

I'm acquainted with Maddison. The fact that it focuses on old-time data doesn't mean its focus on current data is shallow.

The Penn numbers show the same trend:

https://ourworldindata.org/grapher/real-gdp-per-capita-pwt?country=MYS~THA~CHN~JPN~KOR~TWN~IDN~PHL~USA

Only the WB differ, and they differ in that they show China above Thailand instead of below.

https://ourworldindata.org/grapher/gdp-per-capita-in-us-dollar-world-bank?tab=chart&country=JPN~CHN~KOR~IDN~THA~MYS~PHL~USA

It's still below Malaysia and far below SK TW JP. Even if we took these as the right ones (doubtful since it's 1 of 3), it wouldn't change the conclusion that it's just a middling story of growth, don't you think?

Agreed on the dear point though.

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Maybe he has a rose-tinted view of the West. Maybe you have a rose-tinted view of China. Time will tell.

What is clear is that considering the US a plutocracy and China a meritocracy is a gross distortion of the facts. The US is a constitutional federal Republic with a deeply entrenched rule of law. Moneyed interests do exert large influence (a constant throughout the world) but they are still subject to and held in check by the laws of the land. China is a centralized autocracy. All power flows from the CCP. There are no transparent processes through which interests can be perceived (as is the case in democracies with a free press, we can see the process through which participants form and advance their interests), all laws are subject solely to the whims of the CCP. Such a system relies heavily on the power-center controlling society and the economy.

The 21st century will reveal which system is better able to identify and advance the state’s interests (where by ‘state’ i mean the body politic that makes up the nation).

But there are strong arguments for why Thomas’ perspective is longtermist and yours is shorttermist.

That said, your point that China experienced an unprecedented per capita growth miracle in the last few decades is true and noteworthy. If it is indeed a harbinger of the future, maybe the US system is in trouble.

My money is on democracy. Switzerland may be a free-rider nation, but its governance is among the best in the world, and tight feedback loops between the government and the electorate are an important driver of that (as well as federalism, hard-working culture, and well functioning free markets & rule of law - all attributes that the US shares to a large extent)

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I agree on everything! Except for the unprecedented growth in gdp per capita. Look at chart 10. Pretty standard.

I do have an article draft on the freedom vs productivity point.

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Ben I appreciate your well argued response - I sincerely hope the political leaders in US can deliver for their people, if not the world. Unfortunately, evidence suggests they have achieved neither over the past 40 years, and I see no sign of change any time soon.

It is tempting to infer that because democracy is alive and well in Switzerland, it should bode well for the US. However, the complexity and consequence of decisions that have to be taken by the two countries are very different, and such complexity and consequences are why the common men and women are especially ill qualified to decide by casting their votes - on one hand electing an orange moron could have started World War 3, on the other, not so much. The US waged numerous hot and cold wars in distant land over the past four decades, causing the death of circa one million while bringing untold suffering to many times more - did their electorates ever get the "tight feedback" you think they deserve?

It is said Biden wants to correct various mistakes made by Trump, but he can't, unless he wants to lose the House and Senate next year. You would have thought any half decent system would have a feedback loop to ensure no moron can ever be elected President again, where is it?

I appreciate and accept that different and no less serious dangers can exist in an autocratic system, but elections are not the only way to find out what people want, and what the majority wants might not be good for the world, the state or for their children. It is said the Chinese national and local governments are often their survey organisations’ biggest customers. If you infer there is a clear link between being able to vote and voter trust and satisfaction, you might want to see this: https://news.harvard.edu/gazette/story/2020/07/long-term-survey-reveals-chinese-government-satisfaction/

Fundamentally, don’t you find it disconcerting that while e.g. lawyers, surgeons and engineers are only qualified to practice based on their ability and experience, popularity is all our political leaders need?

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Tomas, your thesis is provocative as you will have anticipated. I ask you and your network to confront these questions. (1) The USA's economic performance is a result of its size, natural resources, and commonalities. (2) That performance does not result from exceptionalism, integrity, diligence or virtue. (3) It's a ridiculous concept to ask smaller nations to compete with the USA's scale. (4) China will not only compete but surpass the USA; but they are not a competitor (5) The world will benefit from trading blocs that leverage the scale of the USA, and the USA should encourage them without self-interest. (6) Why not trading blocs in LATAM, ASEAN and the near Middle East. (7) I learned from my father-in-law, British, a senior diplomat in the European Commission. I have lived and worked around the world.

