Sv: NB Li Feng Seminar is nearly over with big issues outstanding

[Hugh Whinfrey <whinfrey@xxxxxxx>]

John M. Legge wrote:

>The discussion of Li Feng's paper seems to have been very thin, in
>spite of the importance of his subject.

I apologise for not participating - I was extremely interested when he
first came out with the paper, but I just have too many 'threads' going on
in my life at the moment to open another one up.  However, I am fascinated
by the conclusion here, and have made some comments below:

>I developed a two sector, two period model of an economy based on Li
>Feng's relationships, and one strong conclusion is that, in a society
>with an advanced (=high growth of productivity) and a large less
>advanced sector, full employment growth NECESSARILY involved
>significant inflation.
>
>If 70% of economy is "low tech" with 2% pgr, and 30% is "high tech"
>with 6% pgr, and low tech output is held constant, growth will be 2.6%
>real and inflation will be 3.4%.  If real wages are constant, real
>profits will rise 29.7%.  Keeping inflation lower than this  requires
>an unrealistically rapid transfer of productive resources from the low
>to the high tech sector.

So, essentially, the traditional infrastructure gets impoverished and
excessive funds are diverted into the more speculative sectors of the
economy. Sounds remarkably like a description of the alleged blowoff
top in the US stock market these days, and fingers low inflation as
the culprit.  Amazing.

What happens with a longer multi-period model?  Has this been played
around with? Specifically, the values of the variables it produces
after the point at which it may seem to break down or go unstable might
be of some interest.  Also, the point at which it is too late to reverse a low
inflation policy would also be of interest.

I'm afraid I won't be able to take the time to deal with it myself for several
months, but I'd love to hear from anybody who has checked out my questions
above and could give me an 'appetizer' on it.

Hugh


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