Why China will democratize

Tyler Cowen has a new Bloomberg article discussing why China may never democratize:

The argument that China will become democratic rested on observations of Japan, Taiwan and South Korea, all nearby countries that became democratic or sustained a democracy once they were sufficiently wealthy. The middle classes in these countries wanted accountable government, and ultimately the autocracies were willing to step aside and support democratic transitions, albeit with the Japanese path being more closely linked to the American postwar settlement and occupation. Much of Eastern Europe and Latin America became democratic too, and so it seemed plausible that China might be next in line.

Conversely, there are two powerful arguments that China will not become democratic. First, China never has been democratic in thousands of years of history, and perhaps that history simply will continue.

Second, the middle to upper middle class is still a minority in China, and will stay so for a long time. A smaller country can build up in percentage terms a larger middle class, by exporting, than can a very large and populous country. There’s just not enough demand in global markets to elevate all or even most of the Chinese people, and so Chinese inequality likely will stay high, to the detriment of democratic forces.

In essence, many of the wealthier Chinese trust the Communist Party to look after their interests more than they trust elections.

Both of these arguments are wrong, although the final sentence I quoted is entirely accurate.  Many affluent urban Chinese do not support democracy because they worry that it would turn the country over to the rural poor.  Today.

Nonetheless, both of Tyler’s arguments are wrong:

1.  The fact that China has thousands of years of non-democracy carries exactly zero weight, because all countries had thousands of years of non-democracy before becoming democratic. It’s simply not a “powerful argument”—it carries no weight. So the fact that East Asia is increasingly democratic is very relevant.  Those East Asian democracies also had thousands of years of non-democracy before first becoming democratic.

2.  And it’s true that the middle and upper middle class are still a minority in China, but it is not true that things will stay that way for a very long time. China will be mostly middle class by 2050. A big issue in China today is the fact that working class wages are rising faster than professional white collar wages, and indeed are often higher. College grads complain that factory workers and construction workers make more than they do.  And all wages are rising very fast.

In my view the relevant odds are as follows:

1.  Odds of China becoming democratic:  95%

2.  Odds of China never becoming democratic, and most of the rest of the democratic world reverting to authoritarianism:  4.99%

3.  Odds of China never becoming democratic, but most of the rest of the developed world staying democratic:  0.01%

So if China really never does become democratic, the real story is that democracy will fade away in the rest of the world.  It’s simply not plausible that we’d continue on for hundreds of thousands of years with China non-democratic and South Korea, Japan and Taiwan democratic.  That’s not how things work.  Something has to give.

You can’t be pessimistic about China and optimistic about the world, at least in the very long run.

PS.  Here’s China Daily, telling white collar workers to stop complaining that blue collar workers make more than they do:

Manual workers deserve the high wages they get

DATA ON AN employment exchange website show the average monthly income of construction workers in Chengdu, Sichuan province, was 8,300 yuan ($1,210) last year, with skilled bar benders, bricklayers, carpenters and painters earning more than 10,000 yuan. In contrast, the average monthly salary of clerks and secretaries was about 3,800 yuan. An article on youth.cn comments:

The huge income gap between blue-collar and white-collar workers may be surprising for many people. But manual workers’ incomes have been rising over the past few years because of the supply-demand law.

Each year, 7 million college graduates enter the job market, while the number of skilled laborers joining the workforce is much lower, because it takes years for a worker to become an expert in his/her field while clerks can learn their job in months.

If blue collar workers really are making $15,000/year, in a country with a much lower cost of living than the US, then I may be excessively conservative in my 2050 date for a majority of China being middle class.  It’s coming faster than almost anyone imagined.

HT:  TravisV



48 Responses to “Why China will democratize”

  1. Gravatar of Andrew Clough Andrew Clough
    11. July 2017 at 12:11

    I broadly agree that a democratic China is likely. But I can imagine that technological advances will make the maintenance of an autocracy more feasible in the future than it was in the past and I’d put that at well over 0.01%. I wouldn’t expect currently democratic states to become autocratic in that case. Which is to say, I think you’re probably right but horribly overconfident.

  2. Gravatar of Matthias Görgens Matthias Görgens
    11. July 2017 at 13:54

    What’s more interesting to me than democracy in China is robust rule of law.

