Publications by Author: Cooper, Richard N.

2010
Cooper, Richard N, Stefan Collignon, Masahiro Kawai, and Yongjun Zhang. 2010. “Rebalancing the Global Economy: Four Perspectives on the Future of the International Monetary System.” Bertelsmann-stifung. Bertelsmann-stifung. Publisher's Version Abstract

The Europeans can be proud as they look back on fifty years of peaceful integration. Nowadays many people in the world see the European Union as a model of how states and their citizens can work together in peace and in freedom. However, this achievement does not automatically mean that the EU has the ability to deal with the problems of the future in a rapidly changing world. For this reason the European Union needs to keep developing its unity in diversity in a dynamic way, be it with regard to energy issues, the euro, climate change or new types of conflict. Self-assertion and solidarity are the fundamental concepts which will shape the forthcoming discourse.

“Europe in Dialogue“ wishes to make a contribution to this open debate. The analyses in this series subject political concepts, processes and institutions to critical scrutiny and suggest ways of reforming internal and external European policymaking so that it is fit for the future. However, “Europe in Dialogue“ is not merely trying to encourage an intraEuropean debate, and makes a point of including authors from non-EU states. Looking at an issue from a different angle or from a distance often helps to facilitate the crucial change of perspective which in turn makes it possible to continue to develop Europe in a meaningful way and to engage in a critical and yet courteous discourse with other civilizations and continents.

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Cooper, Richard N. 2010. “The World Economy in 2033”. Abstract
The record of long-term forecasting, particularly by economists, is not a glorious one. In a celebrated article, the great English economist John Maynard Keynes, writing in 1930 about “the economic possibilities of our grandchildren,” forecast that in a century’s time the working week would be about 15 hours long, thus creating a serious challenge of how to use our extensive leisure. We have less than a quarter century to realize that result. The trends point in the right direction, but are substantially off in magnitude.
Cooper, Richard N. 2010. “Does the SDR Have a Future?”. Abstract
This article will briefly address the future prospects for the dollar as an internationally acceptable denomination for assets, and then discuss the several ways in which the SDR or some other internationally-agreed reserve asset might partially substitute for the US dollar in its international roles, and even eventually replace it. It concludes that there is no practical substitute for the dollar in the near future, meaning the next decade or two; and that while the SDR could be made a substitute for the dollar along several dimensions in the longer run, it would require a major concerted effort by the leading governments of the world to do so.
2006

International treaties in pursuit of common endeavors can be classified into two categories: those that set mutually agreed national objectives and leave each signatory to pursue them in their own way; and those that define mutually agreed actions. The proposed treaty on global climate change falls into the first category with respect to greenhouse gas emissions by the rich countries. Stabilization of atmospheric concentration of greenhouse gases requires eventual engagement of developing countries. The proposed treaty, based on historical emission levels, does not provide a foundation acceptable to them. Indeed, there is unlikely to be any generally acceptable principle for allocating emission rights, potentially worth trillions of dollars, among rich and poor countries. This probable impossibility suggests a successful attack on greenhouse gas emissions, necessarily international in scope, must be through mutually agreed actions, such as a nationally-collected emissions tax, rather than through national emission targets.

Cooper, Richard N. "A Treaty on Global Climate Change: Problems and Prospects." Working Paper 97–09, Weatherhead Center for International Affairs, Harvard University, December 1997
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Cooper, Richard N. 2006. “Understanding Global Imbalances”. Abstract

Two contemporary issues provide reason to focus on national saving and investment: the debate over public pensions, and pensions more generally, in all rich countries; and the large global current account imbalances, conceptually the difference between national savings and domestic investment. Are we all saving enough to provide adequate retirement income for rapidly ageing populations—especially Americans, whose household savings seems to have disappeared altogether in 2005? And are the countries with large external deficits—notably the United States—mortgaging the income of future generations inappropriately, not to mention courting financial calamity in the meantime?

This paper will not answer either question definitively, but I hope to shed some light on them, especially the second. The focus of attention will be the United States, but in an increasingly globalized economy it is increasingly anachronistic to focus on domestic factors alone, and it is simply inappropriate when the issue is the country's external deficit—equal attention must be devoted to the counterpart surpluses elsewhere in the world.

1092_rc_globalimbalances.pdf

2005

The Bank for International Settlements (BIS) was created in 1930 primarily to administer the Young Plan, including reparations loan repayments from Germany. But the first objective of the BIS, as defined in its statutes, is to "promote the cooperation of central banks…"—to provide a place of meeting for central bankers to exchange information, discuss common problems, agree on shared aims, set common standards, and possibly even provide mutual support. This objective must be viewed against the background of the 1920s, when there had been episodic, typically bilateral cooperation among central banks. Indeed episodes of such cooperation can be found in the pre–1914 period, for example a gold loan by the Bank of France to the Bank of England during the Baring Crisis of 1890, or discounting of English bills by the Bank of France in 1906, 1907, 1909, and 1910, thereby relieving pressure on the gold reserves of the Bank of England. Indeed, examples can be found from even earlier, including the Latin and Scandinavian currency unions.

1052_almost_a_century_final.pdf

WCFIA Working Paper 05-04, August 2005.

