All the Empty Bits of Europe where Millions of Refugees can Go

Rather confused today

Donald Tusk

EUROPE is “close to the limit” on accepting a new wave of refugees, according to EU bigwig Donald Tusk.

Speaking ahead of his visit to the G20 in China, the European Council President said: “The practical capabilities of Europe to host new waves of refugees, not to mention irregular economic migrants, are close to the limits

Wheras a German Minister in a speech in India says

‘We need more immigrants we welcome them we have room in Germany

Ok whats the evidence over what bits of Europe are full and which are empty?

Luckily the OECD publishes an index of rurality measuring how much of an area’s p[opulation is not living in urban areas.

In the past this was difficult to apply across Europe because of differing sizes of statistical areas.  Those fine fellows at Eurostate have applied a straightforward GIS technique to remap it based on a consistent raster grid.  Heres the result.

The green areas being the rural ones.  The results are striking, there are areas about 6 or 7 times larger than England as empty as the borders of Scotland.  How can Tusk reasonably claim Europe is full.  Also notably Hungary and England have no or few very rural Green areas perhaps explaining a little of their politics.

Given that there is a close correlation between urban expansion, economies of scale and economic growth if aging Europe is to match emerging economies growth rates it need to find areas for rapid large scale urbanisation as the national strategies of India and China do.

Certainly the green areas contain many mountainous and/or arid areas – though for right or wring this never held back China.  But it also contains many wet lush and flats areas, especially in Poland and the former East Germany.

Adjusting for post-war border changes both countries have lost around 10 million population each which have only been made up in the last few years, and both countries have static and declining populations.

But what about infrastructure etc.  If you had followed this argument Europe would still be in the Dark Ages.  Why because it is urbanisation which creates the innovation and economic growth that pays for the infrastructure.  The harmful effects of immigration only occurs when nations restrict immigrants access to land and the extent of new urbanisation.

The level of refugees reaching Europes shores by boat in 2015 is around 1/10 th of those that reached the US by boat in its peak immigration years before WWII.  The issue isnt the number of immigrants’, perfectly manageable, but the quality of the boats.

 

 

 

Why SFC models are based on Better Theory – a Response to Simon Wren Lewis

What makes Stock Flow Consistent models distinctive?

Simon Wren Lewis enters the fray following the publication of a paper jointly by Stephen Kinsella and Bank of England Collaborators.

Simon Wren Lewis damns with faint praise.

SFC models are popular with Post-Keynesians, and the definition you find on Wikipedia is “a family of macroeconomic models based on a rigorous accounting framework, which guarantees a correct and comprehensive integration of all the flows and the stocks of an economy.” Now I suspect any mainstream macroeconomists would immediately respond that any DSGE model is also stock-flow consistent in this sense. This point is made in a post by Noah Smith, and it is completely valid,…it would be a mistake for others to believe that the properties of their model show the importance of accounting rather than the theory they have used.      (my emphasis).

First off impressive as it is the BOE model has flaws.  Its treatment of investment and savings is insufficiently Kaldorian/Kaleckian to my taste, hence its unsurprising estimate of the fiscal multiplier as 1 – missing the fundamental Keynesian insight that savings are driven by investment.  Also its treatment of banking (and central bank ) equity is too Godleyian, so it still retains vestiges of the treatment of the financial sector as barter.

Unsurprisingly though Simon Wren Lewis misses that and feigns a ‘so what’response as if they are no different that pre DGSE aggregate models.  They are not.

Simon seems to treat accounting and theory as if they are counterposed.  The fundamental insight of SFC models is that modelling must be based on accounting theory.  Fundamentally the identity Assets=capital+liabilities.  With this one relationship you can derive all other economic identities Bourbaki style, such as equity, profits, debt and money.  Done properly you can avoid elementary errors which have led to such confusions as neoclassical capital and growth theory, the neglect of the financial sector and unsound concepts of state money where central banks have assets but no liabilities.

Simon is right that DGSE neglects through theory  intertemporal wealth balances, and doesn’t even have an accounting framework for measuring them.  This is why Noah Smith, Nick Rowe and others are wrong to state DGSE models as SFC.  If you allow this is an error the fundamental theoretical break with SFC models is they enable all economic actors to target some level of balances.  For example a householder saving for a deposit on a loan, or targetting investment returns for retirement, or a business forgetting  rate of return (as of course businesses maximise returns not profits).

In my own work I have used Ole Peters concept of rational leverage to replace the Euler equation approach which dogs DGSE and develop a concept of demand for money deriving from technological change which drives the financial sector.

The so called ‘heterodox’school has done a poor job of selling how and why SFC is theoretically superior.  It needs to get fundamental and undertake a project of defining all foundation economic concepts from accounting identities – right back to the roots of value theory, and tackling each and every component of orthodox theory.