    India and Singapore show that those things don’t necessarily go hand in hand: India is democratic, but doesn’t really have rule of law. Singapore’s (and even more Hong Kong’s) democracy is at best in name only, but they have robust rule-of-law.

    Rule of law is something the Chinese middle class can definitely get behind.

  3. Gravatar of Lorenzo from Oz Lorenzo from Oz
    11. July 2017 at 15:10

    Democracy is (roughly) the end point of a process of social bargaining. Korea was even more run by a Neo-confucian meritocracy more consistently than China yet South Korea has generated a robust democracy. So, I am guessing your prediction is pretty good in the long run.

    Of course, pressure for democratisation can lead to unfortunate regime responses — see the German Second Reich.

  4. Gravatar of Benjamin Cole Benjamin Cole
    11. July 2017 at 17:27

    Interesting topic, and I certainly hope Scott Sumner is correct.

    In recent decades, democracy has been taking a beating in Asia. Think Russia (Putin), N Korea (Kim), the Philippines (Duterte), any country in Islam (Turkey, Iraq, Iran, Syria, Afghanistan, etc), China (Xi Jinping) and a SE Asian nation run by junta.

    Sad to say, Asia is largely going backwards and has been for decades.

    The Chinese Communist Party and Xi are on a worrisome track.

    Largely unrecognized by Westerners, every large company in China has board seats and usually board control allocated to the CCP, and now the CCP is forming working committees inside of all large companies, for better monitoring.

    CCP officials are showing up at trade negotiations and other arenas where they have not before.

    The elimination of legal and speech rights in China has been near-complete under Xi.

    This from Nikkei Asian Review July 10:

    “Xi tells his troops: ‘Call me chairman’
    By resurrecting Mao’s old title, China’s leader wants to show his rivals who’s boss

    KATSUJI NAKAZAWA, Nikkei senior staff writer

    TOKYO — In a surprise gambit, Chinese President Xi Jinping has broken with a long-standing military tradition in a bid to strengthen his political position ahead of the Communist Party’s leadership reshuffle later this year.

    It happened when Xi, who doubles as the party’s general secretary, paid a high-profile visit to Hong Kong for a ceremony to mark the 20th anniversary of the former British colony’s return to Chinese rule.

    On the eve of the July 1 handover anniversary ceremony, he attended a military parade to review the 3,100 Chinese troops stationed in Hong Kong. Although the military event drew little attention, a significant thing happened there.

    Apparently at Xi’s behest, the troops referred to him as “zhuxi” instead of “shouzhang,” the title usually used during such inspections.”


    Oh, who knew that 3,100 mainland troops are stationed in Hong Kong? And hailing “Chairman Xi”?

    Okay, so we have Chairman Xi, the spreading CCP and a curious penchant to militarize parts of the Pacific (although the U.S. is by far the worst offender in this case).

    We can hope China will follow the Taiwan or Hong Kong path. China is rapidly becoming a graying and richer society, so maybe that will help.

    But take off the rose-colored glasses.

    China and large swathes of Asia have been going backwards from all types of civil rights and democracy for decades now, thanks to Islam, communism, and thuggery.

    India may be an exception.

  5. Gravatar of Alec Fahrin Alec Fahrin
    11. July 2017 at 18:54

    I completely agree with you that Cowen is wrong. He is fearmongering about China, as usual. Just like in 2015 when he made that “the fall of China” video. The guy is wrong about China quite often, despite how prescient he is on American/European issues. I assume this has a lot to do with his lack of knowledge or experience in China.

    Korea was a totalitarian monarchy that kowtowed to China for 25 centuries. Now it is more of a democracy than Japan or Taiwan or Vietnam. History does not necessarily determine our future. The world is not path dependent, or every nation would still be a monarchy.

    25% of China is already middle class. In a few decades, this percentage will pass 50%. Just like what happened for every other developed nation in the world.
    Furthermore, Cowen seems to think China is still an export-dependent economy. Yet, as a % of GDP, exports have fallen towards the levels of the USA. Domestic consumption has increased rapidly to fill that gap.

    Nonetheless, I don’t necessarily agree with your percentages.
    The definition of “democracy” is fuzzy, to say the least. East Asian democracies are definitely not liberal democracies with the power in the hands of the citizens. The militaries and companies in the Asian democracies as a whole, hold much more power than in liberal democracies.

