Coronel Mostaza

Católico. Uruguay + hispanidad. Riverista. A despertarse que nos comen los piojos…

[Javier Hazan @javierHazan]

Jajaja, vamo el FMI carajo!! La nueva izquierda!!

[Juan Manuel @juan_21993]

Está difícil el ascenso social en el mundo desarrollado. A pesar de la narrativa buenista pro Europea, Estados Unidos es el país que más se destaca.

[Juan Manuel @juan_21993]

Es URGENTE tener una Estrategia Nacional de Desarrollo. La misma deberá ser: inclusiva, ambientalmente sostenible, y favorecer los encadenamientos productivos en sectores previamente seleccionados que permitan diversificar la matriz productiva primario exportadora y reducir la heterogeneidad estructural de nuestra economía periférica del Sur Global.

[Kristalina Georgieva @KGeorgieva]

As I leave Uruguay, I take with me wonderful memories and this very special moment at Escuela 108. Sofia, a young student, surprised me with a little Bulgarian flag and a heartfelt handwritten note. A beautiful gesture I will carry with me. Gracias por la calidez, Uruguay! 🇺🇾

[Coronel Mostaza @mostazauy]

Tremendamente compartible análisis.

[Jesús Fernández-Villaverde @JesusFerna7026]

A few weeks ago, Daron Acemoglu (@DAcemogluMIT), David Autor (@davidautor), Keelan Beirne, and Andrew Scott circulated a provocative paper, “Baby Busts and Growth Booms: Demographic Change and the Macroeconomy,” which reports that lower birth rates are associated with higher growth in GDP per working-age adult across countries and with higher wage growth across US commuting zones, with no negative impact on aggregate GDP or earnings.

Since I have been working on fertility and growth for some time, I read the paper carefully. I did not find the evidence compelling.

My reason fits in two words: terra incognita. The fertility collapse now underway has no historical precedent. The seven decades of data the paper analyzes, however carefully, contain nothing remotely comparable to the ultra-low fertility rates we observe today.

To their credit, the authors know this. The conclusion states: “Our findings describe the past; whether they provide a reliable guide to the economic consequences of coming demographic transitions is not yet established. … Changes this rapid are outside the support of the historical evidence, and could theoretically yield different adjustment dynamics from those we document.” I agree word by word. I simply would have given this caveat more prominence because it is the heart of the policy question.

Let me explain why by discussing the evidence across countries and leaving the evidence from US commuting zones for another day. I want to keep this post short.

In the introduction, the paper presents as its key finding a negative and quantitatively large relationship between 1950 birth rates and economic growth from 1970 to 2020.

But the birth and fertility rates of 1950 provide little information about the consequences of the ultra-low birth and fertility rates we are experiencing today. Observations from a very different range of values are unlikely to capture the nonlinear cumulative effects of ultra-low birth and fertility rates.

I include a table listing the bottom ten countries in 1950, 1980, and 2025, according to the UN World Population Prospects, consistent with the authors’ sample exclusions for microstates, territories, and tax havens. In 1950, Austria had the lowest birth rate, at 15.5 births per 1,000 people, with a total fertility rate (TFR) of 2.09, roughly the replacement rate. Most of the negative effects I have emphasized in my writings stem from rapid population decline, as will be the case for South Korea, with a TFR of 0.75. If you ask me whether I expect problems for a country with a TFR of 2.09, my answer is no: no shrinking cities, no empty schools, no social security dilemmas. In fact, I believe that TFRs between 2 and 2.4, such as those in Western Europe in the early 1950s, are probably the best-case scenario in terms of economic growth: you have either a stable population or a gentle increase, and you do not suffer the pressures of TFRs of 3.0 or higher. Thus, I do not find extrapolating from Austria’s growth experience from 1970 to 2020 (which is effectively what the regression does) very informative about South Korea’s growth experience from 2045 to 2095: the former was close to an ideal demographic situation, the latter not so much.

Moreover, the range of TFRs (which say more than birth rates about the future behavior of the population) at the bottom of the cross-section is not wide enough to learn much about the nonlinearities that appear below 2.1. In summary, I cannot see the external validity of this regression.

The authors, with outstanding craftsmanship, address this problem as best they can by using later-vintage birth rate and growth data. If I read Appendix Table A1 (Panel A, countries) correctly, they run the same specification with 30-year growth windows for each starting decade. The coefficients on the t−20 birth rate (measured, as in the paper, per 100 people) are: 1950 vintage (growth 1970–2000): −0.13 (s.e. 0.10), not significant; 1960 (1980–2010): −0.26 (0.09); 1970 (1990–2020): −0.32 (0.06); and 1980 (growth 2000–2020, only a 20-year horizon): −0.26 (0.05). They also report robustness to using log birth rates, but taking logs of the regressor does nothing about the nonlinearities that matter, namely those well below replacement.

The problem is that even in 1980, birth and fertility rates were not as low as they are today. In the table, you can see that Germany, the country with the lowest birth rate at the time, had a TFR of 1.56 (and no country was below Denmark’s 1.54). But keep two facts in mind.