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Hi Scott, thank you for your very thoughtful and succinct comment!

1. Yes I think you're right. The natural resources side was the main point of this article

https://unchartedterritories.tomaspueyo.com/p/world-chessboard

I just don't know how to quantify it.

The size is covered in the articles that touch on network effects:

https://unchartedterritories.tomaspueyo.com/p/should-everybody-learn-english

https://unchartedterritories.tomaspueyo.com/p/history-network-effects

I will cover this in the premium article this week.

2. I agree that fluffy things like that mean nothing.

3. This follows from 1. But they can compete in other ways. Eg, they can unite, they can take advantage of tax arbitrage, they can focus on education, they can specialize... It's not a coincidence that all the countries that are richer in GDP per capita vs the US are smaller, and only a few are petrostates.

4. Depends on the metric. On GDP, yes because there's so may Chinese. On GDP/capita I highly highly doubt it. They are a competitor insofar as they are an inspiration for a completely different management system that is at odds with the US approach. It's a bit like during the Cold War.

5. Agreed. What happened with TPP was very sad.

6. Agreed! That would be great. Note that LatAm has Mercosur, ASEAN has ASEAN... I think you mean more of it. Hard agree.

don't think you can categorically claim this. A better question would be "what % of the gap is due to

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I was surprised to see this comparison using GDP as a measure, and reading some of the other comments I see I'm not the only one. Its a very poor measure of wealth and the critiques of it as a yardstick go back at least to the 80's. Richness <> GDP.

More importantly I think is the argument about using median rather than average (per capita). For example - Ireland comes in with a higher GDP per Capita, but a lower median income PPP per capita, which suggests that the "economic growth" from the tax avoidance of companies nominally being based there doesnt translate to actual benefit and "richness". https://en.wikipedia.org/wiki/Median_income

Its also worth looking at the trends, for example https://en.wikipedia.org/wiki/Personal_income_in_the_United_States#By_educational_attainment shows essentially no improvement in inflation adjusted income for any income group, i.e. the increase in GDP is just a numbers game once you take inflation into account.

I usually love your articles, but this one seems to have missed the important points.

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Thanks Mitra.

From the comments, I think it didn't focus on something many people thought important, which is considering the inequality component when talking about wealth.

I'll do that in the future. Thanks for the feedback.

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Thanks Tomas, its not just the importance of looking at inequality, its also that once you look at Median's countries that look to be accelerating, or leading often aren't. In fact, if growth is slower than the increase in inequality, then for more than half of their population they could be going backwards, while other countries, with better equality may actually be doing (relatively) better.

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There's an argument from many people (in example Michael Beckley) that measures such as GDP do not account for the costs of producing and maintaining that level of economic value.

The same agricultural value entails different costs in the US midwest (and moving the final products through the Mississippi basin) than in other parts of the world. Maintaining a large enough military force without actual threats to the homeland (USA) is quite different (and less costly in net terms) than maintaining a large military to fend off adversaries (Greece).

Maybe that also accounts for a part of different country trajectories.

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It's an interesting idea using US GDP/capital to benchmark other countries. But past performance is no guarantee of future performance.

Other economic models can overtake the US. For example, the tax haven model outperforms the US on a GDP per capita basis.

The democratic socialist model also outperforms the US on a median salary basis. The Nordic countries and Australia all beat the US on this basis - because much of the income growth is captured by corporations and not filtered down to individuals. (Source: https://worldpopulationreview.com/country-rankings/median-income-by-country)

Median income is a more statistically robust measure than mean income because it is not affected by extreme outliers. The US has more billionaires than anywhere else, so they drag up your statistics even though much of your country is very poor.

The US is lauded for the outperformance of its market. But its government is bitterly dysfunctional regardless of who is in power because of your deeply divided society. Noone looks to the US government and sees a model they want to emulate. Maybe if your democracy looked a little bit more like ours, you might catch up to us on a median income basis while keeping your world beating companies.

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Thanks!

Well there is some stickiness to performance. When the US has been the world leader for 150 years, and keeps growing at 2% throughout, that's saying something. You can tell by the volatility of GDP per capita vs. that of stock market stocks. GDPpc is waaaay less volatile and more predictive. Look at NL before the US: the richest country for centuries.