    My prediction by 2050.
    80% chance of East Asian “democracy”.
    10% chance of liberal democracy.
    5% chance of continuation of the current authoritarian single-party system.
    5% chance of continuation with other nations becoming less democratic.

  6. Gravatar of Alec Fahrin Alec Fahrin
    11. July 2017 at 19:00


    India is definitely NOT an exception. The rule of law, media, and level of democracy has decreased steadily there over the last decade. Not to mention the secularism of the constitution being ignored by cow-meat banning hindu nationalists.

    Furthermore, why do so many “analysts” read massive changes from a one word difference? HK PLA is not the same PLA of the mainland because they report to a different command structure. Unless “Zhuxi” is used on the mainland, I’d say this was just an overly enthusiastic (and autonomous) PLA garrison commander wanting to lick a boot.

  7. Gravatar of Ryan Murphy Ryan Murphy
    11. July 2017 at 19:31

    I’m guessing your Bayesian prior on anarcho-capitalism is less than 0.01%?

  8. Gravatar of Benjamin Cole Benjamin Cole
    11. July 2017 at 23:10

    Alec Fahrin: I will stand corrected on India, as I have not lived or worked there, and only occasionally read about India. My loss; it will be the largest nation on the planet soon. If India is regressing, that is bad news, as I have been reading about pro-business reforms.

    As for mainland China, my outlook is not based on the recent appearance in HK by “Chairman Xi,” but a long string of events, extending back to Tiananmen Square. Xi makes Trump look like a cream-puff version of Peter Pan.

    As an aside, I agree that Tyler Cowen is wrong on Sino economic growth. Oddly enough, the People’s Bank of China may be one of the better central banks going, and will remain better as long as they do not Westernize.

    I like the PBoC tactic of occasionally buying bad loans from the banking system. As they are well below their inflation target, this seems an excellent way to unburden the financial system and conduct QE, or helicopter drops, at the same time.

    The other threat from the PBoC tactic of buying bad loans would be moral hazard. But if bank managers are demoted or fired maybe that is enough to prevent bad loan practices from becoming endemic.

  9. Gravatar of Christian List Christian List
    12. July 2017 at 01:20

    Odds of China becoming democratic: 95%

    Odds are meaningless when you don’t set a more or less specific timeframe.

    Odds of China never becoming democratic: 4.99%

    “Never” might not be not a meaningful timeframe in this case.

  10. Gravatar of Christian List Christian List
    12. July 2017 at 03:00

    I assume you meant to say: “by 2050”.

    I find it very hard to give any odds. There’s only one China and only one 2050 and we live in one universe only. So it will either happen or it won’t.

    I agree that you can not be optimistic about the world but pessimistic about China.

    But the opposite is true as well: It’s hard to be optimistic about democracy in China right now, because important regions of the world became less democratic in recent years (think of Erdogan, Duterte, Putin, Trump for example). So the trend seems to go in the other directon (right now).

    Democracy in China would be really revolutionary but revolutions only happend when developements become instable (often economically), so you are actually pretty pessimistic about China in the short run: You predict instability in China that leads to a revolution.

  11. Gravatar of ssumner ssumner
    12. July 2017 at 05:13

    Ben, You said:

    “Sad to say, Asia is largely going backwards and has been for decades.”

    This is just silly. Asia is far more democratic than in the 1970s. Look at Burma, Indonesia, South Korea, Taiwan, Singapore, Iraq, Iran, Philippines, Hong Kong, Turkey—not perfect, but all more democratic than in the 1970s. There are other examples as well. Yes, Thailand is going backwards.

    You said:

    “Oh, who knew that 3,100 mainland troops are stationed in Hong Kong?”

    You don’t recall what happened in 1997?

    Alec, In what sense is “power in the hands of the citizens” in America but not South Korea? I don’t understand. Can you be specific?

    And please explain how the military in Japan holds more power than the military in the US

    Ryan, You’d have to define the term before I gave odds. But my odds would probably be more than 0.01%.

    Christian, OK, over the next 100 million years.

  12. Gravatar of Wednesday assorted links – Marginal REVOLUTION Wednesday assorted links - Marginal REVOLUTION
    12. July 2017 at 07:13

    […] 5. Scott Sumner argues China will democratize with p = 0.95. […]

  13. Gravatar of Alistair Alistair
    12. July 2017 at 07:39

    You need to specify a time horizon for China to become democratic. You can’t just say p=0.95…sometime. Say “within 50 years” or whatever, or the statement is meaningless.

