Economics

Mao and Later: How Markets Benefit Well-Being

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Berkeley economist Brad DeLong put together the chart above. In it, he uses 1991 data and matches an Iron Curtain country with a free-market equivalent. The appalling result of trying to "attempting to reproduce the Rathenau-Ludendorff Imperial German war economy of World War I" in communist countries is plain to see.

In 1989, the Iron Curtain came down, and we could see what a difference it made as we could examine levels of material well-being on both sides of the Curtain. This is as close to a perfect natural experiment as anyone could wish: the Iron Curtain's location was determined by where Stalin's and Mao's and Giap's armies marched–which is as exogenous to other determinants of economic well-being as anyone could wish….

Eschewing markets robs you of between 80% and 90% of your potential economic productivity.

Now you can argue that the difference in human well-being is less than this gap in material wealth. Cuba, after all, has a high life expectancy and a low level of inequality.

Or you can argue that the difference in human well-being is much, much greater than this gap in material wealth.

More here.

Hat Tip: Alan Vanneman.