Nobels on Where Is the World Economy Headed?

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Hyatt Regency Chicago, Grand Ballroom AB
Hosted By: American Economic Association
  • Chair: Dominick Salvatore, Fordham University

Where in the World Is the World Headed?

Angus Deaton
,
Princeton University

Abstract

As a new administration takes over in Washington, I review what we know about recent changes in global poverty and global inequality and review recent history using surveys of self-reported well-being. I emphasize the need to step back from current difficulties and take a longer and more positive view. Even so, and in spite of the enormous reductions in global poverty that have come from globalization and growth, I question whether we have paid enough attention to the domestic losers in this process, especially as revealed by the marked deterioration in the health of working-class white middle-aged Americans.

Seeking Political Keys for Economic Growth

Roger Myerson
,
University of Chicago

Abstract

The high elasticity of national output with respect to quality of governance may be greatest discovery of modern times. After a century when America was a developmental model for the world, we should understand that, since colonial times, America's successful development has been based on principles of decentralized federal democracy. The spreading application of such principles around the world has unleashed productive potential for more of humanity, with accountable provision of local public investments and broad democratic protection of private investments. The increased effective global supply of human talent is correspondingly increasing demand for the finite resources of the planet.

How the Left and Right Are Failing the West

Edmund Phelps
,
Columbia University

Abstract

The West's economic growth was powered mostly by the indigenous innovation in America, Britain and France. This business innovation slowed sharply in the late 1960s and slowed again around 2006. But right-leaning economists, adopting supply-side models, generally look to measures that would boost business investment, while the left-leaning economists, adopting demand-side models, look to measures that stimulate "demand," especially government demand for infrastructure investments. It will be argued here that neither of these two approaches can be expected to revitalize the West in any sustained way since neither serves to stimulate the indigenous business innovation that is essential for rapid economic growth -- not to mention high prosperity and mass flourishing.

Economic Risks Associated With Deep Change in Technology

Robert J. Shiller
,
Cowles Foundation and Yale University

Abstract

The fourth industrial revolution is producing rapid change, but little concrete is known about what it will bring in the future. The change will affect different people, with different aptitudes and different human capital investments, differently, in complex ways impossible to predict now. For example, we do not even know whether new forms of artificial intelligence will be substitutes or complements to various forms of human intelligence. Since these new sources of change are today not understood, there is a need now to develop new forms of risk management. President Obama’s call for wage insurance (State of the Union Address 2016) for people who are forced to take a new lower-wage job should be followed up. Risk management institutions for livelihoods can take various forms and need not be government run, but governments have an important role in providing research and regulation.

New Divisions in the World Economy

Joseph E. Stiglitz
,
Columbia University

Abstract

The Enlightenment brought on the Industrial Revolution, marked by a smaller and smaller percentage of our labor resources being required to meet our basic needs. Though there are uncertainties about the pace and significance of the innovations that we will be confronting in the near and far future, almost certainly this trend win continue, and so too for the associated trends in wage, income and wealth disparities. How we cope with these trends will be the determining fact in the nature of our societies. If, as it is said, the past is prologue to the future, at least initially, there will be large disparities in responses. Some countries will enact large training programs, change the work week and other aspects of patterns of work and leisure, and take other actions to maintain full employment and ameliorate the natural economic and social divisions that these changes in technology will bring about. Others will follow a more market driven evolutionary approach, shaped by special interests, in ways that, often, rather than leaning against the wind, reinforce these market forces. The world will become more divided, between those countries that seek and succeed in limiting this Great Divide in income and wealth, and those who do not. These differences, in turn, will have global political consequences, e.g. generating conflicts over the kind of international economic architecture is best for the global economy.
Discussant(s)
Dominick Salvatore
,
Fordham University
JEL Classifications
  • E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • F4 - Macroeconomic Aspects of International Trade and Finance