Rudd and "National Competitiveness"

Prime Mininster Rudd's recent essay contains a number of references to global competitiveness.

.... Australia cannot meet the challenges of raising our global competitiveness if we do not lift productivity growth.

The Prime Minister needs to have a read 0f Paul Krugman's classic 1974 article in Foreign Affairs.

competitiveness is a meaningless word when applied to national economies. And the obsession with competitiveness is both wrong and dangerous.

Absolute levels of productivity, rather than levels of productivity relative to our trading partners, are what matters for living standards. The Prime Minister appears to limit his attention to productivity growth in tradeables, but there is no reason to ignore productivity growth in non-tradeables.

Davidson and Kates Make Page 2 of the Oz

My colleagues Professor Sinclair Davidson and Dr Steven Kates are mentioned on page 2 of today's The Australian.

Rudd fails economic history lesson, Christian Kerr, July 28, 2009 ....PRIME Minister Kevin Rudd has got his economic history in his latest exercise in essaying "exactly wrong". That's the view of RMIT University academic Sinclair Davidson, who says it doesn't augur well for our future......

Davidson wants to know how we can trust a bloke who has got the past wrong to lead us into the future.....

Davidson points to research by RMIT colleague Steven Kates which shows how unemployment in Australia after 1932 fell more swiftly than in the US and Britain. The essay shows how ignorant Kevin Rudd is of Australian economic history.....

All up, Davidson describes the background to Rudd's latest essay as extraordinary. "He's put us into debt to the tune of $300 billion having claimed to have learned lessons that he doesn't know."

Quote of the Day

Endangered Species for Sale? by David Zetland, posting at Aguanomics

The difference between abundant chickens and endangered tigers is property rights. Chickens are owned by individuals who protect them from others; tigers are owned by "us" and protected by nobody. If you want to save the tigers, sell them.

Can Governments Promote Long Run Growth?

Looking back to the 2009-10 Federal Budget, much was made of the "infrastructure measures that represent a critical investment in the drivers of Australia's long run economic growth".

A recent paper suggests, however, that promoting long-run sustained growth is much trickier than boosting short-run growth. The paper concludes that "Except for the decades around WWII, there is no evidence of country specific effects on long run growth rates…Growth rates are determined by international factors, and are insensitive to national policies, especially for small countries. This implies severe restrictions on the ability of most governments to increase national long run growth rates". (HT: Stumbling and Mumbling).

Price Elasticity of Marriage

A new paper concludes that “even small changes in the cost of marriage can have significant effects”, suggesting that marriage demand is quite price-elastic.

Financial Guru

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The State of Macroeconomics

These three articles in The Economist, on the state of macroeconomics, make for interesting reading. Brad de Long, Paul Krugman and Stumbling and Mumbling comment. Mark Thoma provided useful discussion on this topic back in April.