    I propose a wager a la Bryan Caplan. Quote me you timeframe for your P=0.95 and I will bet against you appropriately. We can let Freedom House or some third party do the determination.

    If your timescale is too long, then we may bet on a shorter, interim period at lower odds.

  14. Gravatar of ssumner ssumner
    12. July 2017 at 08:24

    Alistair, I am pushing back against the claim that China will “never” democratize. If I say there is a 5% chance they never democratize, that implies a 95% chance they will eventually democratize. In a billion years. Over at the MR comment section to Tyler’s newest post I said 50% chance in my lifetime.

  15. Gravatar of Tom Tom
    12. July 2017 at 09:10

    People keep forgetting China is a mini united nations. The Han Chinese themselves don’t even speak the same language. Each province is in itself a different country. Mandarin is the language of law and business but people speak a different language in the house.

    You can’t look at the Asian tigers and assume China will follow. First these tigers had heavy US/Uk influence. Japan, South Korea and Taiwan would not be democratic without the US. We defeat Japan in WWII. We fought the Korean War for S. KOREA. We guarantee Taiwan’s independence. Hong Kong and Singapore are the result of the British.

    A democratic China would be like former USSR. It would break apart. Its not going to happen. The West policy of antagonizing China is not going to change that. The threat of the West is too great for Bejian to allow what happened to the USSR to happen to China.

  16. Gravatar of Todd Kreider Todd Kreider
    12. July 2017 at 09:38

    I posted on Marginal Revolution yesterday:

    Cowen again makes three important claims about China without evidence:

    1) “…at times many commentators thought a democratic China was not so far away.” This isn’t my memory of the past 20 years. I predicted in 2000 that China would be a fledgling democracy by 2015 and what several China history and political science graduate students told me “never”, “maybe in a hundred years” with only one saying “maybe after 2050” as I argued they seriously estimated the power of exponentially increasing computer power on open communications.

    2) “Today, as restrictions on political speech and opposition increase, hardly anyone thinks this is a realistic scenario.”

    Again, both are stated as fact without evidence. From around 2010, I started to notice some Chinese political scientists state that they thought China would democratize around 2020. I think Cowen should explain how he knows more restrictions have been placed on political speech compared with 2010 or 2000.

    3) “…. the middle to upper middle class is still a minority in China, and will stay so for a long time. A smaller country can build up in percentage terms a larger middle class, by exporting, than can a very large and populous country.”

    The size of the middle class has exploded in China over the past 15 years as GDP per capita has increased from $4,000 a person in today’s dollars to $15,000 with cities on the East Coast at $25,000 to $30,000. China should keep growing at 5% to 7% for at least five years so in 2022 will be at $20,000 per capita. The gini coefficient is high but not so high to keep the large middle class from continuing to mushroom.


    Added now: I don’t see how Scott is predicting a middle class in China around 2050 when it is very close to being here now.

    The GDP per capita in China is where Japan was in 1973 and where the U.S. was in 1960. They didn’t have a middle class then? What is the difference. The post transfer gini coefficient is quite a bit higher in China at .50 but in 1973 Japan was at around .35 then.

  17. Gravatar of ssumner ssumner
    12. July 2017 at 10:42

    Tom, No, China is nothing like the USSR, and won’t break apart. It’s 92% Han. And most the the rest are deeply embedded in Han regions. At worst, they might lose a few tiny western regions, with 1% of their population.

    Todd, I agree it will come well before 2050, I was just being conservative.

  18. Gravatar of Chuck Chuck
    12. July 2017 at 11:27

    Once a nation becomes democratic it starts to stagnate or even decline. You see this in the history of the U.S. Voting was originally restricted to property owning white males. As the franchise was expanded the quality of governance declined.

    For China’s sake, I hope they don’t democratize for a while, but like Sumner I suspect they will eventually succumb. After being fat and happy for too long the leadership will start to forget what it took to get there. Like spoiled children, the people will start demanding “free” goodies and the leadership, like modern parents will give in.

  19. Gravatar of Tom Tom
    12. July 2017 at 11:55

    At the end of the Qing dynasty, each province was run by warlords. Mao had to forcibly reunite the country.

