The preference of economists, not to mention other kinds of experts, to attribute China’s high savings rates to Confucian values is all the more strange when we remember that just fifty years ago East Asian countries tended to have very low savings rates, and moralizing economists then had no trouble blaming Asia’s seemingly intractable poverty and low savings on Confucian values, which for much of Chinese history had been criticized for encouraging laziness and spendthrift habits. Economists want eagerly to assign virtue or vice, but sometimes it is easier simply to stick with arithmetic.
I am unable to find any data on the Chinese national savings rate before 1980, and I am surprised by the claim that it was remarkably low. Does the author cite data to that effect (or any authors blaming that on Confucianism)?
[edit]Found household data for Japan going back to 1962, when it was solidly higher than European numbers.
Ummm… household data for Japan isn’t household data for China. But your surprise is your prior, unfortunately. I can’t say I know something particular here, as I know damn well I could waste my evening gathering real evidence, rendering any opinion I might give right now uselessly uninformed.
What I had wanted to emphasize from both the quote and the interview, though, was the degree to which we can be far more rational about economics simply by acknowledging the realities of basic accounting: surpluses somewhere must equal deficits elsewhere. Before this reality, huge quantities of implicitly normative “economics” dissolve.
Ummm… household data for Japan isn’t household data for China.
The quote said “East Asian” countries, hence Japan.
What I had wanted to emphasize from both the quote and the interview, though, was the degree to which we can be far more rational about economics simply by acknowledging the realities of basic accounting: surpluses somewhere must equal deficits elsewhere. Before this reality, huge quantities of implicitly normative “economics” dissolve.
It’s not at all obvious to me that the quote has anything to do with that. The quote seems to be arguing “if you use current data, you would think X->Y. But if you used past data, you would think X->~Y, so we should be reluctant to use causal reasoning like this.”
Because of an argument I came across earlier which failed spectacularly badly (which also had to do with China), I pattern-matched and said “wait, would we actually think X->~Y if we looked at past data?”. According to the paper Lumifer found, at least, the answer is “no, we would think X->Y.”
What I had wanted to emphasize from both the quote and the interview, though, was the degree to which we can be far more rational about economics simply by acknowledging the realities of basic accounting: surpluses somewhere must equal deficits elsewhere.
In general it’s not very rational to take a look at a complex field and simply posit that if they would follow some simple rules that you consider reasonable they would just do better.
I’m surprised by your surprise. It might be hindsight bias on my part, but not wanting to save money in a totalitarian Communist society makes perfect sense to me. Live for today, because tomorrow you might be locked up or the government might embark on some bone-headed 5-year economic plan and your money would be worthless.
I’m surprised by your surprise. It might be hindsight bias on my part, but not wanting to save money in a totalitarian Communist society makes perfect sense to me. Live for today, because tomorrow you might be locked up or the government might embark on some bone-headed 5-year economic plan and your money would be worthless.
When you look at national savings, 5-year plans suggest that the savings rate should be higher, because the government is forcing people to invest money that they otherwise might have consumed. [Edit] Also, a feature of econ textbooks in the US from ~1950 to ~1990 were dire predictions that the USSR would overtake the US because the national savings rate in the USSR was higher than the US, and the Solow growth model suggests that GDP growth is proportional to savings rate. (Turns out, socialist countries are better at saving at the national level but worse at using those savings to achieve real growth.)
The actual heuristic that generated my surprise had to do with personality rather than incentives, though: I didn’t think that even communism was enough to defeat the Chinese propensity to save, and it struck me as unlikely that the savings rate in China would be high from antiquity to 1900, drop for a few decades, and jump back to high.
When you look at national savings, 5-year plans suggest that the savings rate should be higher, because the government is forcing people to invest money that they otherwise might have consumed.
As far as I understand command economies, it’s not like the government is forcing people to invest their money, it’s more like the government decides how much to allocate for consumption and pays it out as salaries—and the rest it wastes… err, I mean uses for capital spending. In this case the “national saving rate” does not reflect any population preferences, only Politbureau considerations.