You're right that a new system could overtake the US. I hope it does! It's not perfect economically, and it's definitely poor politically. But economy-wise, it will be hard.

Tax havens are not scalable. Only small countries can pull them off because they live off of the wealth generated in bigger countries, which then travels to these havens to save on taxes. If everybody did it (or big countries did it), they would lose more $ through a lower taxation rate than they would gain through attracting foreigners.

You're right on median GDP per capita for measures of well-being and inequality. I wasn't focusing on that in this article, here it's about pure economic potential.

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Muy interesante por la sencillez, como toda navaja de Occam, en eso está también su peligro.

Por ejemplo, la omisión del tamaño de las economías y su disponibilidad de recursos internos para crecer por cuánto tiempo. China no es comparable con Japón por esa razón.

El PBI per cápita es una medida relativa a sí mismo, como el peso específico. Pero un gigante, aun con un peso específico menor, tiene mejor pronóstico en cualquier lucha que un enano.

China tiene aun grandes reservas de chinos pobres y capacidad para mantener el orden interno suficientes para ser competitivo por unos cuantos años más. Es decir, ser más grande (mayor PBI) y poner más condiciones a los demás países. Cuanto más grande sea que USA, el menor PBI per cápita será su ventaja.

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Matiz actualizado en el articulo. Gracias de nuevo!

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Totalmente de acuerdo, Jorge. Como dicen los americanos, quantity has a quality of its own.

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I enjoyed reading this article but I was wondering if your charts analyzed nominal or PPP GDP per capita, which I believe is a more accurate measure, accounting for differences in relative costs of local goods? The other consideration is that an economy's performance should not only reflect output per capita but also analyze distribution through the Gini index. The US has relatively high income inequality with a high proportion of income being accumulated by the wealthy. I am not sure I agree that other countries that have slightly lower GDP per capita but more widely distributed income/wealth are trailing the US in economic performance.

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Thanks. It’s all nominal. I will update the article to reflect it.

Different measures have different uses. GDP per capita focuses on the perceived wealth of locals. This is not what I wanted to focus on.

I wanted to focus instead on economy-wide dynamics. These are better analyzed with nominal GDP.

Of course, when I will look at inequality and perceived individual wealth, I’ll use PPP instead.

Thanks for checking me!

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Tomas, you scare me. Your articles on COVID-19 were great - an example of a nerd in his element. But you epitomize the arrogance of US capitalism and its silicon valley techno-magicians. You will know of Yeat's warning, "The best lack all conviction while the worst are full of passionate intensity", as the world slouches towards Bethlehem.

You imagine a world without countries, ignoring the fact that it's the state and its laws that protect the majority from the tyranny of elites. You imagine a world without fiat money, ignoring the fact that fiat money is what invests in the public good. And now you pontificate about GDP, ignoring the fact that it's a largely debased measure that, today, accounts for little more than how effectively we're destroying our planet. And yes, the US, to its shame is at the top of the list. And always has been!

Here are four things for you to consider:

1. GDP requires energy and energy is running out. I challenge you to look at human population - three phases stand out - civilization (the rise of cities), the age of coal (1775 to 1940) and the age of oil since then (with doubling times of 950, 135, and 40 years). If we're faced with declining energy, what happens to our GDP, our economies, and our social structures?

2. Inequality: GDP measures a total but not its distribution. I challenge you to look at Peter Turchin's work, "Quantitative historical analysis uncovers a single dimension of complexity that structures global variation in human social organization", 2017. And you'd be doing a real service if you looked into how income distributions (measured using "1/f" plots) have changed over the last 50 years.

3. Eco collapse: our planet cannot support the ruinous monetary growth that US capitalism demands. I challenge you to look at William Rees's work on "eco-footprint analysis".

4. Conventional economic analysis is wrong. It envisages a system in equilibrium (our economies are dynamic), with no need to account for money (banks and fiat governments create money - one for profit and the other for free), and no answer as to why income distribution is the way it is - which takes us back to item 2 above. I challenge you to read Stephanie Kelton and look at Steve Keen's work.

In the meantime, a bit of grace would serve you while you acquire wisdom to supplement your technical ease and youthfully uninformed imagination.