    There are 9 different Han dialects. The Shanghai area belongs to the Wu speaking Han. Around Hong Kong belongs to the Cantonese speaking Han. Hunan speaks a different Han dialect. They have to use Mandarin to communicate with each otherwise they can’t understand each other. Each of these groups have population in the 10’s of millions. There is always tension between the different groups just like the Tong wars in the West.

    The only thing holding them together is the threat from the West. They remember what happened at the end of the Qing Dynasty when the West forced unfair treaties on them. They will not forget the opium being force on them back then. Until the threat of the West is gone China will not allow what is happening to the US with president Trump to take place.

  20. Gravatar of Christian List Christian List
    12. July 2017 at 14:52

    I agree with Tom. Democracy is a Western idea that was “brought” to certain Asian states when Western power was pretty much at its peak. Western domination and Western appeal seem to be in decline. I doubt that the average Chinese people even know what democracy is. An idea that’s not even in their mind has no impact. And when they know about democracy then most of them see it as a decadent Western ideology far beneath their dignity. People from Russia and many Islamic states seem to think in a similar way. So no, Turkey, China, and Russia will not turn into democratic wonderlands. So far they head into the opposite direction at full speed.

  21. Gravatar of Phil Phil
    12. July 2017 at 15:09


    How did you come to $15,000 / year? Based on the quote, it looks more like $1,500?

  22. Gravatar of Major.Freedom Major.Freedom
    12. July 2017 at 16:16

    There is a convincing theory that democracies tend to result in dictatorships.

    In addition, historically this has always occurred. One notable example is the world’s first great democratic wave in the city states of ancient Greece. Then, the people kept voting to loot from the public purse, until there was nothing left.

  23. Gravatar of ssumner ssumner
    12. July 2017 at 16:30

    Tom, That’s flat out wrong. The Han are very cohesive group. Mandarin is widely spoken all over the country. The various dialects are not suffering from “tension” between each other. You may know a bit about Chinese history, but you don’t seem to be very aware of modern Chinese society. There’s more tension between New York and Texas than the south and north of China.

    Christian, No, that’s wrong. In fact your comment is silly. Please stop.

    Phil. Huh?

  24. Gravatar of Carl Carl
    12. July 2017 at 18:06

    There’s a correlation between wealth and democracy above a threshold of wealth. Below that threshold, democracy is difficult to sustain and above it dictatorship is hard to sustain. There are exceptions, but the exceptions are almost exclusively large commodity exporters. To become wealthy otherwise, an economy must operate in an environment of institutional stability and distributed decision making that is inimical to tyrannical political rule. China has moved across the wealth threshold and has done so on the merits of a diverse economy. The odds are strong that the positive feedback mechanisms that have carried it this far will aid the further distribution of power in China.

  25. Gravatar of Tom Tom
    12. July 2017 at 18:19

    Texas and New York speak the same language. The Hans do not. Mandarin is the official language like English is in India. The Haka and Cantonese have a history of tension. It is being kept in check by the central government only. Once that is taken away it will probably split up into 3 regions just like the 3 kingdom period. The threat of the West is the only thing holding everything together.

  26. Gravatar of Benjamin Cole Benjamin Cole
    13. July 2017 at 02:05

    “China economy to grow 6.6 percent in 2017, topping government target despite policy curbs: Reuters poll”

    Okay, so yet another year without a China collapse.

    This above story frets a lot about debt.

    This question of debt…man, what a topic. In Japan, the government debt will soon be owned by the Bank of Japan. So is Japan indebted? I call it Mobious strip economics.

    In China, the PBoC periodically buys bad debt from the banking system. They also engage in quasi-QE, quasi-helicopter drop activity. The PBoC is well below inflation targets.

    Will China end up monetizing its debt ala Japan?

    Will it matter?

    Should Japan, China and the US just drop the fan and go to money-financed fiscal policies?

    Why all the tweetybirding around and the building up of debt levels?

    PS. China has many of the same problems as some US cities. It has zoned tightly for residential in key cities, leading to price appreciation as money flows into China, and as incomes rise.

    Even commie bankers like to lend on zoned property. What could be safer?

  27. Gravatar of Alistair Alistair
    13. July 2017 at 03:57

    Many thanks for the reply.

    OK, so P(democratic in SSumner lifetime) = 0.5, that’s tractable. It still seems high to me. I’d certainly bet, going from east Asian priors.

