American Economics Thread

USTBasisRollCarry

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If China can achieve successful growth when US had overwhelming economic advantages, why can't the US also achieve healthy growth with a strong China? I find this type of black or white thinking unrealistic. I believe both economies will eventually learn to work with whatever economic balance they arrive at.
A lot of China's growth in the past few decades is catch-up growth or in the economic literature "convergence".

To oversimplify: in order to produce anything, you need labor, capital, and technology. Specifically, with labor: it is the number of hours worked, accumulated education and experience and the number of workers. With capital: it takes on a "human capital" form of education/experience, physical capital of the infrastructure/buildings/machines and intangible capital such as software. With regards to technology: it is anything that increases the ability to use the same units of labor and capital to produce more output, be it management processes, scientific breakthroughs, good governance, etc.

With high-income countries (such as the United States), growth in labor and capital is much slower -> going from 0 computers to 1 computer causes a substantial increase in productivity, going from 1 computer to 10 computers does not increase productivity substantially so nearly all growth comes from discovering new technology and diffusing that throughout the economy; in low and middle-income countries (such as China), substantial growth can come from the labor term -> moving individuals through school and from the rural areas doing subsidence agriculture to higher productivity manufacturing/services, the capital term -> using accumulated savings to finance machines/infrastructure/urbanization/buildings/etc, and the technological term -> adapting the ways that is done in other more productive countries and as a result, is capable of growing much faster.

Poorer countries have the potential to grow faster than wealthy countries (otherwise known as unconditional beta-convergence) but this is often not realized: one way that this is controlled for is with conditional beta-convergence (poorer countries or regions with similar governance mechanisms will grow faster than wealthier countries/regions with similar governance mechanisms). Evidence of this comes from both observations of economic growth since the 1940s of OECD countries and from within-country regional growth patterns (for example: poorer states in the United States tend to grow ~2% faster than wealthier states; poorer provinces in China also tend to grow faster than wealthier provinces in China; etc).

The tl;dr is that a substantial amount of growth in China is catch-up growth and that as a result, the expectation should be for China to grow faster than the United States but those growth differentials should narrow over time as China approaches the technological frontier (and that has largely been observed over the last decade when China's growth has slowed but is still very fast)
 

CMP

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The tl;dr is that a substantial amount of growth in China is catch-up growth and that as a result, the expectation should be for China to grow faster than the United States but those growth differentials should narrow over time as China approaches the technological frontier (and that has largely been observed over the last decade when China's growth has slowed but is still very fast)
I will just leave this here for you:
1681561472312.png
 

USTBasisRollCarry

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I will just leave this here for you:
View attachment 111037
Not contradictory evidence that China approaching the technological frontier (the phenomena in the above image is quite new) will cause China's growth rate to slow as catch-up growth opportunities are largely used and existing technologies are integrated.

China still has substantial growth potential from urbanization, physical capital formation in poorer provinces, human capital formation (mean years of formal schooling in China is 8), and writ-large diffusion of technology/management practices to lower productive regions.

The ASPI report on research counted research papers but of course, for that to drive growth, it needs to be translated into marketable technologies (which won't be known for a few years). China's technological convergence has been very rapid, but nevertheless, as the various pages of this site will indicate - there are still a few areas where China lags the commercial technological frontier - large body aircraft, integrated circuits, biotech, etc.
 

USTBasisRollCarry

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Not contradictory evidence that China approaching the technological frontier (the phenomena in the above image is quite new) will cause China's growth rate to slow as catch-up growth opportunities are largely used and existing technologies are integrated.

China still has substantial growth potential from urbanization, physical capital formation in poorer provinces, human capital formation (mean years of formal schooling in China is 8), and writ-large diffusion of technology/management practices to lower productive regions.

The ASPI report on research counted research papers but of course, for that to drive growth, it needs to be translated into marketable technologies (which won't be known for a few years). China's technological convergence has been very rapid, but nevertheless, as the various pages of this site will indicate - there are still a few areas where China lags the commercial technological frontier - large body aircraft, integrated circuits, biotech, etc.
China's technological convergence has been very rapid, but nevertheless, as the various pages of this site will indicate - there are still a few areas where China lags the commercial technological frontier - large body aircraft, integrated circuits, biotech, etc. Development in those areas would provide growth in the present but inherently make future growth harder and that's largely been seen with China's growth trajectory where d^2(GDP)/d^(time) < 0 for the last decade and a half as China has converged.