First, less importantly, Germany, like the other countries in the 1980 panel, has experienced large waves of immigration over the past few decades. By comparison, countries with high fertility in 1980, such as Mexico, have had large emigration flows. Therefore, the reported coefficient averages effects that include each country’s endogenous migration response, and the low-birth-rate observations come precisely from countries with positive net migration. The paper argues that lagged birth rates are orthogonal to subsequent flows. But orthogonality is not the same as informativeness about countries that will have little migration to speak of.

Second, more importantly, let me return to my central point about nonlinearities. A TFR of 1.56 means each generation is 76% the size of the last: the population declines about 0.9% per year, so after 100 years you retain roughly 40% of the initial population. A TFR of 0.75 means each generation is 37% of the last: about a 3.35% decline per year, leaving roughly 3.5% after a century. Hence, we are dealing with a factor of about 11. A TFR of 1.56 and a TFR of 0.75 both count as “low fertility” in a regression, but they are qualitatively different regimes. The 1980 variation the paper identifies lives in the gentle-decline world; nothing in their data resembles the second.

My favorite part of the paper is the evidence linking lower birth rates to more labor-saving patents, larger shares of high-tech exports, and faster TFP growth, with a WWII casualty exercise presented as an out-of-sample test of the labor-scarcity channel. I take this evidence seriously. But the mechanism does not extrapolate any better than the regression. In any semi-endogenous growth model in the tradition of Chad Jones, fewer people eventually mean fewer ideas. With a TFR of 0.75, the pool of potential innovators shrinks by almost two-thirds in each generation, and that is likely to overwhelm any gain from developing labor-saving technology. In comparison, the war shock was bad for one cohort, but then it was over.

I have some further minor quibbles about identification in the cross-section, but those are better left to a seminar discussion than to X.

I want to close by acknowledging that the assessment of empirical exercises is ultimately subjective. I do not find the evidence from Austria in 1950 or from Germany in 1980 persuasive regarding what will happen to South Korea. Instead, I find the evidence I reported in Table 1 of “The Wealth of Working Nations,” with Gustavo Ventura (@King_ofSweden) and Wen Yao, relating GDP growth in G7 countries plus Spain to demographic forces, to speak much more directly to the issue at hand and to imply much more negative outcomes, yes, including for Germany:

https://t.co/fclL5aozqL

Other readers might find the evidence in “Baby Busts and Growth Booms” more compelling, or at least intriguing. But we should not fool ourselves: we are sailing into demographic terra incognita, and in these waters, the pretense of knowledge is the most dangerous temptation. I am keenly aware of the limits of what I can determine.

[Juan Manuel @juan_21993]

AAAA ES DEMASIADA ESTRATEGIA NACIONAL DE DESARROLLO!!!

[BÚSQUEDA @BUSQUEDAonline]

La vicepresidenta Carolina Cosse estuvo dos veces este año en Nueva York para participar de eventos en Naciones Unidas. Los viajes no se difundieron en sus redes sociales ni en el sitio web del Parlamento, donde habitualmente se informan sus actividades.
https://t.co/ngxaiO6A4l

[Coronel Mostaza @mostazauy]

@PhDenLogica Más bien directivos y amigos con subcontratos….

[Jesús Fernández-Villaverde @JesusFerna7026]

Yesterday, I lectured on Alexander Hamilton’s economic program for the U.S. I always look forward to this lecture, both for the content and because Hamilton is my favorite founding father. I was never a Jefferson man.

Hamilton understood that “libertarianism in one country” is not feasible. Assume, just for this paragraph, that libertarian economic policy is right: that a minimal state is the best recipe for growth. A country that adopts it will grow much richer than its neighbors. But then its neighbors will want to invade it to seize its wealth or, at least, use the threat of violence to turn it into a tributary state and extract rents. And a libertarian state cannot defend itself (no, Switzerland was never a libertarian state; it always spent heavily on defense, for example in the service it required from its citizens). The more you believe in libertarian economic policy, the more you should fear your country adopting it (unless, by some miracle, the whole world adopts it at once).

Hamilton instead foresaw that the U.S. would live in a world of competing empires, where constant war requires professional armies, not militias. The Revolutionary War was not won by militias, however much the myth of the well-regulated militia survives among some Americans, but by the professional armed forces of the U.S., France, and Spain. No “la Royale” under the Comte de Grasse, no victory at Yorktown.

Hamilton therefore anticipated that the U.S. would need a powerful fiscal-military state and a prosperous economy to ensure the survival of freedom and the republic. Economic and military strength go hand in hand: like the god Janus, they are two faces of the same phenomenon.

For some decades, the U.S. fiscal-military state could stay small: two oceans and luck with neighbors (a quasi-balance with the British Empire to the north after the War of 1812, where neither side had much incentive to deviate, and a quasi-failed state to the south). But by the early twentieth century, reality kicked in: Germany, Japan, the Soviet Union, China. This is an important and often underappreciated mechanism behind the creation of the Federal Reserve System in 1913 and its survival thereafter, as shown by the way it floated the Liberty Loans of 1917 (no, the U.S. could not have fought in France on tax revenue alone; no great power ever has).