    I’m guessing you’re about 55. So that’s a 30 year span? If we take the democratisation event as something with uniform probability through the span (a bit unfair – you might argue it was more likely near the end of the span).

    If China becomes democratic before 30 years are up, I will pay you immediately $300 in 2017 dollars. Otherwise you will pay me $10 in 2017 dollars per year this event does not happen? 🙂 I am sure we can agree a reasonable 3rd party metric for the event. You may wish to add caveats in case “China” ceases to be unitary entity for measurement purposes.

  28. Gravatar of Alistair Alistair
    13. July 2017 at 04:09


    I’ve notice my formulation is a little off and unfair to yourself; ideally the bet should be formulated on an exponential distribution. My annual payout should be smaller so our expected payouts are zero if your odds are exactly right…tsk, maths!

  29. Gravatar of Christian List Christian List
    13. July 2017 at 04:26

    TC wrote a short but well-argued piece why China may never democratize. You wrote a reply to that with a much stronger antithesis (“Why China will democratize“) but so far you aren’t even able to come up with just one good argument why your bold heading is true. Sad.

  30. Gravatar of Jose Jose
    13. July 2017 at 06:31

    Democracy (e.g. rule by elected government) is an overvalued concept. What is important is civil rights guarantees, rule of law, and a competitive/meritocratic process to appoint government officials.

    If China advances civil rights guarantees they may well be a much better place to be than most wetern countries with elected governments, because the appointment process within the communist party seems to be very competitive e and meritocratic

  31. Gravatar of Patrick Sullivan Patrick Sullivan
    13. July 2017 at 06:50

    Tim Taylor on the Willow Theory of Money (WTF!);


    Of course, the Treasury could simply have kept a record of these transactions in a ledger somewhere. But the tally stick system enabled something radical to occur. If you had a tally stock showing that Bishop Basset owed you £5, then unless you worried that he wasn’t good for the money, the tally stock itself was worth close to £5 in its own right.

    If you wanted to buy something, you might well find that the seller would be pleased to accept the tally stock as a safe and convenient form of payment. So the tally sticks themselves became a kind of money, a particular sort of debt that could be traded freely, circulating from person to person until it utterly separated from Bishop Basset and a farm in Wycombe.

  32. Gravatar of Patrick Sullivan Patrick Sullivan
    13. July 2017 at 08:02

    Also, another nail pounded into the coffin of the minimum wage;


    ‘This paper estimates the long-run impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18 and using monthly payroll records for the Danish population. We show theoretically how the discontinuity in the minimum wage may be exploited to estimate the casual effect of a change in the minimum wage of youth on their employment. On average, the hourly wage rate jumps up by 40 percent when individuals turn eighteen years old. Employment (extensive margin) falls by 33 percent and total labor input (extensive and intensive margin) decreases by around 45 percent, leaving the aggregate wage payment nearly unchanged. Data on flows into and out of employment show that the drop in employment is driven almost entirely by job loss when individuals turn 18 years old. We estimate that the relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is about -0.8.’

  33. Gravatar of Patrick Sullivan Patrick Sullivan
    13. July 2017 at 08:40

    Never reason from a non price change;


    Robert Gordon and many other economists have noted that the prices of high-tech equipment have fallen at a much slower pace in recent years than in earlier decades. Indeed, official published measures of prices for many high-tech products are barely falling at all. Gordon and others focus on prices because economists often use trends in relative prices in a sector to infer rates of innovation.8

    However, a growing body of literature suggests that significant biases exist in these official price measures. Byrne, Oliner, and Sichel (forthcoming) developed a new index for microprocessors used in desktop personal computers. Their preferred index fell at an average rate of 42 percent a year between 2009 and 2013, while the most comparable official price measure (the producer price index
    for microprocessor units [MPUs]) declines by an average
    rate of only 6 percent a year. This measurement gap arose
    in the mid-2000s because of a major change in the life-cycle
    pattern of Intel’s posted prices for MPUs. Before the mid-
    2000s, the posted prices of MPUs tended to fall as newer
    models were introduced. This price trajectory allowed a
    standard methodology used for semiconductors in the
    producer price index (matched-model indexes) to capture
    quality change through the rapid price declines of older
    models. Since the mid-2000s, posted prices of Intel MPUs
    have tended to remain stable, even after the introduction
    of newer, more powerful models. Reflecting these relatively
    flat price profiles, a matched-model index will indicate little
    change in quality-adjusted prices even if the quality of each
    newly introduced model is much greater than its predecessor.

