Earth economics studies the economy of our planet from the perspective of an autarkic system (a “closed economy”). It ignores the constituent national and regional parts of the planet economy and focuses on the whole. The book respects the heritages of IS/LM (Keynes) and neoclassical growth (Solow) not out of economic respect but because these tools are very useful in understanding the crisis and the policy response to that crisis.
paper describes a paradox of global thrift. Consider a world in which interest
rates are low and monetary policy cannot stabilize the economy because it is
frequently constrained by the zero lower bound. Now imagine that governments
complement monetary policy with prudential financial and fiscal policies,
because they perceive that limiting private and public borrowing during booms
will help stabilize the economy by reducing the risk of financial crises and by
creating space for fiscal interventions during busts. We show that these
policies, while effective from the perspective of individual countries, might
backfire if applied on a global scale. In a financially integrated world, in
fact, prudential policies generate a rise in the global supply of savings, or
equivalently a drop in global aggregate demand. In turn, weaker global
aggregate demand depresses output in countries whose monetary policy is
constrained by the zero lower bound. Due to this effect, the world might
paradoxically experience a fall in output and welfare following the
implementation of well-intended prudential policies.
widely understood that the real price of globally traded commodities is
determined by the forces of demand and supply. One of the main determinants of
the real price of commodities is shifts in the demand for commodities
associated with unexpected fluctuations in global real economic activity. There
have been numerous proposals for quantifying global real economic activity. We
discuss which criteria a measure of global real activity must satisfy to be
useful for modeling industrial commodity prices, we examine which of the many
alternative measures in the literature are most suitable for applied work, and
we explain why some popular measures are inappropriate for modeling commodity
prices. Given these insights, we reexamine in detail the question of whether
global real economic activity has declined since 2011 and by how much. Drawing
on a range of new evidence, we show that the global commodity price boom of the
2000s appears to have been largely transitory. Our analysis has important
implications for the design of structural models of commodity markets, for the
analysis of the transmission of commodity price shocks to commodity-importing
and exporting economies, and for commodity price forecasting.
the global economy becomes more integrated, there is a growing tension between
the nature of economic activity and the measurement system that attempts to
keep up with it. Many policies are still determined by measuring economic
activity at the national level. Since the typical unit of analysis is the
economic area (the “island”), economic activity is measured within the island
and in terms of transactions between islands. But, increasingly, companies and
their ownership are global, with economic activity taking place in a
geographically dispersed way. We analyse several important issues created by
this tension, show how they manifest themselves in the data and draw lessons
New data are available on Earth's per capita income. This project of Groningen University provides data for 169 countries and several world regions including World. The Maddison series provides estimates dating back to the year 1 AD. The series cgdppc is based on international comparisons of income levels; rgedpnapc (what's in a name) is based on growth rates according to National Accounts
Economic inequality is
widespread and has been growing since the 1980s, calling economic
growth policies around the world into question, according to new
research from the World Inequality Lab. The study findings are
detailed in the first World
The full report is
available in English, but the 20-page summary is available in 8
languages: English, French, Spanish, German,
Russian, Arabic, Hindi and Chinese - wir2018.wid.world
The research relies on the most extensive database
on the historical evolution of income and wealth inequality.
It aims to contribute to a more informed global democratic debate
on economic inequality by bringing the most up-to-date and
comprehensive data to the public discussion.
The report was coordinated by
economists Facundo Alvaredo, Lucas Chancel, Thomas Piketty,
Emmanuel Saez and Gabriel Zucman.
coordinator of the report, stressed:
the first time ever, this report examines how global growth
shared among individuals in the entire world since the 1980s,
particular focus on emerging countries
inequality data had previously been sparse or nonexistent."
The primary research findings indicate that income inequality has
increased in nearly all world regions in recent decades, though at
different speeds, highlighting the important roles of governments
to mitigate inequality. Since 1980, income
inequality has increased rapidly in North America, China, India,
and Russia, while growing moderately in Europe. However, there are
exceptions to this pattern: in the Middle East, sub-Saharan Africa,
and Brazil, income inequality has remained relatively stable, at
extremely high levels.
