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Timmy elsewhere

At the ASI.

One of the great moments in economic punditry

2 thoughts on “Timmy elsewhere”

  1. Pendantry follows: I’m not sure your claim that Smith must have believed in long-term growth because he was aware of “Smithian growth” follows. Imagine a political economist by name of Pseudo-Smith. Pseudo-Smith has noticed that specialisation increases productivity (although he thinks it’s a shame that it’s also so stultifying) and he correctly identifies that a trend to increased specialisation in the manufactures will make the country richer (although he doesn’t have the modern concept of quantifiable GDP or GDP per capita). Pseudo-Smith also, incorrectly, believes that the factors of production are fixed. So although Pseudo-Smith knows that the division of labour will lead to economic “growth” (not in the quantifiable sense, but certainly that the country gets richer) he also believes that this re-organisation of finite resources is tending towards an optimum, at which point growth ceases. We will be better off than ever before, but no richer shall we become.

    Perhaps a more sophisticated version of Pseudo-Smith might have noticed the general increase in the population, but believe that other factors increase in proportion (productive capital at least, goodness knows what Pseudo-Smith would make of land), so that everything balances out per capita and again specialisation leads only to a higher level of national wealth, not to a long-run exponential trend.

    I’m not claiming that Smith = Pseudo-Smith, just that belief in Smithian growth can be consistent with disbelief in long-run growth. Even though much of the “technological growth” of the Solow residual is actually attributed to organisational improvement rather than shiny gadgets, and specialisation plays a big part, there’s a lot of intellectual leaps required to get from Smithian growth to the Solow growth model.

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