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Thanks DFWCom, I appreciate your thoughtful comment.

On the conviction side, I have strong opinions loosely held. I love being proven wrong. In fact, it's one of the reasons why I publish these articles. When somebody corrects me, I love it, and I incorporated the insight in the next round.

I don't imagine a world without countries. I imagine a world with weakened nation-states. That doesn't mean nations or states will disappear. It means they will take another form. And I try not to project my own hopes, but rather to analyze how the world will unfold—a hard task, agreed, but nonetheless one we should undertake.

I'm not sure why you say fiat money invests in the public good. I think you mean states invest in physical public goods. I agree with that. I neither desire nor predict a world without states. I foresee one with weakened nation-states.

I hear your concern about climate change. It's one of the things I have in mind. I have a hypothesis I want to share, but it's not trivial to research. It's one of my projects.

Regarding your specific concerns:

1. Energy is running out

I'm not sure I understand this point. Oil and gas are certainly not running out, as we always discover more and harder-to-find becomes easier with technology.

If you don't want oil, you can have nuclear, which doesn't generate CO2, is cheap, and is among the safest types of energies when measured as deaths per kWh (including renewables and accidents like Fukushima and Chernobyl).

And the obviously there's renewables, of which we use little vs. potential.

And finally there's efficiency, where many developed countries have increased their populations while reducing their energy consumption.

2. Inequality

I agree with you. It's a matter dear to my heart. I read Capital in the 20th century about 5 years ago and have kept thinking and writing about it. I will soon start publishing on it.

3. Eco collapse: as I said, I'm looking into climate change, which I think is the 1st step.

4. I'm not sure what point you're making here.

More importantly, I'm not saying in the article that I think everybody should be like the US. I'm only making the commentary that the US is the leader in GDP per capita that all others who want to grow their GDP per capita take as the lead.

And please, abstain from ad hominem attacks. I encourage you to engage with the arguments, but personal attacks get you banned.

Thanks again!

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I have replied to Jake - see below.

So a final comment on Piketty. I read "Capital" too. His first assertion is that if the rate of interest is greater than growth (and it perennially is) then inequality will inevitably result. My assertion is that government policy that has made it happen. And quantitative easing, recently, has made it worse.

I mentioned before I'd implore you to look at income distributions using "1/f" plots (log income vs log probability). Gini coefficients really don't give insight but the slope of a 1/f curve does. How does the US, today, compare with 1950 and with other countries? And is it still even a straight line, which denotes the same rules are applying at all scales. It would be a fascinating window into how things have changed since Reagan and Thatcher. And how much worse things have become.

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Thanks DFWCom. I will read your comment below and answer.

I'm looking for the 1/f plot that you mention. Just to make sure I understand, you're talking about the Lorenz Curve?

https://en.wikipedia.org/wiki/Lorenz_curve

https://towardsdatascience.com/clearly-explained-gini-coefficient-and-lorenz-curve-fe6f5dcdc07

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Interesting... But I was thinking of "Richter" plot - a log-log plot that shows a power law as a straight line. I believe "1/frequency" came from early studies of thermal noise in electrical circuits. The point is it's a negative slope, which, for earthquakes, means lots of small ones and fewer big ones. I believe there's a complex systems underlay to it, including fractal dimensions - something I haven't studied. The fact it's a straight line means the fractal scaling is the same for all earthquakes. Applied to income distribution it means the same rules apply to the poor and the rich. I doubt this is true any more.

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Got it. Yes, I understand what you mean now. World GDP growth is the same, also a log-log line.

Back to the point you were illustrating with these lines, I agree that inequality is huge and growing at a level that is not humanly conceivable. I also think that doesn't lead to a society-wide happiness optimum

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DFWCom how do you scare yourself from Tomas' ideas?

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Hi Jake, well, there’s a loaded question but one deserving of, at least, an attempt at an answer.

First though, to Tomas – thank you for your generous response. Yes, my comment had a soupcon of “attack” but my wish for grace (which is lent by God) was offered in generosity and my comments on your technical proficiency and youth are factual.

