The best news of 2015
Eleven days ago I predicted:
I predict that the Chinese government will eliminate the one child policy within 2 years””that will help.
If only I had said “two weeks”. Here’s the FT:
China has decided to scrap its one-child policy, one of the most draconian social experiments in modern history which has caused criticism overseas and resentment at home for decades.
Xinhua, the state news agency, sent a one-line tweet on Thursday night saying that all couples would be allowed to have two children, more than three decades after Beijing adopted a policy limiting most of the country to only one child.
Now if only they’d allow all couples to have 20 children. Still, this is great news.
In 2013 the policy had been relaxed somewhat:
Beijing had said it expected about 1m babies to be born as a result of the 2013 policy relaxation, but recent figures showed that only less than half that number had so far been born.
Less than 1/2 of a million is still a lot of precious human beings.
In recent years the policy was not as draconian as before, but it was still pretty awful:
Enforcement of the one-child policy has remained harsh in many rural areas, even in recent years, with many Chinese women undergoing mandatory pregnancy tests, forced sterilisations after pregnancies, and even forced abortions.
Financial penalties for excess children could range from three to 10 times annual family income, and varied widely by area.
Villagers in two provinces visited by the Financial Times this month said family planning enforcement had become stricter despite the announcements of loosening on a national level.
Whoever that commenter was who asked me for examples of how China continues to reform, here it is (and it’s hard to think of a more important reform.)
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29. October 2015 at 09:06
Tyler Cowen has a completely opposite take on this problem, correctly pointing out China’s one child policy probably was a net plus not a net minus. Who to believe? A former chess master child prodigy, speed reader, voted ‘sexist man’ by some woman’s magazine, a noted economist who ‘discovered’ Scott Sumner (boo, hiss, even greats make mistakes) aka TC, or the “Rush Limbaugh” of economics, a man who self-promotes himself via Photoshopped James Bond movie posters?
29. October 2015 at 09:17
It’s a win for human rights, but a very easy one for the CPC to make. Fertility is now firmly in check by other factors, as the 2013 relaxation demonstrates. This is the demographic equivalent of removing price ceilings when the price is hitting a floor.
29. October 2015 at 09:23
Scott,
Exactly.
One thing. The FT (and many other places) said, “… limiting most of the country to only one child.”
This is a very common misconception. The quota, from the beginning (and until today’s announcement) was 1 only for urban Han. For all other groups it was higher, from 2 to 4. Back in the beginning, in 1980, most of the country had a quota of more than 1. And since the new rules in the past few years (again, before today’s announcement), couples for whom either is an only child had the quota increased by 1, so even for many urban Han, the quota was 2. And as of today, the minimum quota is 2. It’s not clear how the existing rules apply. It’s possible it’s just increased by 1 across the board, so some people might have a quota of 5.
“Whoever that commenter was who asked me for examples of how China continues to reform, here it is…”
There’s more. This is actually part of the ten-point announcement from the 18th Central Committee. This is item #4.
Very very rough translation the 10 points:
#1. GDP goal. Double total and per capita GDP by 2020 (from 2010). Eliminate poverty.
#2. Scientific development. Establishment of national labs, etc.
#3. Increase participation of Hong Kong and Macau in economic development. Improve cross strait relationship.
#4. Complete opening up to 2 children per couple. Start program to tackle aging issues.
#5. Improve finance regulation. Complete opening up of price competition of products and services.
#6. Changes in the social insurance funds/policy. Start new rural medical insurance plan.
#7. More common secondary education. Eliminate tuition fees for some schools and poor families, etc.
#8. National security policy. Ensure the political, economic, cultural, etc., safety of country.
#9. A number of people (list of names) being investigated and disciplined for breaking rules.
#10. Three people (list of names) promoted to the secretariat.
For those who can read Chinese, this is the report from guancha.
http://www.guancha.cn/politics/2015_10_29_339361.shtml
29. October 2015 at 09:38
DF, This will greatly improve the lives of millions of people. Reforms like that don’t come along everyday.
Absolute zero, Thanks for that info.
29. October 2015 at 09:51
This is great news as I always wondered how well a society could function with such a higher number of young men than young women. However, I think the change will be limited as China is still looking to control poor agricultural families as opposed to Urban families who moving very quickly to Natural Low Birth Rates anyway.
The big question I do have is: How much did the One Child Policy help China grow its ‘oppressive capitalism’ from 1978 -2015?
29. October 2015 at 10:29
Now for the bad news. Larry Summers seems to believe, along with Ted Cruz, that ‘the price of money’ is an interest rate;
http://larrysummers.com/2015/10/28/5298/
‘What arguments do Spence and Warsh offer for their heterodox conclusion? They note rightly that monetary policy has been easy and investment has been weak in the current recovery.’
29. October 2015 at 10:49
Why aren’t China-related ETFs increasing on this news????
29. October 2015 at 11:17
@TravisV Why aren’t pork and chicken and feed companies up on the news????
29. October 2015 at 11:19
Ray,
Cowen said there were probably some benefits, but added that “I would never institute a one-child policy, which I consider to be an immoral restriction on personal liberty.”