    The new price measure Byrne, Oliner, and Sichel developed (an hedonic index) more fully captures ongoing quality change and reveals rapid price declines after this quality change is taken into account.

    This evidence on faster price declines indicates that innovation and multifactor productivity growth in semiconductors—the general-purpose technology behind much of the digital revolution—has been far more rapid than official indexes suggest. Byrne and Corrado (2016) document rapid price declines for a range of other high-tech products, pointing to ongoing brisk technical advances in a wide range of high-tech sectors. This evidence suggests that the IT revolution is still going strong.

  34. Gravatar of cnk guy cnk guy
    13. July 2017 at 13:48

    Every hinges on whether China will go to war. They are pushing the limits in the South China Sea, with North Korea and India.

  35. Gravatar of Benjamin Cole Benjamin Cole
    13. July 2017 at 18:51

    From AEI:

    “Is Turkey the most Orwellian country?

    July 12, 2017 1:11 pm Foreign and Defense Policy, Intelligence, Middle East, Terrorism

    Time in Turkey is running backwards, and the country increasingly seems mired in 1984.”


    Well, AEI’s Michael Rubin is clumsy with his metaphors.

    But Scott Sumner thinks Turkey is democratizing, or is more democratic than 1970.

    I wonder how this can be?

    The great reforms of Attaturk, equality of the sexes, separation of church and state, a Westernized democracy…all seem to be disappearing in Turkey.

    I have not lived or recently visited Turkey. In the 1970s, many urban Turkish girls looked a lot like Italian girls, in dress.

    Today, female travelers are advised: “Clean, modest clothing is appreciated and often required. In short, don’t show thighs, shoulders or tops of upper arms. Slacks, or knee-length skirt or dress; blouse or top with sleeves to at least the mid-upper-arm. Have a headscarf to cover your hair.”

    Here is one take on modern-day Turkey:

    “During the last ten years, a new Turkey has been created. The Justice and Development Party (AKP) government of Prime Minister Recep Tayyip Erdoğan has begun the establishment of an authoritarian regime built upon Sunni Islamic principles and neoliberal economics. We are in an era where the two have combined to create the worst of all worlds for women.”


    I do not know what “neoliberal economics” means, as “crony capitalism” would be closer to the mark.

    Westerners often project positively upon non-Western societies, particularly in outlook.

    In 1970, I would have predicted Turkey would evolve into an Turkish-style Italy.

    Instead Turkey has gone backwards.

    So what projection to make today?

    How about, “I don’t know. I also have only guesses about China. Making predictions is hard, especially about the future.”

  36. Gravatar of MichaelM MichaelM
    13. July 2017 at 21:01

    Benjamin, are you not aware that, in 1970 Turkey was in a state of near-anarchy and would suffer a military coup the very next year? And was fresh off of another military regime barely five years earlier?

    It’s been twenty years since the military successfully influenced politics in Turkey and, whatever you may think about Erdogan himself (including his long term effects on democracy in Turkey), the democratically elected government won this time.

    Is Turkey a perfect democracy today? No.

    But it’s certainly closer than it was in 1970.

  37. Gravatar of Benjamin Cole Benjamin Cole
    14. July 2017 at 01:35


    Good points. On the other hand, the military actually has a “good” reputation in Turkey, as one of the more-democratic institutions.

    As for women, perhaps they prefer a beneficent military dictatorship to fundamentalism.

    On another topic, from Nikkei Asian Review:

    TOKYO — Japan remains in dire fiscal straits, with the latest estimates still showing it behind in progress toward the goal of a primary surplus by fiscal 2020, as pressure to spend mounts while the tax base shrinks.

    The primary deficit is seen at around 8.1 trillion yen to 8.2 trillion yen ($71.4 billion to $72.3 billion) in fiscal 2020, down slightly from January’s projection. The Council on Economic and Fiscal Policy, headed by Prime Minister Shinzo Abe, will soon release its economic outlook and estimates on revenues and expenditures — sets of data the government uses to start drawing up the following year’s budget. The powerful government panel meets this Friday and next Tuesday.


