So the LSE is employing idiots now, is it? @jasonhickel edition

To eradicate poverty global GDP would have to increase to 175 times its present size if we go with $5/day. In other words, if we want to eradicate poverty with our current model of economic development, we need to extract, produce, and consume 175 times more commodities than we presently do. This is horrifying to contemplate.

Yes, a horrifying contemplation. The idea that someone employed by the London School of Economics thinks that GDP measures commodity consumption.

Might I suggest just a little wander down the corridor to the people who know these things? Like GDP is a measure of value added, not physical commodities extracted, produced or consumed?

Christ, they managed to get it into my thick head as a student, they should be able to crowbar it into the mind of one of the staff.

13 thoughts on “So the LSE is employing idiots now, is it? @jasonhickel edition”

  1. He’s an anthropologist. Academic anthropology has been infested by … what does one call it? PC? New Left? Occupy Progressive types? We need a catchy term that captures it.

    But anyhow, they’ve been there for ages. I’ve recently read Chagnon’s book about his appalling treatment – goes back almost 20 years.

  2. I didn’t go to the LSE, so my understanding of the math may be off kilter.
    Assuming 1 billion (Collier’s figure) on $1 a day or less, and another billion on less than $5 a day, lifting 2 billion people to an income of $5 – $10 cannot require an increase of 17,500% of GDP. Not even the RMT union bases its wage bargaining on the wages of people who look at the arse end of an ox.

  3. BiF

    You are correct. The main problem is that the idiot who wrote the original paper doesnt seem to understand the underlying mechanics of GDP or who we are analysing. GDP only counts market based transactions ignoring those that take place within the household (and effectively small clan based villages). The bottom billion have a disproportionate number of subsistence farmers who basically earn bugger all in the market economy. Growth has not really done much for them because they are still subsistence farmers.

    The main area where this has changed is China where the peasantry have left he fields and become factory workers, thus becoming part of the market economy. At some point the Indians will join the Chinese en masse – in about 10-20 years and we will find another giant reduction in the number of the poor. The anthropologist is a moron, but so is the guy he is quoting.

  4. Where to even begin?

    1) Take at face value the result that it will take 100 years to get most of the poor out of poverty. What the heck is wrong with that if it took developed countries 300-350 years to get to where they are now?

    2) This contiguous set of assertions

    “… their incomes increased at a rate of 1.29% each year.

    So how long will it take to eradicate poverty if we extrapolate this trend? 100 years.

    That’s what it will require to bring the world’s poorest above the standard poverty line of $1.25/day.”

    implies that right now “the poor” that the author is talking about are getting by on 35 cents per day. I know of no statistic that shows that.

    3) I wonder if the author has conflated some arithmetic in their spreadsheet. The $1.25/day target, worked backwards to the $0.35/day income of today, implies a mean income of $125/year today. Casual application of Benford’s Law makes me think there’s a math error.

    4) The quote “… that’s 90 million people … who will remain in poverty forever.” is presuming that the author’s growth rate calculations are nonsense, and that for this group the growth rate is 0.0%. Note that there is zero justification for this assertion.

    5) How can this quote: “A growing number of scholars are beginning to point out that $1.25/day – which is the official poverty line of the SDGs – is actually not adequate for people to survive on.” not be false? Clearly some people are surviving on this. In fact, this seems to be what most people, in most areas, in most times, survived on for most of human history. It isn’t pretty, but it’s a fact.

    6) What about this quote “if people are to … achieve normal human life expectancy,” What is “normal life expectancy” if life expectancy has not had a fixed central location for a couple of centuries? An even scarier thought for macroeconomists is that — the development freight train barreling our way that we should be worried about — is that rich countries got rich before they extended life expectancy, and poor countries are doing the opposite: how will they support their coming old cohorts?

    7) The whole miracle of growth is that, if you need to increase your income by 175 times, you don’t need to do it by raising your consumption of resources by 175 times. It is about the value of what you do with the resources, not the count of resources used.

    8) Tee-hee-hee: the actual (simplistic) theory of growth used by macroeconomists paints a far worse picture that this. (Rough) estimates show that if you’re going to double income by increasing your use of resources, you need to raise your use of resources by 2 to the 3rd power (or 8 times). No one objects to that third power as an approximation. This means to raise your income by 175 times, you need to increase your use of resources by 5.36 million times. This is absurd. But it’s absurd, not because the math is wrong, but because it’s a demonstration that use of additional resources (as asserted by the chicken littles) will never get us where we need to be, and didn’t get us where we are. The miracle of development is that we can (and have in some locations) improved the efficiency of our institutions enough to make that sort of resource abuse unnecessary.

    9) Lastly, there’s this gem “… the average income [somewhere] would have to be $1.3 million per year simply so that the poorest two-thirds of humanity could earn $5 per day.”

    First off, what exactly would be wrong with having an income of $1,300,000/year? I think that would be rather nice. Unless, of course, it’s an axiom of your belief system that higher incomes are inherently bad.

    Second, to get this number, the author is assuming that the mean incomes of “the rich” grow at the same pace as the mean incomes of “the poor”. But working backwards, this implies the mean incomes of the rich are currently about $90K/year. That’s true of many individuals, but when you’re working with aggregates (as the author is), it isn’t true (except in special cases like Luxembourg and Qatar). For GDP per capita, this figure is off by about a magnitude.

    Third, most of what we know about economic growth is consistent with the poor growing faster than the rich. So you probably can’t justify doing the math this way anyway.

  5. And one more thing …

    The Guardian piece cites the World Economic Review piece by David Woodward.

    “World Economic Review” sounds impressive, but this is a very new journal, that has zero presence on the radar screens of actual economists. According to Google Scholar, only 3 articles ever published in that journal have ever been cited (in other academic journals) at all.

    But, of course, Woodward isn’t an actual economist … unless someone who advises on issues related to the economy is an economist. Anyway, he has no Ph.D. in economics (or any field). He has no master’s level degree in economics (or any field). He did “[graduate] from Keble College, Oxford in philosophy, politics and economics”, a place with currently only 4 people in its economics department, only 1 of whom lists economics as their field. No knock on that department, but Oxford employs a couple of hundred economists, so this is not really where you go in Oxford if you want to specialize in economics.

  6. @David Tufte

    Oxford’s collegiate system does not limit students to studying with the fellows within the college, but instead means that Mr Woodward would have been taking classes from the breadth of the entire Oxford economics faculty. However, since he did PPE, the total number of classes that he would have taken in economics is limited. He would have received an excellent education – tutorials with just 2-3 students spent with tenured faculty, but insufficient to make up for a lack of depth that doing a masters and PhD would have provided.

    Also you are being a mite (and only a mite) unfair to the WER. This august journal is 684th on IDEAS/REPEC simple journal ranking. It is part of the heterodox economics family – as seen by the inclusion of the Ha-Joon Chang of Cambridge, so beloved of this blog, on their editorial board. 684th is pretty low…

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