Erik Reuter wrote:
That's absurd. Doubly so. First, global growth is almost certainly NOT overestimated by 1%. The fact that comparing the growth rates of various countries over the last 200 or so years, INCLUDING THOSE DEVASTATED BY WAR, has almost all of the free-market economies coming in at about 1.5 - 2% long term real GDP per capita growth is a good clue that we are not off by 1%.
Erik, where did I say that it was 'real' growth? I didn't, and didn't for a reason. I was not talking about growth adjusted for inflation. Does that make it a little less absurd?
The economic history of Germany obviously will have uncertainties during the World War and hyperinflation. But since we know how GDP was growing before and after the World Wars, missing a chunk of data in between is not a serious problem.
It is: If you want to know the annualized rate, not knowing whether, or how fast the GDP dropped during WWII in germany would throw it off.
Now, if you were to argue that there will be the occasional "black swan" event that will devastate an economy, and that this should lower our productivity growth estimate, then that would be reasonable, although it would naturally be difficult to come up with an exact number since black swan events are, by definition, rare and difficult to predict.
That's closer; but we have (v.) rough estimates from the fragmentary evidence of collpasing economies by war or disaster.
But it is absurd to say that this possibility increases the probability of having ABOVE trend GDP growth. It obviously does not. It increases the probability of having GDP rapidly reduced by, say, an order of magnitude in a short time, which would annualize out to a much lower GDP growth rate. If you think there is say, a 1 in 10 chance of this happening in the next 75 years, and you want to put it in your model, you would either use a lower growth rate in your forecasts, or if you are doing Monte Carlo as Dan suggested, you would have some scenarios where the whole economy goes to hell, and this would average out to a bigger deficit for SS.
A valid point. Fine, I hereby amend my suggestion that the error margin have a larger negative than postive. Sure, it ruins the symmetry of the +/- sign but...
Alternatively, you might model it by making your high-cost (low productivity growth) case have a lower productivity growth than 1.3%. But one thing you would certainly NOT do is INCREASE your productivity growth estimate on the upside.
Incidentally, if you are not willing to discuss in good faith by signing your real name, I'm not inclined to converse with you anymore.
!! What the deuce does my real name have to do with anything?! I am conversing in good faith here; or thought I was. People, please chime in if I am wrong. If you insist on discussing only with people willing to give out their name freely online, go ahead. But if you suspect I am some old foe, or new adversary, out to entrap you or that I intend some other nefarious practising on you, just ask me.
-- Erik Reuter http://www.erikreuter.net/
~Maru Pseudonymous Been singin' them anonymity blues... _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