  38. Gravatar of Saturos Saturos
    14. July 2017 at 05:09

    Peter Turchin reviews Dani Rodrik’s book on the limitations of economics: http://escholarship.org/uc/item/7hr2x4hs#page-3

  39. Gravatar of Scott Sumner Scott Sumner
    14. July 2017 at 05:31

    Tom, You said:

    “Mandarin is the official language like English is in India.”

    This is a ridiculous comparison. The idea that Han regions of China will split up is just silly.

    Alistair, Please don’t waste my time with this nonsense.

    Christain, You said:

    “well-argued piece”

    Really. Saying China has a long history of being non-democratic is a good argument? What country does not? Be specific.

    Ben, You don’t seem to know what the word ‘democracy’ means. It does not mean human rights, equality for women, etc. It means that the public elects governments. That’s all.

    Yes, Turkey is more democratic than in 1970, albeit less so than 10 years ago.

    Thanks Saturos.

  40. Gravatar of Ravi Smith Ravi Smith
    14. July 2017 at 08:16

    Great post! I agree that China will almost certainly become ‘democratic’ (ie. people will view China as being a democracy). However, I do sometimes wonder if democracy is really a precise term. The US, Switzerland, and Australia are some of the oldest and strongest democracies in the world, yet all are further from the ‘one man one vote’ principle than any of the Latin American or African democracies. Lorenzo noted that “Democracy is (roughly) the end point of a process of social bargaining.” Without breaking from Lorenzo’s analysis, I think that different selection pressures give rise to distinct social bargains (ie. there are multiple stable equilibriums). Here are three common equilibria:

    1. Land-owning Aristocracy: rule of law + representation. Democracy means responsibility or ‘the right of the people to fire the government’.
    2. Trading towns: local self-government + constitution (fundamental law and procedure to alter it). These types of democracies place a high value on civic participation.
    3. Monarchy: centralized authority + meritocratic bureaucracy. Democracy here refers to ‘the peaceful transition of power’.

    If I had to guess, China will end up as #3 or develop a different ‘democratic’ social bargain altogether.

  41. Gravatar of Tom Tom
    14. July 2017 at 13:03

    Just because you say China will not split does not mean it won’t. What proof do you have to support that? The many dynasties and kingdoms of China are proof that it does happen. Democracy is still an experiment. Its just some 200+ years old. Everything depends on economic growth. Looking at the US and its growing overlord class, I see it turning into the Chu state during the warring states period. Too much hoarding at the top. Once democracy surpass 700 years then there will might be some truth to it. Chinese dynasties have lasted as long 700+ years before. Even the Rome Republic didn’t last that long.

  42. Gravatar of Tom Tom
    14. July 2017 at 13:10

    Second, tranistioning from one form of goverment to another is very messy and it will weaken China to outside interference which the ruling class will not tolerate.

  43. Gravatar of ssumner ssumner
    14. July 2017 at 17:15

    Ravi, I see something like Singapore’s democracy.

  44. Gravatar of Benjamin Cole Benjamin Cole
    14. July 2017 at 17:22

    Scott: if information and news is controlled…what means “democracy”?

  45. Gravatar of Tom Tom
    15. July 2017 at 22:31

    Singapore is a country of about 5 million only. Its easier to have democray. Second, the British ruled Singapore for a long time. The transition over was simple. The people were used to the British system. They were given just more rights.

    Look what happened to India with 1 billion people. Its a mess. I won’t be surprise if India breaks up some more.

  46. Gravatar of Jon Jon
    16. July 2017 at 21:30

    It is so refreshing to read a forthright statement such as these workers earn more because of the supply demand law. Can you imagine such a statement being made in the US? At best you’d be called callous.

    There is a lot of double-speak in the China Daily. But they are free of progressive orthodoxy. Its not really possible to understand the world until you read multiple slants and work-out the angles behind the contradictions. You got to read the right publications to form a proper basis, even then working the angles is hard.

  47. Gravatar of Ognian Davchev Ognian Davchev
    16. July 2017 at 23:10

    Awesome video about ruling and politics which is relevant to the discussion.


  48. Gravatar of Carl Carl
    17. July 2017 at 10:28


    What do you think is the mechanism driving democratization in China? Is it being driven by a virtuous cycle of economic development and democratization or something else? Is it something deeper?

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