The Unassuming Economist

From HumanProgress by Marian L. Tupy:

“Earlier this year, the Groningen Growth and Development Centre released a new edition of its Maddison Project Database, which provides information on global growth and income levels over the long run. The 2018 version of the data, first compiled by the late University of Groningen economics professor Angus Maddison, covers 169 countries up to the year 2016. Some information, dealing with parts of Europe and the Middle East, goes back to the time of Christ (or, for the secularly inclined, Rome’s first emperor, Octavian). It provides a stunning window on humanity’s struggle to generate and sustain rapid economic growth, until recent centuries ushered in the current Age of Abundance.”

“Angus Maddison, the British quantitative macroeconomic historian who died in 2010, spent his adult life estimating gross domestic product (GDP) figures for a growing range of countries over a lengthening period of time. In 1995, he published GDP estimates for 56 countries going back to 1820. In 2001, he extended his estimates to the beginning of the Christian Era. To some, Maddison’s numbers are “no more than educated guesses.” To others, they are “fictions, as real as the relics peddled around Europe in the Middle Ages.” But, Maddison’s research served an important purpose. “In disputing his figures,” The Economist predicted, future “scholars would be inspired to provide their own.” And so it proved to be.”

“The Maddison Project started in March 2010, when a group of Maddison’s colleagues decided to continue the Briton’s work on measuring economic performance for different regions and time periods. The latest edition of the GDP data was five years in the making and while the numbers have changed, the economic growth trend lines have stayed the same. As in previous editions of the data, human economic history resembles a hockey stick, with a long straight shaft and an upward-facing blade. For thousands of years, economic growth was negligible (resembling that long straight shaft). At the end of the 18th century, however, economic growth and, consequently, the standard of living, started to accelerate in Great Britain and then in the rest of the world (resembling that upward-facing blade).”

“That the early data should be most readily available for the constituent parts of the Roman Empire and Mesopotamia is unsurprising, since documentary and archeological evidence from those two regions is plentiful. According to the researchers at GGDC, real or inflation adjusted income per person around the time of Octavian (63 BC – AD 14) varied from $1,546 in Italy to $973 in Spain. That amounts to between $4.2 and $2.7 per person per day. It is a testament to the unevenness of economic development that, over two millennia later, some countries are still stuck at those (and even lower) levels. In 2016, GDP per person in Burundi, Central African Republic, Democratic Republic of Congo, Liberia, Malawi and Niger was $692, $619, $836, $764, $950 and $906 respectively.”

“Those African countries are outliers, of course. In most of the world, GDP per capita has risen dramatically, especially over the last two centuries. To get a sense of how recent and unprecedented the Age of Abundance is, consider France. In AD 1, GDP per person in the Roman province of Gaul was $1,050 – and that’s where it remained for the next 13 (yes, thirteen) centuries. During the first half of the 14th century, however, French incomes rose by some 50 percent, reaching a high of $1,553 in 1355. Why?”

“The end of the Medieval Warm Period in the late 13th century led to cooler weather and higher rainfall. Harvests shrunk and famines proliferated (e.g., 1304, 1305, 1310, 1315–1317, 1330–34 and 1349–51). To make matters much worse, the Black Plague (1347-1351) wiped out between 75 and 80 percent of those French who survived the climate change. Curiously, the two catastrophes had a salutary effect on both the economic and institutional developments in Western Europe. Abundance of land and agricultural tools seemed to have increased productivity of the surviving peasants, while labor shortages encouraged the lower classes to demand better treatment from their feudal overlords. As a consequence, serfdom gradually disappeared from the region, although it continued to persist in Eastern Europe, where the Black Plague was, due to lower population density, much less deadly.”

“As the population of Western Europe recovered, incomes waxed and waned, neither falling to their pre-plague levels, nor rising above their mid-14th century maximum. Thus, as late as 1831, the average GDP per person in France was only $1,534. Put differently, in the 18 centuries that separated the reigns of the first Roman Emperor and the last French king (Louis Phillipe), incomes rose by a paltry 50 percent. The Industrial Revolution, a British import, changed French fortunes considerably. Between 1831 and 1881, incomes rose by 100 percent ($3,067). As such, France made twice as much economic progress in 50 years as it did in the previous 1,800 years. In 2016, French GDP per capita stood at $38,758, meaning that a modern Frenchman is roughly-speaking 24 times better off (in real terms) than his ancestor 200 years ago. Remarkable.”

