Tuesday, September 28, 2004

How Nobel Winners See The World Economy

In the Wall Street Journal, special World Business Report (subscription only)

In yesterday's WSJ (9/27/04), they asked 12 of the 32 living Nobel laureates in economics for their views on a variety of issues related to the global economy. Here are some excerpts:

"Which economy do you expect to be the biggest 75 years from now: the U.S., the European Union or China?"

GEORGE A. AKERLOF, Koshland professor economics at the University of California, Berkeley: The European union. It has more people than the U.S. and per capita income should not be that much different. I think the current gap between China and the U.S. and the EU is probably too large to make up.

KENNETH J. ARROW, professor of economics emeritus at Stanford University: Unless there is a radical change in growth rates, China will be the largest economy in the world. I don't expect, however, per capita income in China to be as much as half the European level.

JOHN F. NASH JR., senior research mathematician at Princeton University: Well, since the European Union is an undefined area, as of the year 2079, if it then includes Russia, it should be the largest. If not, the U.S. would be likely, even though China and the U.S. have similar land area.

ROBERT M. SOLOW, institute professor emeritus and professor of economics emeritus at the Massachusetts Institute of Technology: In total output, probably China. In output per person, probably the U.S.

"Do you think the fruits of the global economy will be distributed more evenly 50 years from now, or less evenly, and why?"

PROF. ARROW: I think incomes will be more equally distributed in the future, if only because some large countries, China, India and Indonesia, are growing more rapidly (per capita) than the advanced countries.

MILTON FRIEDMAN, senior research fellow at Stanford University's Hoover Institution on War, Revolution and Peace: More evenly. Why? The major sources of income difference today are between the developed and the undeveloped countries. This intercountry difference will decline as globalization (you read it here first!) spreads and more and more countries find a way to achieve economic growth and prosperity.

CLIVE W.J. GRANGER, professor of economics emeritus at the University of California, San Diego: About the same. If population growth is not controlled, there will always be many poor people in the world.

PROF. SOLOW: Toss-up. The relative lot of the unskilled and uneducated will probably worsen, but there is the possibility of improved nutrition, population control and education as democracy spreads.

JOSEPH E. STIGLITZ, university professor at Columbia University: In 50 years, some countries in the developing world will have caught up, but there's a very high risk of a wider gap for others unless we do something markedly different about the disparity between Africa and the industrial countries. What we will see is a world in which the differences between the top and the bottom are larger. In China, a majority of people will see income increases and will see the gap reduced.

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