I read an amazing article on a 16th century economist Sir William Petty
Its amazing to see that so early on he could estimate the GDP, create guessitmates as a legitimate method of prediction & planning. What should be the ideal money supply, what is velocity of money, how do banking system, interest rate and foreign trade impact the growth and development of the nation.
He estimated the value of land based on economic output and Present value. He estimated (quite accurately) the peak population & size of London, impact of full employment, division on labor on productivity.
What it pains to see that although his theories were pretty accurate foundation stone of economics, he never received any credit for this path breaking thoughts and theories. Adam Smith’s wealth of nation had no reference to his work, John Maynard Keynes recreated his work abinitio when computing aggregate demand and unemployment. Only Karl Marx Das Kapital has given him some credit.
Why is the world so much obsessed with per capita GDP?
Its gives us an illusion that population is the limiting factor for every nation. However we very well know that in most countries 5-7% unemployment is considered healthy. Also if you are as rich as USA/Western Europe then one of the major concern of the country is to limit the population influx and keeping illegal immigrants under check. So essentially a country can always increase its workforce.
So what is the most limited of all resources… LAND.
In the paper Geography and Economic development the authors John Gallup, Jeffrey Sachs and Andrew Mellinger plotted the GDP per unit land all over the world.
Notice how prominent are the rivers like the Ganges and the Grand canal in China in this plot. The plot reinforces our conviction that most wealthy cities are ports which are close to the sea/inland waterways and hence the wealth of the nation is a function of the connectivity and influx of man and goods.
What i could not stop wondering is that how close this graph is to the night sky of the Planet Earth. So its like the Big Mac Index. The economist can spend a year collecting data and crunching it, or just take a picture and get a fairly accurate answer. After all the more prosperous you are, the more outdoor lighting you need.