I don’t really see how that conflicts with this post.
29. October 2015 at 11:44
The mass public thinks over population leads to a poor nation. What they don’t realize is that it’s poor governance that leads to “over” population. A properly functioning government with a free people will always have the right population.
29. October 2015 at 11:54
Having kids is like any other market…the cost benefit analysis is done by every parent…if you let the market do its thing, you will have the right amount of product (people).
29. October 2015 at 12:28
Scott,
No doubt. But the desire for the average Chinese couple to have more than one child is at an all time historical low right now, stretching back millennia. Let’s not overplay its significance either.
29. October 2015 at 16:19
I echo AbsoluteZero. I am surprised at the FT article. But FT says its reporter talked to rural residents….hmmm.
In any event, birth rates have plummeted all over the Far East and even in Thailand. Don’t expect much.
29. October 2015 at 16:22
Ray, You said:
“Tyler Cowen has a completely opposite take on this problem, correctly pointing out China’s one child policy probably was a net plus”
I know I can count on you. No he didn’t say it was a net plus, and he didn’t support the policy. Nothing he said contradicts anything here.
Collin, It had little impact on China’s growth.
DF, A 1/2 million Chinese may not be significant to you, but they are significant to the half million Chinese. Also don’t forget how intrusive and corrupt these regulations have been. They’ve caused all sorts of abuse and personal tragedies. I think it’s a mistake to assume that something that only affects a small percentage of Chinese in not important. China is very big. The recent tsunami only affected a very small percentage of Japanese citizens, but it was still a big deal.
29. October 2015 at 17:54
“Less than 1/2 of a million is still a lot of precious human beings.”
Anti-libertarian human beings are not precious. They might one day become precious, but the mere fact that they are human does not make them precious.
Imagine half a million additional Rays. Or Sumners. Blegh.
29. October 2015 at 21:50
@Sumner, who disputes Cowen said anything good about China’s One Child policy.
From Cowen’s blog, first sentence, “As a leader I would never institute a one-child policy, which I consider to be an immoral restriction on personal liberty. But if we ask whether this policy had benefits for China, it absolutely did” – See more at: http://marginalrevolution.com/#sthash.F6YGwSaK.dpuf
The above passage supports a ‘net plus’ interpretation.
I can see lying about something nobody can prove, like monetarism as exposed by you, but lying about something in plain sight? Goebbels would be proud…
30. October 2015 at 00:38
“and it’s hard to think of a more important reform.”
It might be a cliché. But what about some careful democratic reforms? Role models could be Hong Kong and Taiwan.
30. October 2015 at 06:32
Europe to U.S., ‘We suck!’
http://www.voxeu.org/article/selected-takeaways-ecb-s-sintra-forum-inflation-and-unemployment-europe
‘The discussion of structural problems in Europe sparked a lively debate about the nature, timing and sequencing of structural reforms relative to cyclical policy measures. Mario Draghi (2015) set the tone in the opening speech in which he highlighted the value of structural reforms in increasing the flexibility of the economy in response to shocks, reducing hysteresis effects and enhancing its long-run growth potential. They could unleash the “untapped potential” of euro area countries and help in making the ongoing cyclical recovery a stronger, structural recovery. The benefits of flexibility are particularly high in a monetary union, where large structural divergences across countries can become “explosive” and endanger the integrity of the union. The time for accelerating structural reforms now in the euro area is advantageous, because monetary policy meaningfully buttresses demand and fiscal policy is broadly neutral. Many Sintra participants supported the view that labour and product market reforms are needed for reducing European unemployment and for better preparing European countries for the structural change that productivity-enhancing innovation requires ….’
Take that, Bernie Sanders!
30. October 2015 at 06:36
Tyler Cowen questions Krugman, but there’s not much new here…..
http://marginalrevolution.com/marginalrevolution/2015/10/on-what-grounds-will-marco-rubios-fiscal-policy-be-rejected.html
30. October 2015 at 06:42
More from the Sintra conference;
———-quote———–
[In Europe] Wages are set such that insiders remain employed without consideration of the fate of the unemployed (outsiders). A key implication of this theory is that there is no “natural” level to which the unemployment rate tends to gravitate over long periods of time. It can also account for the stability of wage inflation over the last two decades.
Many conference participants concurred that hysteresis effects play a role in Europe and should be taken into account by public policy. Some Sintra participants argued that such effects justify aggressive monetary policy actions to avoid recessionary episodes, which would have long or permanent effects under the hysteresis hypothesis (e.g. Ball 2015 or Summers 2015). It was also mentioned that hysteresis implies that monetary policy could produce effects on medium-term growth, not just dampen cyclical fluctuations.
Willem Buiter (2015) pointed out that the euro area suffers both from deficient aggregate demand and from fundamental supply side problems. Whilst the insider-outsider problem does not necessarily call for demand policies, he argued that to close the output gap the euro area needs an effective combination of monetary and fiscal policy, including the use of “helicopter money”. Demand policies could also somewhat help in reducing insider-outsider problems by increasing the number of insiders. But addressing this specific problem at source would require labour market policies, notably constraints on collective bargaining arrangements.
