Cafe Hayek - Latest Comments in Lucas on Redistribution

Re: Lucas on Redistribution

john petz — Sun, 18 Dec 2005 14:58:48 -0000

Hey Spencer,

so what explains Hong Kong, which is an incredibly wealthy society that grew rich without a healthy vibrant public sector? Incentives matter most in development and I wouldnt be so quick to pour most of the attribution of East Asia's recent growth on the public sector. True, a quality public sector can be benficial but unfortunately the incentives to provide a functional and EFFICIENT public sector sector are not nearly as STRONG as the incentives to provide an efficient and productive private sector. History and theory provide ample evidence to illustrate that point. I am no expert on the history of East Asia before liberalization however, if I were to guess I am sure that most of the inequality in the country was due to government and the cronyism which is often an outgrowth of government within impoverished nations.

Re: Lucas on Redistribution

spencer — Sat, 17 Dec 2005 05:07:32 -0000

Just take a look at the areas Lucas was talking about -- East Asia. One of the biggest factors behind the growth of that region was their public education system

that interestingly in Korea and Taiwan was copied after the Japanese system becuae they had been colonies of Japan.

Moreover, both countries had had a massive

redistribution of land from the hands of the few landlords to the hands of many right after WW II that created the incentives or ownership the rural ag workers needed to generate a surplus that was used to finance the early development of industry in both countries.

It is fantastic how often the facts never seem to fit the theory.

Re: Lucas on Redistribution

spencer — Sat, 17 Dec 2005 04:50:01 -0000

Much of the improvement in the standard of living since the industrial revolution is due to improvements in education and public health. But for the most parts these improvements were a shift of resources from the wealthy to the poor throught the public sector.

Consequently I can not agree with the statement "But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor."

We have gotten where we are by a combination of good government and good capitalism. We still need both.

Re: Lucas on Redistribution

John Pertz — Thu, 15 Dec 2005 13:42:00 -0000

Wild Pegasus, care to elaborate a bit more? You have peaked my interest. What exactly are you saying?

Re: Lucas on Redistribution

Wild Pegasus — Thu, 15 Dec 2005 12:45:33 -0000

But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor.

Actually, much of the early history of the Industrial Revolution is the exact opposite: the redistribution of resources from the poor to the rich.

No one can dispute the positive material outcome of the IR, but if it had been done without the massive theft at the beginning, it would have turned out that much better.

Re: Lucas on Redistribution

save_the_rustbelt — Thu, 15 Dec 2005 07:06:57 -0000

I agree.

So let us also stop redistribution to Halliburton, the oil companies, Wall Street, K Street, big pharma, etc.

By the way, Ken Lay says he is innocent :-)

Oh sorry, I'm certain you did not want to hear that.

Re: Lucas on Redistribution

Arun Khanna — Wed, 14 Dec 2005 16:35:33 -0000

"In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother."

We should value all children equally in a moral sense but not in a material sense. The child born in an American family should not be valued equally to a child born in an Indian family since her endowments reflect her families and societies past actions. If this was not true, what is the incentive to create wealth of a nation?

Ending on a personal note, I was born in a middle class family in India.

Re: Lucas on Redistribution

Slocum — Wed, 14 Dec 2005 16:06:03 -0000

"But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor."

I think that's both profoundly right and profoundly wrong, depending on what one consider 'resources'. The vast increase in well-being that has occurred since the dawn of agriculture has been largely caused by redistribution -- not of physical resources, but intellectual ones. The poor of the world will, indeed, be made wealthier by the redistribution of the ideas of the rich (and the rich, too, will be better off for that).

Re: Lucas on Redistribution

eric — Wed, 14 Dec 2005 15:51:19 -0000

he also has a neat riff on how economists spend too much time on business cycles, and not enough on growth.

Re: Lucas on Redistribution

John Pertz — Wed, 14 Dec 2005 10:52:09 -0000

No single message necesitates its broadcast throughout the world more than this latest insight from Robert Lucas. Making sure that everyone, who has some sort of interest in the developing world, understands this message is vital for fighting off the anti-growth zealots who abound throughout the rich world.

Re: Lucas on Redistribution

Christopher Meisenzahl — Wed, 14 Dec 2005 08:47:24 -0000

So very true, and it's depressing to know that it will be attempted again and again. ;-(

Re: Lucas on Redistribution

Aaron Krowne — Wed, 14 Dec 2005 08:09:06 -0000

Even Galbraith admitted this.

The problem is that naive intuition hasn't changed...