Chancel, general coordinator of the report, emphasized:
fact that inequality trends vary so greatly among countries,
countries share similar levels of development,
the important role of national policies in shaping inequality.
instance, consider China and India since 1980: China recorded
higher growth rates with significantly lowerinequality levels
positive conclusion of the World Inequality Report is that
policy matters, a lot."
The report also reveals the
dramatic decline in the net wealth of governments over the past
decades and the challenges this poses for tackling inequality.
Based on the data, the report discusses promising options to tackle
income and wealth inequality—starting with the importance of
economic data transparency.
Zucman, coordinator of the report, said:
establishment of a global financial registry to record the
financial assets would deal severe blows to tax evasion
laundering, and would enhance the effectiveness
progressive taxation, which is an essential tool in reducing
The report stresses the need for more ambitious
policies to democratize access to education and well-paying jobs in
rich and emerging countries alike. Public investments
in health and environmental protection are also necessary to
empower younger generations. To finance these investments in the
future, capital taxes on the wealthiest or debt relief have
regularly been used by governments throughout history.
results of the report include the following
- Strikingly, since 1980 the richest 1% captured
twice as much as the poorest 50% of the world's population.
In other terms, since 1980, 27% of all new income generated
worldwide were captured by the richest 1%, while the poorest 50% of
the world's population captured only 13% of total growth. These
figures are brought into sharp contrast considering the top 1%
currently represents 75 million individuals while the bottom 50%
represents 3.7 billion individuals. The population in between,
largely comprised of lower- and middle-income earners in North
America and Europe, experienced sluggish or even zero income growth
- Since 1980 there have been
large shifts in the ownership of capital. Who owns this capital is
crucial in determining inequality. Net private
capital--the assets of individuals minus their debts--has risen
enormously in recent decades, but conversely, net public
capital--the assets of governments minus their debts--has declined
in nearly all countries since the 1980s due to large scale
privatizations and rising public debts. Public capital is now
approaching or below zero in rich countries. This exceptional
situation by historical standards has strong implications on
policy. In particular, it becomes extremely challenging for
governments to invest in education, healthcare or environmental
- Wealth inequality among
individuals also increased sharply since 1980.
Significant increases in top wealth shares have been experienced in
China and Russia following their transitions from communism to more
capitalist economies. The top 1% wealth share doubled in both China
and Russia between 1995 and 2015, from 15% to 30% and from 22% to
coordinator of the report, stressed:
combination of privatizations and increasing income inequality
the rise of wealth inequality—within countries and at the global
level, private capital is increasingly concentrated among a few
was extreme in the U.S., where the share of wealth
the top 1% rose from 22% in 1980 to 39% in 2014."
- Global income and wealth inequality will
steadily rise if countries continue to follow the same trajectory
they have been on since 1980, despite strong growth in emerging
countries. By 2050, the share of global wealth held
by the world's 0.1% richest (representing 7.5 million individuals
today) be equal to that of the middle class (3 billion
- However, rising global
inequality is not inevitable in the future and limiting it will
have tremendous impacts on global poverty eradication.
If all countries follow the same inequality trend as Europe since
1980, the incomes of the bottom half of the world population could
rise from €3 100 in 2017 to €9 100 in 2050. Alternatively, if
countries were to follow the U.S. trend, the incomes of the bottom 50%
would rise to just €4 500 by 2050.
The data presented in the report
combines in a systematic and transparent manner all available
economic data sources, including household surveys, tax receipts,
and income and wealth national accounts (including offshore leaks,
when available). This enterprise relies on the analysis of more
than 175 million data points on inequality.
Alvaredo, coordinator of the report, said:
enterprise relies, in one way or another, on the inequality
in WID.world −The World Wealth and Income Database−
inception as the World Top Incomes Database in 2011.
databases would not have been possible
the cooperation of more than 100 researchers around the world.”
Inequality Report 2018 Highlight
WID.world relies on the combined
effort of an international network of over a hundred researchers
from all continents...