———-endquote————-
30. October 2015 at 06:46
Did the One Child Policy contribute to the great Chinese Growth?
The main reason for China Growth is the change to market economy with a capitalism repression and the One Child Policy enhancing the Open Economy.
China government main goal to grow: Why?
a) Families with less children focus more on that child’s education with less cost than trying to educate 4 children.
b) Less children is a great way to keep working class wages down.
c) Less children forces citizens to save more.
d) Less children will increase female labor participation.
e) Less children breaks the poor farmer cycle.
Why is this so important? Watching Japan today we are witnessing what happens to society and economy when long term fertility starts decreasing AS and AD curves for a significant period. For the most part other libertarians love large family stability (Murray and Caplan being the most obvious) and I find their solutions to completely lacking in creating these societies.
30. October 2015 at 14:30
Ray, Yes, he thought it was a net plus, that’s why he opposed it.
You said:
“@Sumner, who disputes Cowen said anything good about China’s One Child policy.”
Really, I did? Where did I dispute that?
Christian, I should have been clearer, I meant a more important recent reform. Yes, democracy would be really important, perhaps more so.
Patrick, Let’s hope Europe is waking up.
30. October 2015 at 20:40
“Less than 1/2 of a million is still a lot of precious human beings.”
I can see the headlines now.
‘Well-Respected Economist Outs Self as Cannibal: Simultaneously Reveals Eating Disorder, Promises Low Chinese Birth Rates Will Help Him Lose Weight!’
30. October 2015 at 23:28
Scott, another prediction of yours, that the media will soon report another recession in Japan, also pretty close to passing:
http://www.nytimes.com/2015/10/26/business/international/japans-struggling-economy-finds-abenomics-is-not-an-easy-fix.html?_r=0
31. October 2015 at 04:47
@Sumner, who questions why I say he disputed Cowen on China 2-child policy:
SUMNER: (emphasis added)
//
Ray, You said:
“Tyler Cowen has a completely opposite take on this problem, correctly pointing out China’s one child policy probably was a net plus”
I know I can count on you. No he didn’t say it was a net plus, and ***he didn’t support the policy***. Nothing he said contradicts anything here.
// ***emphasis added***
From Cowen’s blog, first sentence, “As a leader I would never institute a one-child policy, which I consider to be an immoral restriction on personal liberty. But if we ask whether this policy had benefits for China, ***it absolutely did***”
Ok, but I give up. “You win” professor. You’re always right.
31. October 2015 at 10:48
Michael, You have a very powerful imagination.
mbka, Yes, coming soon.
Ray, Wow, a policy that “had benefits” but nonetheless on balance he opposed is a “net plus”? If he opposed it can’t we assume he viewed the policy as a net minus, despite some benefits in terms of education? Isn’t that logical? Where did he say it was a net plus? And where did I say it did not improve education? Can you find the quote where I disagree with Tyler?
How did you ever score 120? Did they not include a logic section on your test?
31. October 2015 at 15:12
Ralph Nader: “An Open Letter To Chairwoman Yellen From the Savers of America”
http://www.commondreams.org/views/2015/10/31/open-letter-chairwoman-yellen-savers-america
http://econospeak.blogspot.com/2015/10/a-nadir-for-left-wing-monetary-advice.html
31. October 2015 at 16:47
Interesting new paper: “A sharp drop in Nominal GDP will cause a drop in Economic Freedom”
http://marketmonetarist.com/2015/10/29/a-sharp-drop-in-nominal-gdp-will-cause-a-drop-in-economic-freedom
31. October 2015 at 17:30
Brad DeLong: “What Kind of New Economic Thinking Is Needed Now?: A Twitter Dialogue, with References”
http://equitablegrowth.org/what-kind-of-new-economic-thinking-is-needed-now-a-twitter-dialogue-with-references/
31. October 2015 at 17:39
Arnold Kling has a new post on his blog: “Another AS-AD Anomaly”
31. October 2015 at 21:57
It’s a good move, if largely symbolic.
1. November 2015 at 07:29
Tyler Cowen has a long new post: “What’s the natural rate of interest?”
http://marginalrevolution.com/marginalrevolution/2015/11/whats-the-natural-rate-of-interest.html
1. November 2015 at 15:20
TallDave, I’d say it’s really important, not at all just symbolic. It will have a huge impact on the lives of 100,000s of people.
Travis, Thanks for those links. I wonder if Krugman will start calling Nader a crazy right-winger.
2. November 2015 at 07:51
Scott — As a symbolic change to a less repressive China, it’s very important, but as a practical matter looks like they mostly stopped enforcing the law even before 2013, when they mostly abandoned it, and even then demand was less than expected.
https://en.wikipedia.org/wiki/One-child_policy
Still, definitely something to cheer for.
3. November 2015 at 12:44
Talldave, Believe me, it was still being enforced in plenty of places. Yes it was weakening, but it still impacts lots of people.