Saturday, 3 November 2012

Two articles in The Economist

A bad error is in this, from 2007 (found when I was arguing that children ARE a public good):

First, it should be obvious that nations don't have to have pension systems highly sensitive to worker-to-retiree ratios. A shift to a system of mandatory personal retirement accounts immediately solves that problem.

It's an old joke that when The Economist is at its most certain it is at its most wrong, and this would back that up. It's not 'obvious' because such a shift does not solve that problem, either immediately or over the medium-term. If you think about it for a second it's obvious that it does not - imagine if no-one was born after you, and so when you reached 65 or 70 and retired there were no younger people in employment. What good would your personal retirement account be then? If it was in equities, those companies would be worthless, if it was in govt bonds, the govt would have defaulted, it was in cash that would be inflated away. Or simply think about it in terms of actual transactions - who would make you food, or provide healthcare?The only get out is if it was invested overseas, but that isn't the argument being made here.

Less of an error, but sloppy, is in this week's edition. In an article on French competitiveness, it says:

The Netherlands, with a fraction of its population, now exports more than France.

The Netherlands is an important trading nation, but a key reason for the Netherlands' remarkable export performance is its huge amount of "re-exports" (about 50% of exports). These are imports that come into a Dutch port via a trader, and are then rexported unchanged to another country, most commonly Germany. There is value-added by Dutch traders, but it is a small fraction of the nominal value of goods traded.

Now there might be good reasons to believe French competitiveness has declined and its export performance compared with the Netherlands might be one of them. But this particular statistic doesn't really tell us anything. After all the Netherlands also exports more than the UK, which has a similar population to France.

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