No. Not at all. China's problem is not fiscal incapacity (and the West's problems much less so). It's unwillingness to provide a welfare state, which it absolutely should. Anything we can do we can afford, says Keynes wisely. China gave itself the capacity to do very much. It can afford very much.

I don't know what "interest groups" you are taking about, but the whole point of the design is to prevent capture of subsidies by monopolies. Sure, stuff is subsidized, but producer surplus remains very hard fought as price is competed to (modified) variable cost. It's not a cushy subsidy.

I'll take your word, but point out that over the past forty years a kind of triumphal consensus about Western democratic capitalism being the best way to run economies has led to apparent deterioration by a variety of measures including political satisfaction. 1/

Perhaps China is a weird outlier, but in a real world of mimetic humans, the subtleties of your regressions will be outweighed by salient successes and failures. Subtleties of research programs are not laurels enough to rest on. /fin

Yes! We can't, and wouldn't want to, do the things China did in the ways it did. 1/

That doesn't mean we can't acknowledge it has had some extraordinary successes, see if we can't understand the bases for those successes, and find ways to adapt those techniques that would be consistent with our own values and political systems. drafts.interfluidity.com/2024/09/04/i... /fin

I did not claim political regimes are inconsequential to development. I claimed that "democracy" and "autocracy" are way, way too course-grained to think about the ways political regimes are consequential to development. 1/

"Drugs are good for curing cancer" is a dumb, useless claim. Yet it is still true that certain particular chemotherapy agents are very good for curing certain particular cancers! So, the dumb, useless claim is true in a sense. It's still useless. Taking aspirin for your brain cancer won't help. /fin

As I said, this is a dispute we can have another time. I asked you to stipulate, for the sake of argument, that "running an economy hot" is good policy. Unemployment leaves its scars, so do inflations, there's a dispute to be had. 1/

But we agree, I think, that IF running an economy hot is wise, and running an economy risks (does not require, but risks) inflation, there's a time-inconsistency for governments under most contemporary democratic institutions. 2/

"And, of course, there is a third alternative: GDP=Potential GDP, inflation on target." This I think is pure theology, mere cult. What is "target"? Where does it come from? "Potential GDP", the same. 3/

Only in very stylized model is there some ex ante optimal long-term growth path that can be hewed or not hewed. That is a human construction, constructed not because it describes anything humans have experienced of the world, but because it simplifies certain kinds of analysis. 4/

To then claim there actually does exist in the world an ex ante optimal growth path and all we must do is follow it is to succumb to idolatry and call it science. In real life, the opportunity set is unknowable, there is no achievable optimal, we must decide in which direction to err. /fin

I think this conversation is happening at an incoherent level of generalization. "Democracy" is not good or bad for development. It's too broad a thing to be a treatment. That's like saying "drugs are good for curing cancer". Which ones? Which cancer? 1/

Similarly claims that democracies broadly redistribute. In the US, for decades, because of the disinflationary effects of inequality and a culture of "temporarily embarrassed millionaires", electoral incentives have tilted more towards concentration than redistribution. /fin

We are agreeing on this. Biden faced a time-inconsistency problem. Electorally, under current institutions, recession is better than inflation. On long term welfare merits, inflation is better than recession. 1/

Democracies have to devise institutions that allow policy that is long-term beneficial but short-term very broadly painful to survive. That's a challenge. Autocracies have to do the same, but the constraints they face and the tools by which they address them are different. /fin