This was not the first case. Central banks were not born from monetary theory but from war. The Bank of England was created in 1694 to finance William III’s war against France. Hamilton’s First Bank of the United States was established to consolidate Revolutionary War debt. The logic is simple: the state that borrows cheaply and at scale outlasts its rivals on the battlefield, and a credible central bank is what makes such borrowing possible.

This is why central banks survive even in republics deeply suspicious of concentrated financial power. Presidents could campaign as Jeffersonians as much as they wanted; the first serious war turned them into Hamiltonians. Hamilton understood how the world works; Jefferson did not. And the causality also runs in the other direction: by lowering the cost of mobilizing resources, central banks made war on a modern scale possible.

To paraphrase Charles Tilly: war made the central bank, and the central bank made war.

[Mel Gibson @_melgibson1_]

Heaven has walls, a gate, and strict entry.

Hell has open borders.

Think about it…

[Sachin Jose @Sachinettiyil]

A crucifix that remained standing following the wildfire in Gironde, France.

Image: Patrick Bernard

[Milton Friedman Quotes @MiltonFriedmanW]

“You must distinguish sharply between being pro-free enterprise, which I am, and being pro-business, which I am not. Those are two different things.”

— Milton Friedman

[Caminante Wanderer @CaminaWanderer]

Toda la tradición filosófica occidental, desde Aristóteles, define al hombre como animal racional. No porque no sintamos, sino porque la razón es la diferencia específica que nos distingue de los demás animales, que también sienten y emocionan. Reducir esa definición a un eslogan de autoayuda con base en "estudios de neuropsicología" no es un descubrimiento: es ignorar 2.500 años de reflexión sobre qué somos. Y hay algo más gracioso todavía: para argumentar que no somos racionales, el autor usa... la razón. Se refuta a sí mismo en la misma frase.

[Dr. Salle Lorier @sallelorier]

GRAN TRIUNFO!!Paramos el rescate de 122 millones al CASMU.
Una institución parasitada por la MAFIA MEDICA EMPRESARIAL.
Esta acusación nuestra, fue tangencialmente ratificada por el propio ministro @OddoneGabriel en la comisión de hacienda y salud pública integrada con diputados.
Estuvimos presentes Nicolle y yo y de mi parte expresé que el Casmu era parcialmente, una aparente asociación criminal.

[Gerardo Tapie @Gera__UY]

Algunas puntualizaciones sobre el cutcsa gate:
1) En la medida que las empresas no modernicen su mediocre sistema de pagos, y acepten tarjetas como en cualquier lugar normal, te tienen que aceptar el dinero.
2) En tanto se acepte dinero como forma de pago, tienen que tener cambio.
3) Son 500, no 2000. El boleto en efectivo sale casi 70 mangos. No jodamos. No es Calculo 2 de la FING.
4) Como vas a bajar a un gurí de 14 años a las 7 de la mañana porque no tenés o no querés darle cambio. Es un servicio público que están obligados a darte en la medida que cumplas con la contraprestación económica. No es opcional y no es la voluntad arbitraria del chofer de turno que te toque.
5) Por algo cada año se venden menos boletos. Pésimo servicio, caro, arbitrario, y encima te tratan mal. Sigan así que todos van a andar en un BYD.

[Juan Manuel @juan_21993]

¿Cómo imaginás tu futuro?”: les hicieron las mismas preguntas a chicos de barrios privados y de villas y sus respuestas revelaron algo invisible.

Podes ganar. Podes perder. Pero siempre hay que poder imaginar un futuro. Por eso hay que seguir bajando el riesgo país y la tasa de descuento. Por los bonos, pero también por los pibes y las pibas (como Lucrecia).
https://t.co/QpdaGyGXrN

[Juan Manuel @juan_21993]

No existe tal cosa como la "gobernanza de las empresas públicas". Se privatizan y a otra cosa. Y hay que apurarse antes de que no valgan nada.

[Gerardo Tapie @Gera__UY]

Cuál tiene sentido densificar y desarrollar?
A) Barrio consolidado pegado al centro y varios nodos de transporte, sin valor patrimonial.

B) Zona periférica de la ciudad, de importancia ambiental y sin servicios construidos (lo cual luego toda la población subsidiaria).

[lnceLPljaCorta @13cm95kg]

"China no tiene ideas imperialistas con el pais"

Desde el espacio brilla mas la flota ilegal de pesqueros chinos que cualquier lugar en la patagonia, Peru y Bolivia.

[Coronel Mostaza @mostazauy]

Papelon. Entregados a la peor versión del amiguismo empresaurial. Y haciendo gárgaras de cosas verdes y ecólogia y coso.

[Roberto LópezBelloso @lopezbelloso]

Primero se los excluye de la lista de protección y después se crea el grupo de trabajo para ver cómo protegerlos. Sin palabras.

https://t.co/xnvEZ0Riqo