My blog on an alternative view of economic theory turned out to be very popular. So here’s another one in a similar vein, this time it was a speech given to academics and central bankers last summer. It’s a 7 minute read:
(Thank you academics)
I would like to thank the organizers of this conference for inviting me. I feel honoured to be in the company of academics and central bankers. Coming from the finance sector, academia appears like a noble profession that puts the pursuit of truth above all else. Moreover, having sat in on the conference I can fairly say that the accusations that academics live in ivory towers, care more about pleasing journal editors than truth, and bias their choice of research to maximize funding opportunities are all profoundly untrue! Now, I must use this opportunity for your help in answering three pressing questions I have.
(Question 1: data)
The first one relates to data. I noticed that many of you use lots of data to verify your ideas. This is great as it brings you closer to the real world, but have you heard of GIGO? It stands for “garbage in, garbage out”. Sometimes it is put in more colorful and vulgar terms, but I’ll leave that to your imagination.
(Adding up China)
I ask because I also work with lots of data and more often than not I find it is deeply flawed. Let me give two examples. How big is the Chinese economy? Using GDP, it is around $8 trillion, making it the second largest economy in the world. And depending on what price index you use, it could be similar in size to the US  . But how is the GDP number compiled? I ask because China is a vast and complex country, yet it can produce its first and final GDP number only ten days after the end of the quarter! Even the US cannot do that – it takes a month for the first estimate, and then another two months for the third estimate. On top of that, if you add up the GDP of the provinces, they add up to $1 trillion more than the published total for China as a whole  . That’s the equivalent of Mexico or Korea! And this discrepancy has been increasing over time.
(Put them in prison)
I don’t want to be biased against the developing world, so for my second example I’ll take the US. As we know, the Fed is obsessed with unemployment. The latest data shows the US unemployment rate falling to 6.3%  . Remember it was 10% in 2009. In the Euro-area it is 11.8%, but even before the crisis, the lowest it ever got was 7.3%. Even the more Anglo-Saxon UK has higher unemployment at 6.9%. So the US seems to have structurally lower unemployment than Europe. How does it do it? Flexible markets, supply-side reforms, American exceptionalism? Well if you delve deeply into the numbers it seems like the gap can be explained by the fact that the US has put over 2 million people in prison or around 1.5% of the labour force  . In the UK it’s only 0.3%. Once you take this into account, then the US unemployment rate is higher than the UK. So it seems like the US would rather put people in prison than to have them unemployed. The irony is that incarceration costs per inmate are $30,000 a year compared to unemployment costs of $15,000 per year  .
But I’m sure of all of you are fully aware of how most data is useless, and so there is no question whatsoever that your papers suffer from the GIGO issue!
(Question 2: Land)
Anyway, over to my second question – land. .When I studied economics at high school, I was taught about the three factors of production: land, labour and capital. I notice that most academics, including those in emerging markets, tend to focus on the capital part. So that may be capital flows, capital stocks, asset pricing or industrialization. There is some work on labour, but almost none on land. Not only that, but when I studied economics at Cambridge, I discovered that there was a degree course called “Land Economy”. Amongst us “real” economists that course had a reputation for … how shall put it … lack of rigour and acceptance of students who win the Boat Race for Cambridge. How wrong could I have been!
(Origins of crises)
After all, it was property that was behind the 2008 financial crisis, it was farming/commodities that partly inspired the Arab Spring and most recently it is a land dispute that has brought Ukraine and Russia to the brink of war. In fact, land ownership probably gives us a better explanation of economic development than any other factor.
(Basics of capitalism)
Because once land reform is introduced, it necessarily requires a system of measurement (of plots of land) and contracts to create deeds. This leads to the creation of a financial system as the land can be used as collateral for loans. Finally, land ownership would not mean anything if there was no legal system to enforce and recognize ownership. So all the ingredients for a successful modern capitalist economy come from land reform  .
(The unsung hero)
That was the case for the US and Europe during their development phases. In Asia, Deng Xiaoping innovation was not opening up to the world, but rather it was land reform; the chengbao system, which allowed 30y leases for farmers to cultivate and sell produce. Earlier post-war East Asian success could also be traced back to the US implementing the land reform ideas of the Soviet exile Wolf Ladejinksy, a land economist. So one doesn’t need to be a Marxist to obsess about land, just look at the facts.
So it puzzles me why most academics ignore land, what could be more important than who owns the Earth!
(Question 3: what’s the point of it all?)
My final question is perhaps the hardest. What is the point of it all?! Emerging countries are all striving to become as rich as the US, but to what end? Let me take a stab at that question. The US is the richest country the world has ever seen. The average person earns $53,000 a year. This compares to $34,000 in the Euro-area, $37,000 for Japan and $10,000 for China  . That sounds good, doesn’t it? But what does it mean in terms of day-to-day living? Well let’s take a look. Survey data shows that the average American lives in a 3 bedroom, 2 bathroom 1500sq ft house  . The typical job is to work in retail, the typical position a cashier or a middle manager. Workers who take annual leave typically take 8 days 
Let’s drill down further. On an average day, an American sleeps for 8 hours, works for 8 hours, spends around 3 hours doing chores and has 4 hours of leisure time  . And what is most leisure time spent doing?! Watching TV!
What do they watch? Well the most viewed TV shows are the crime show “NCIS” – a show about a grumpy man, who always gets it right, and his team solving crimes. The second most viewed show was “Sunday Night (American) Football” – a show with a bunch of tough guys with pads chasing a ball. The third most viewed show was the comedy “Big Bang Theory” – a show about a group of nerdy men trying to live in the real world .
So during the 200,000 years of human existence, we’ve seen majestic art and architecture, the flourishing of philosophies and religions and advances in technology that has allowed man to see deep into space and split the atom. The culmination of this all is the US, where the favoured choice for free time is to watch NCIS or the Big Bang Theory! That’s where all your work is leading emerging market countries. Remember that, the next time you publish a paper.
 Recent World Bank data shows that making the appropriate cost of living adjustments, the US and China are now similarly sized.
 The sources for the provinces and published headline GDP are different, which may account for some of the discrepancy. But the discrepancy has exploded since 2009 suggesting something beyond measurement error.
 Bureau of Labor Statistics. If one includes discouraged workers and part-time workers who want to work more, then the US unemployment rate rises to 12.3%.
 International Centre for Prison Studies. The US has the highest prison population rate in the world at 716 per 100,000 of the national population. The US is followed by St Kitts and Nevis (714), Seychelles (709), and Virgin Islands (539). For comparison, South Africa’s prison rate is 294, Mexico’s is 219, Iran’s is 284, China’s is 121, UK’s is 148 and Russia’s is 475.
 Vera Institure of Justice: “Price of Prisons: What Incarceration Costs Taxpayers”, January 2012. CBO: “Unemployment Compensation and Trade Adjustment Assistance for Workers – CBO April 2014 Baseline”
 See the excellent “Owning the Earth: The Transforming History of Land Ownership”, Andro Linklater (2014)
 IMF, PPP-adjusted data
 US Census. Most are mortgaged or rented, so 20% are owned outright.
 Bureau of Labor Statistics.
 US Bureau of Labor Statistics, Time Use Survey. Only 40 minutes of free time is spent socialising with others.
 US TV Guide. Data for 2012-2013 season. More recent data shows that “Dancing with Stars” has toppled “Sunday Night Football” (Nielsen).