But to Jake, I’m an old man, Jake, and I think the elderly are always a bit frightened by the impetuousness of youth. It’s why North American Indigenous peoples gave power to elderly women – the people least likely to get the tribe into trouble and, too, the people with, perhaps, the most wisdom as to life’s real meaning. I think, too, of Roy’s words in Blade Runner, “I've seen things you people wouldn't believe. All those... moments will be lost... in time... like tears... in rain.” Not, attack ships off the shoulder of Orion, just a world with many fewer than 8 billion people – a world that could sustain humanity, a world in which we could still grow. It is gone, now, Jake, like tears, in rain.

Instead of thoughtful reflection, Tomas gives us a GDP score-card, which, like American reporting on the Olympic Games, shines a light on the top spot and the US – highlighting its values, culture, and, in this case, its GDP. Do you have any idea how tired people in the rest of the world are at the banging of this drum?

If it were just a question of tiredness it would be a small matter. But the notion of GPD is what is driving our planet to extinction. It was useful once – I believe GDP was invented by a US technocrat in WW2 who wanted to measure war production. It reduces everything to money. If motherhood is replaced by child care, nurses by machines, care-giving by minimum-wage, part-time “gigs”; if farming is replaced by “agri-business” and nutrition by chemicals and food by “product”; if education is replaced by diplomas and work becomes soulless; if our lives are endlessly financialized for greater “value” to shareholders so that GDP grows, and grows, forever? And what of humanity? And nothing can grow forever, Jake. GDP does not measure happiness or joy or anything much to do with the human condition. We need a new measure, one that measures “health” – our physical and mental health, the health of our communities, our environment, our planet and the many creatures that sustain us. We are at war with all this, Jake. For the sake of GDP!

I’ll leave you to find your own way but I believe we don’t have much time. I read Limits to Growth back in the ‘70’s – the first to attempt a systemic understanding, including population, industry, and the environment. It was soundly trashed by economists but it’s funny how its predictions are being borne out, including things cresting this decade with subsequent steep declines – not because we run out of things but because they become too expensive.

Add to this our new understanding of chaotic systems – how one can predict the trajectory of climate when we can’t predict the weather. It’s interesting that three of the scientists who helped our understanding received the Nobel prize, today.

GDP is, of course, at the epicenters of economics – a rickety rag-bag of discredited notions, including that price mechanisms will allow endless production of energy (as well as everything else we need to support our ruinous consumption patterns). I disagree with Tomas. I believe peak fossil fuel occurred in 2019 (it was pushed back by fracking in the US but fracking fields last for only seven years and they emit ruinous (to the climate) amounts of methane, a hugely potent greenhouse gas). Our demand for fossil fuels is growing exponentially with a doubling time of 37 years. Tomas knows what this means – that we will use as much fossil fuel in the next 37 years as has been used in all of human history. Fossil fuels make up 87% or our current energy supply and wind and solar don’t even meet our increased demand never mind base demand. Exponentially growing demand and declining supply mean we have a problem, as we do throughout our life-support systems. Every wind turbine we build requires a copper cable the thickness of your leg. And where does the copper come from – we’ve used up the richest supplies? Yes, we can mine lower grade deposits but it requires more energy. Do you see the circularity in all of this? We’re running out of energy.

So are there limits to growth or are there not? Scientists will tell you there are and we’re perilously close to tipping points that will destroy our civilization. Economists, on the other hand, tell us we have nothing to fear – increasing GDP will make us all happy and it can go on for centuries.

I mentioned William E. Rees – see the abstract to his most recent paper here – https://www.sciencedirect.com/science/article/abs/pii/S0921800919310699 - and here’s a youtube – https://www.youtube.com/watch?v=WDWhjSUu8UY. Rees introduced the concept of ecological footprint. As an American, yours will be about 80% more than is sustainable. Can you conceive of telling a country that imagines wearing a bit of fabric over their noses is an affront to their freedom that they need to consume 80% less.

There is so much to do, to re-invent, to re-build. You can imagine my fear at encountering intelligent young men who see none of this and imagine all that’s needed is a score card that measures the wrong things.

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Thank you again for your thoughts, DFWCom.

I take to heart your comments on humility and the importance of inequality in the context of wealth.

I agree with your take on the usefulness of GDP. In most cases, it's overused. I

am trying to use it in a narrow meaning here, specifically the economic one of country-level wealth. I still think it achieves the goal I intended, but if I understand correctly what you're saying is that the goal I intended is not the most important, or can't be considered in a vacuum without considering inequality.