I would also be quite wary of savings statistics coming from communist times as I would expect most savings of actual people to live in shadow/underground economy and not be seen officially.
As far as I understand command economies, it’s not like the government is forcing people to invest their money, it’s more like the government decides how much to allocate for consumption and pays it out as salaries—and the rest it wastes… err, I mean uses for capital spending. In this case the “national saving rate” does not reflect any population preferences, only Politbureau considerations.
Agreed; I think the grandparent refers to money earned by people and spent by the Politbureau as “their” (i.e. the people’s) money, which is an implicitly political use of language (because I’m libertarian).
I would also be quite wary of savings statistics coming from communist times as I would expect most savings of actual people to live in shadow/underground economy and not be seen officially.
Michael Pettis—Not with a Bank but with a Whimper
I am unable to find any data on the Chinese national savings rate before 1980, and I am surprised by the claim that it was remarkably low. Does the author cite data to that effect (or any authors blaming that on Confucianism)?
[edit]Found household data for Japan going back to 1962, when it was solidly higher than European numbers.
Ummm… household data for Japan isn’t household data for China. But your surprise is your prior, unfortunately. I can’t say I know something particular here, as I know damn well I could waste my evening gathering real evidence, rendering any opinion I might give right now uselessly uninformed.
What I had wanted to emphasize from both the quote and the interview, though, was the degree to which we can be far more rational about economics simply by acknowledging the realities of basic accounting: surpluses somewhere must equal deficits elsewhere. Before this reality, huge quantities of implicitly normative “economics” dissolve.
The quote said “East Asian” countries, hence Japan.
It’s not at all obvious to me that the quote has anything to do with that. The quote seems to be arguing “if you use current data, you would think X->Y. But if you used past data, you would think X->~Y, so we should be reluctant to use causal reasoning like this.”
Because of an argument I came across earlier which failed spectacularly badly (which also had to do with China), I pattern-matched and said “wait, would we actually think X->~Y if we looked at past data?”. According to the paper Lumifer found, at least, the answer is “no, we would think X->Y.”
Reminds me of: http://xkcd.com/793/
In general it’s not very rational to take a look at a complex field and simply posit that if they would follow some simple rules that you consider reasonable they would just do better.
I’m surprised by your surprise. It might be hindsight bias on my part, but not wanting to save money in a totalitarian Communist society makes perfect sense to me. Live for today, because tomorrow you might be locked up or the government might embark on some bone-headed 5-year economic plan and your money would be worthless.
When you look at national savings, 5-year plans suggest that the savings rate should be higher, because the government is forcing people to invest money that they otherwise might have consumed. [Edit] Also, a feature of econ textbooks in the US from ~1950 to ~1990 were dire predictions that the USSR would overtake the US because the national savings rate in the USSR was higher than the US, and the Solow growth model suggests that GDP growth is proportional to savings rate. (Turns out, socialist countries are better at saving at the national level but worse at using those savings to achieve real growth.)
The actual heuristic that generated my surprise had to do with personality rather than incentives, though: I didn’t think that even communism was enough to defeat the Chinese propensity to save, and it struck me as unlikely that the savings rate in China would be high from antiquity to 1900, drop for a few decades, and jump back to high.
As far as I understand command economies, it’s not like the government is forcing people to invest their money, it’s more like the government decides how much to allocate for consumption and pays it out as salaries—and the rest it wastes… err, I mean uses for capital spending. In this case the “national saving rate” does not reflect any population preferences, only Politbureau considerations.
I would also be quite wary of savings statistics coming from communist times as I would expect most savings of actual people to live in shadow/underground economy and not be seen officially.
Agreed; I think the grandparent refers to money earned by people and spent by the Politbureau as “their” (i.e. the people’s) money, which is an implicitly political use of language (because I’m libertarian).
Agreed.
A useful paper on the topic. I agree with Vaniver that the quote looks iffy.