“France, of course, was not alone. Similar stories unfolded in other parts of the West.  A year before the Declaration of Independence, American GDP per person stood at $1,883. By the time Barack Obama left office, U.S. GDP per person stood at $53,015 – a 27 fold increase. Today, abundance is no longer restricted to the West. As previously under-developed countries embraced industrialization and trade, they prospered. In 1978, when China started to reform its failing communist economy, its GDP per person stood at $1,583 (French levels in the early 1830s). By 2016, it rose to $12,320 (the French level in 1964). To put that progress in perspective, China grew as much in 38 years, as France did in 130 years. That, too, is noteworthy, for it demonstrates that, given correct policies, countries don’t have to reinvent the wheel. They can adopt ideas and technologies that took advanced countries millennia to develop and leapfrog from extreme poverty into the Age of Abundance within a couple of generations.”

From the US Congressional Budget Office (CBO):

In 2014, household income was unevenly distributed: Households at the top of the income distribution received significantly more income than households at the bottom of the distribution. According to the Congressional Budget Office’s estimates:

• Average income among households in the lowest quintile (or fifth) of the income distribution was about $19,000.

• Average income among households in the highest quintile was about $281,000.

Furthermore, within the highest quintile, income was highly skewed toward the very top of the distribution: Average income among households in the bottom half of the highest quintile (the 81st to 90th percentiles) was about $151,000; average income among the 1.2 million households in the top 1 percent of the distribution was about $1.8 million.

Those amounts include social insurance benefits (such as benefits from Social Security and Medicare) but exclude the effects of governmental policies that directly affect the distribution of household income either through means-tested transfer programs or through the federal tax system.

Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments that are designed to provide assistance to individuals and families with low income and few assets. They include benefits from government assistance programs such as Medicaid and the Children’s Health Insurance Program (CHIP), the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp program), and Supplemental Security Income (SSI). Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes. Means-tested transfers and federal taxes cause household incomes to be more evenly distributed. In 2014, those transfers and taxes:

• Increased income among households in the lowest quintile by $12,000 (or more than 60 percent), on average, to $31,000.

• Decreased income among households in the highest quintile by $74,000 (or more than 25 percent), on average, to $207,000.

CBO has analyzed the distribution of household income and federal taxes on a recurring basis for more than 30 years. For this report, the agency focused on the distribution of household income in 2014 because that is the most recent year for which relevant data were available when the analysis began. In addition, CBO assessed trends in household income, means-tested transfers, federal taxes, and income inequality over a 36-year period, beginning in 1979 and ending in 2014.

Read the full report here.

HT: Carpe Diem. From the article “This Chart Shows the Slow Death of the NYC Yellow Taxi” by Nick Lucchesi:

“A new chart released this week shows that the New York City taxi cab is not only an endangered species but that its days are numbered. Today, there are 65 percent more ride-hailing trips than taxi trips in New York City (see chart above).

Genius employee and data-visual enthusiast Todd Schneider pulled from the reams of data released by the New York City Taxi & Limousine Commission each month that shows fares by car type — taxi or ride-hailing service. His analysis shows the tide has turned: At the end of 2017, all monthly ride-hailing pickups (Uber, Lyft, Juno, Via, Gett) numbered 15 million, while taxi pickups numbered less than 10 million. As use of yellow taxis (which primarily serve Manhattan) and green taxis (which primarily serve the other four boroughs) has been on the decline, there’s been a sharp increase in the use of ride-hailing apps.

The chart above shows the data behind one of the most dramatic changes in America’s largest city over the past five years. The way people in New York (tourists and locals alike) get around has flipped, and it doesn’t show any sign of stopping, according to Schneider’s analysis.”

From Brad DeLong:

Continue here.