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Sunday, January 23, 2011


This is a response to an article on the Adam Smith Instit saying we cannot match them.

  The article is primarily a restatement of the theory that theory that standards of living in different countries must converge. History shows the opposite. Even wikipedia acknowledges "Since the 1950s, the opposite empirical result has been observed on average" and anybody who knows history over the last 2 centuries can see that while wealthy countries today can be over 100 times better off than the poorest this was not the case then. This is supported in China's case by the fact that their growth is an average, with the fastest Guandong, growing at nearly 20%which is also already wealthiest growing at nearly 20% and the more backward inland provinces stagnant.

   The evidence then is that we could be growing faster than China if we were to be making as much effort as them.

     The error is shown particularly in the last paragraph which details our alleged problem
try to develop a better way of tilling your field, and that will give you a productivity boost. But it’s an uncertain process and much slower than just adding tractors. This is essentially where we are in the West – we’ve maxed out the amount of capital we can add, so growth now comes from innovation in business and technology.
     In fact precisely that option is open to us. Genetic modification of plants is entirely practical and is increasing yields - in China but not in Europe where such new technology is banned. The same applies to electricity production where China is building coal & nuclear plants while we subsidise windmills, at at least 4 times the cost. That, alone, is why China now has more electrical capacity than the entire EU. However we do still have the technological edge in trained engineers and could start producing inexpensive nuclear power any time government would let us far more easily than China can. Despite the fact that China is still a heavily regulated bureaucracy they are out pacing us not because that is the law of nature but because they are adopting modern technology and we are adopting Luddism.

     Pretending that our problems are not self inflicted is the first step to solving them. I regret that the ASI seems intent on not even taking that first step.

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Yes indeed, it seems to escape most people that if China can do it, we can also do it, yet like many many other things this is simply not discussed.


It is not in the interest of any politicians in the current system to have a robust, self-reliant populace.
The error in the ASI paper is to think that the pace of innovation is more dependant on the rate of inventions / discoveries than to the rate of adoption of these invention / innovations. Also, fastest is the arte of adoption, greater is the pressure to develop new innovations.

What the statist policies do is to slow down or block the pace of adoption of innovations and then reduce the demand of new innovations.
Good point. It is obviously impossible, except following a period when previous restrainys come off, for afoption of innovation to proceed faster than innovation itself so there is not even the possibility of government not being a brake on this progress.

I have previously pointed out how government can use X-Prizes to stilulate invention itself. This is an extension of government protecting patent rights (a subject on which libertarians are divided, some seeing no such right & others, like me, seeing it as the most important property right). I may right further on this.
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