The perils of knowledge-based-growth
Snower and Bosworth present an interesting analysis on how knowledge based growth can lead to economic and societal fragmentation. They develop a model where there are three types of utility defined by three different identities: an individualistic identity, which is based on egocentric values; a communitarian identity which is driven by the sociocentric values of affiliation and induce individuals to contribute to common cause; and finally a multi-affiliated identity which adopts both sociocentric and egocentric values and utility is derived from both individualistic and communitarian pursuits. Identity formation is endogenous and based on skill. Each type agent maximizes the utility subject to a budget constraint that is a function of their knowledge level i.e. higher skills lead enable agents to consume more.
Our analysis shows how people who are privileged in terms of education and skills tend to adopt individualistic identities, the less privileged are drawn to communitarianism, and those in the intermediate range of the skill spectrum become “multi-affiliated”. Skill- and education-biased growth leads to increasing social polarisation, expanding the individualistic and communitarian groups at the expense of multi-affiliates. This expands the political constituency for closed policies (such as protectionism, immigration controls and nationalism), even when these policies reduce everyone’s living standards. Our analysis thereby the economic and social underpinnings of populism.
Economic, Social and Political Fragmentation: Linking Knowledge-Biased Growth, Identity, Populism and Protectionism
Authors: Dennis J. Snower, Steven J. Bosworth
From: Oxford University, University of Reading
A taxonomy of policies for inclusive prosperity
The policy matrix is an organizing framework. It does not per se determine what the right policies are, but highlights that there are opportunities at each of the three stages of the economic process and at different segments of the income distribution. It can help streamline policy discussions, identify areas for intervention, reveal how different parts of an overall policy system fit together, and allow useful comparisons across policy regimes in different countries.
A Policy Matrix for Inclusive Prosperity
Authors: Dani Rodrik, Stefanie Stantcheva
From: Harvard University