The fact that I consider wealth shouldn't make you think I consider only wealth, or even that I consider it the most important thing. I do consider it an important thing, because wealth is power, and power determines what happens in the world. If we want to steer the world in the right direction, we need to understand how wealth works.

I will consume the links you share, thank you. I have an article draft on climate change, but I haven't shared it yet because it still needs work. The links you shared will help me do that.

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Hi Tomas, it's been a busy day and I haven't been at my computer. It's tedious to send people links and expect them to have time to look at them. But still, I recommend this - https://www.patreon.com/posts/56375631. Simon Michaux is a geologist, I follow Steve Keen on Patreon, and I was much impressed by Tim Jackson. You will see where I stole many of my ideas. Keen is interesting for you, as a data guy. He's built a dynamic model of economics. Dynamic modelling naturally takes you to complex systems. Is it an area you've looked into?

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2h is too much indeed...

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You failed to include income disparity as measured by the Gini coefficient which is very high in the United States which means there are very few extremely wealthy people in that country and a growing number of impoverished people that needs to be considered when looking at GDP per capita.

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It’s an interesting albeit orthogonal piece of data I think. No?

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Interesante artículo. ¿Qué es lo que crees que cumplen los países que siguen a EEUU? Claramente no es la religión. En el gráfico de los países anglos se ve claramente a Irlanda, católico, por debajo de los demás hasta su cambio de políticas fiscales. ¿Tal vez la mentalidad protestante? Tampoco parecen ser las medidas económicas liberales. Los países escandinavos tienen un estado del bienestar muy potente.

Me gustaría ver cual es la gráfica relativa a los países escandinavos. La mayoría de ellos han invertido mucho en estado del bienestar y, además, tenemos para todos los gustos. Desde países muy ricos en recursos como Noruega, a otros no tanto como Finlandia pero que han despuntado también económicamente.

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Mis hipotesis: creo que es una mezcla de

- naturaleza (tienen la mejor del mundo

https://unchartedterritories.tomaspueyo.com/p/world-chessboard )

- instituciones (poca corrupcion, la ley funciona, etc.)

- tamano. Cuanto mas grande mas facil es imponerse y mayores efectos de red

https://unchartedterritories.tomaspueyo.com/p/should-everybody-learn-english

- apertura de mercados y poca intromision gubernamental en la economia

- cultura. Son muy productivos en mi experiencia personal. Tienen una cultura de trabajo fuerte y eficiente.

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Very interesting, but I have two problems with your conclusions. First, per capita GDP comparisons lack some weighting due to the monetary policies adopted by the countries. Take, for example, China, which undervalues its currency to increase exports.

Second when you conclude that taxes are the key to the success of some countries, I find that the list of countries you mentioned corresponds to those that stimulate the economy by laundering money derived from wealth produced in other countries, even within the European Union.

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Thanks Paulo!

On the 1st point I’m not sure I understand it. This is all in USD. If you mean that their currency manipulation increases GDP I’m not so sure, and even if it was the case, it wouldn’t be much. Countries that devalue their currency don’t magically become rich. It is a source of exports, and hence forex. But internal consumption and productivity is depressed because their currency buys less.

On the 2nd point, some countries do launder money. Others don’t. What I think you mean is that they live off of extracting wealth from rich countries. I agree with that. That’s why I called that section Tax Leeches

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In the first point, for example, if you produce half a kilo of bread in China, the value could be one Yuan and it is sold in China, contributing to GDP as a single Yuan. The same pound of bread produced in the United States can be sold for $2, contributing to the $2 GDP. So, in fact, the pound of bread is economically the same, but it is financially "20" less valuable than the other.

On the second point, You can take the example of Google in Ireland, which contributes to Ireland's GDP, but the revenue and profit are coming from all EU countries because of the free market.

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Ah, you meant PPP then, purchasing power parity. Yes, I answer that in another comment: PPP is useful when the main goal is to compare individual wealth and inequality, but that's not what I'm trying to do here. Here, I try to compare economic potential of different economies. The right way to look at it for that purpose is real GDP / capita.

On the 2nd point yes, I agree with your point. This is not laundering, it's tax avoidance, but that's why I call these countries tax leeches

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Thanks for that comment. So much of economics is in the detail of how these numbers are calculated.

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