This is all fairly drifty from the original point on why growth is slower in the US vs. China even with US advantages and the quick answer is that its because the US is wealthier, which makes growth harder.
 

FairAndUnbiased

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US is known as a consumer economy. So let's see what they actually consume.

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In 2021, the average U.S. consumer unit spent about 8,289 U.S. dollars on food. Americans spent the most on housing, at 22,624 U.S. dollars, reflecting 33.8 percent of annual expenditure. The total average U.S. consumer spending amounted to 66,928 U.S. dollars.

An additional ~10k for transportation (mostly operating cars), ~7k for insurance and ~5k on healthcare. Basically ~$52k in consumer spending is used solely to stay alive, housed and able to go to work.

Only ~3.5k is discretionary spending on entertainment and ~1.5k on apparel.

Not exactly what people think of when they hear "consumer economy"...
 

USTBasisRollCarry

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US is known as a consumer economy. So let's see what they actually consume.

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An additional ~10k for transportation (mostly operating cars), ~7k for insurance and ~5k on healthcare. Basically ~$52k in consumer spending is used solely to stay alive, housed and able to go to work.

Only ~3.5k is discretionary spending on entertainment and ~1.5k on apparel.

Not exactly what people think of when they hear "consumer economy"...
Eh, a third of the food spending is food away from home (i.e., restaurants) which have a discretionary component to them; housing is essential but have a substantial discretionary component as well (average house sizes in the US have grown substantially over the decades; a McMansion is not a need) and ditto for the transportation (which have an air transportation component for vacations, road trips and other joyrides), etc.

Food, housing and transportation are all necessities but the mechanism in which they are consumed (McMansions, restaurant meals, and vacations) are not necessities by any stretch of the imagination.

CPI component weights -
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bobsagget

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US is known as a consumer economy. So let's see what they actually consume.

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An additional ~10k for transportation (mostly operating cars), ~7k for insurance and ~5k on healthcare. Basically ~$52k in consumer spending is used solely to stay alive, housed and able to go to work.

Only ~3.5k is discretionary spending on entertainment and ~1.5k on apparel.

Not exactly what people think of when they hear "consumer economy"...
looking at my yearly expenses yeah thats on point. Fun fact there is no such thing as an information economy there is only an industrial economy . Production of physical goods and active development enhancing the physical production of goods are the only real ways to drive growth
 

FairAndUnbiased

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Eh, a third of the food spending is food away from home (i.e., restaurants) which have a discretionary component to them; housing is essential but have a substantial discretionary component as well (average house sizes in the US have grown substantially over the decades; a McMansion is not a need) and ditto for the transportation (which have an air transportation component for vacations, road trips and other joyrides), etc.

Food, housing and transportation are all necessities but the mechanism in which they are consumed (McMansions, restaurant meals, and vacations) are not necessities by any stretch of the imagination.

CPI component weights -
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How much new housing stock being built is affordable housing vs McMansions?

Average American has how many days of vacation to take joyrides or tourist flights?

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Starting in 2000, workers have been taking fewer days off. In 2015, American worked took an average of just 16 days off.
 

Andy1974

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US is known as a consumer economy. So let's see what they actually consume.

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An additional ~10k for transportation (mostly operating cars), ~7k for insurance and ~5k on healthcare. Basically ~$52k in consumer spending is used solely to stay alive, housed and able to go to work.

Only ~3.5k is discretionary spending on entertainment and ~1.5k on apparel.

Not exactly what people think of when they hear "consumer economy"...
It’s apparel AND services. Stunning really.
 

HighGround

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How much new housing stock being built is affordable housing vs McMansions?

Average American has how many days of vacation to take joyrides or tourist flights?

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I'm not really sure what the point here is.

One of the primary issues is in fact, a lack of affordable housing. Not just because easy credit has allowed prices to shoot through the roof, but also because developers focus on creating housing stock that yields the most profit, i.e. Mansions. Lack of housing in United States is largely a policy failure (on multiple levels), not really a failure of capacity. America can certainly build things.

As for the vacations... I don't really know if I would consider it a negative. Americans take fewer vacations and work more hours, but as far as I now, the culture with the most toxic work culture is by far East Asia.

Uh no. The last time core CPI MoM before the pandemic was >0.5% was in the 30 years ago

I was talking about cpi, not core cpi. Though looking at my response, I can see that I did not specify that. And yes, I am aware that I am responding to a comment that talked about core CPI specifically. My point was, that it was not unusually to see high MtM CPI in general.
 
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