II have taken a break from golfing and enjoying my ‘rich social life’ to attend the Beijing Forum 2011 at Peking University, Beijing. Its my fourth Beijing Forum and, in format, it follows the standard, immaculately-organised pattern. Some amazing speakers are presenting – Roger Myerson and James Mirrlees are both Nobel Laureates in economics – as well as Oxford University’s excellent John Knight. John is about to publish a book on the future of Chinese economic growth and gave an excellent account of the major themes today – he is a superstar on China and gave a very good presentation at the 2010 Forum also. Yours truly is (uncharacteristically) humbled by presenting in this sort of company but will do his best to talk about efficient pricing of the environment with transfers to the poor. Its an old theme but I think I have some new wrinkles. Here are PowerPoints for the presentation.
I have enjoyed some dinners with former students of mine at Peking University and with former friends among staff here. These events meant much to me.
Professor Mirrlees gave a paper on optimal borrowing and savings in an open economy and applied not to China. I have to say that I thought it misconceived. It was a Ramsey-type argument with a country being able to borrow at a fixed rate and not facing any adjustment costs in adding to capital stocks. The predictable response was a pulse adjustment in capital stocks followed by higher consumption than would otherwise obtain along with current account deficits. Mirrlees acknowledged that the assumption of zero adjustment costs was unreal but argued the model captured the main features of the current situation. I cannot agree.
China is currently investing 44% of its output and the idea that this should be increased seems incredible to me. There are real labour and planning shortages that do impose very substantial adjustment costs. If these are big enough the zero adjustment cost model will be unrealistic. If they are large enough then capital exports might make sense rather than the dramatic current account deficits Mirrlees envisages. My question: How does Mirrlees know such costs will be small enough to drive his conclusions?
I’ll write further on this if the Mirrlees paper gets published.
I also attended a presentation by a climate change denialist (Ross McKitrick) who really went the whole hog. Climate isn’t really changing and even if it was policies wouldn’t work and the world would need to deindustrialise to deal with it. Hence China should ignore the climate change issue. All of these claims are wrong in terms of science and the economic evidence. Several delegates were stunned by the claims and fortunately, as I discovered afterwards, the Chinese participants did not take these claims seriously.
Beijing itself is very smoggy and the traffic congestion seems noticebly worse than a year ago.