Cooper, Richard N. 2005. “Living with Global Imbalances: A Contrarian View.” Policy Briefs in International Economics. Abstract

Three propositions have become conventional wisdom in Washington and elsewhere. Americans save too little. As a consequence, the US current account deficit is unsustainably large. A necessary step to bring the global economy into sustainable balance is a significant appreciation of the Chinese currency, which in practice has been fixed to the dollar for over a decade. All these separate but related propositions are highly questionable. This policy brief addresses each in turn. It suggests that Americans save quite enough for future generations, that the startlingly large US current account deficit is not only sustainable but a natural feature of today's highly globalized economy, and that a revaluation of the Chinese currency, far from alleviating global imbalances, would run the risk of precipitating a financial crisis. These claims are not meant to suggest there are no problems with the current state of affairs. Rather, this brief suggests that events need to be interpreted in light of the evolution of the US and world economies in recent years and that this interpretation will put the global imbalances in a different perspective.

1072_rc_livingimbalances.pdf
Cooper, Richard N. 2005. “Sino-European Economic Relations”. Abstract

This paper addresses the evolution of economic relations between Europe, especially the European Union, and China over the past two decades, since the emergence of China as a significant player in the world economy. Data on the dramatic increases in trade and financial flows are presented, and comparisons made with the United States. Official dialogue between the EU and China is also addressed. In the economic realm, the parallel between Chinese–EU developments and Chinese–American developments is remarkable, both in trade and in foreign direct investment. Both bargained hard to gain market access from China on the latter?s accession to the WTO and share similar concerns with the trade and economic policies of contemporary China. While official contact between the EU and China is extensive, China remains relatively low in EU priorities, which are heavily focused on the evolution of the EU itself and on its immediate neighborhood. Europe lacks the security commitment to East Asia of the United States, and that lends a remoteness to China, which growing economic relations may eventually overcome.

1018_cooper_final.pdf

Cooper, Richard. "Sino-European Economic Relations." Working Paper 05–03, Weatherhead Center for International Affairs, Harvard University, June 2005.

2002
Cooper, Richard N, and Richard Layard. 2002. What the Future Holds: Insights from Social Science. The MIT Press. Publisher's Version Abstract

Predicting the future is notoriously difficult. But systematic analysis leads to clearer understanding and wiser decisions. Thinking about the future also makes social scientists focus their research into the past and present more fruitfully, with more attention to key predictors of change.

This book considers how we might think intelligently about the future. Taking different methodological approaches, well-known specialists forecast likely future developments and trends in human life. The questions they address include: How many humans will there be? Will there be enough energy? How will climate change affect our lives? What patterns of work will exist? How will government work at the local, national, and world level? Will inflation remain under control? Why have past forecasts been so bad? The book concludes with a discussion of the intellectual and historical context of futurology and a look at the accuracy of predictions that were made for the year 2000.

Late in 2001 the new Deputy Managing Director of the International Monetary Fund (IMF), Anne Krueger, boldly suggested that under certain conditions international debt repayments by a sovereign borrower (= government) should be temporarily suspended while negotiations take place on restructuring its debt. Thus the IMF officially endorsed one of the more radical suggestions for improvements in the international financial architecture that have been made since the Mexican financial crisis of 1995 and the several Asian crises of 1997. This article provides analytical and historical background to evaluate this and other proposals for reform.

571_kruegertxt.pdf

This book has already received wide attention. Its distinguished author has taught economics at Yale, Princeton, Oxford, Stanford, and now Columbia University. He shared the 2001 Nobel Prize in economics for his contributions to understanding the impact of asymmetric information on economic behavior and institutions. He served on President Clinton's Council of Economic Advisers, first as member, then as chairman, before moving in early 1997 to the World Bank as senior vice president and chief economist. Thus he had a ring–side seat among policy–makers during a significant decade which saw the completion of NAFTA and the Uruguay Round, the creation of the World Trade Organization, the transformation of former communist countries to market economies, rapid growth in the world's two most populous poor countries, and several serious financial crises.

Stiglitz reminds his readers again and again that the ultimate purpose of economic policy should be security and prosperity for all—gainful employment, growth in income, adequate public services,especially health and education—that foster individual well-being and facilitate further growth.

570_stiglitzrev.pdf
2001

This paper addresses the influence of foreign trade and investment on inequality or, more generally, on the distribution of income, with a focus on developing countries. There has been some scholarly debate on the influence on economic growth of economic openness to the rest of the world. Since growth affects the level of poverty and the distribution of income, the trade–growth nexus is also addressed.

"Distribution of income" has several quite different meanings, apart from the issue of the specific measurements that are used to describe it. Economic theory has mainly been concerned with the functional distribution of income, that is, with the returns to different identifiable factors of production and their respective shares in total income of a particular country, such as the share of labor income in national income. Popular and political discourse is more concerned with the size distribution of income, such as the fraction of national income accruing to the top ten percent, or the bottom decile, of residents of the country in question — and in particular on whether inequality has risen or declined. In recent years, concern with the size distribution of income has extended to the global distribution, where observations are on countries, grouped by per capita income, rather than on individuals.

The two concepts of distribution are related by the ownership of the factors of production, especially land in a predominantly agrarian economy, capital in a modern economy. If ownership of land and capital were evenly distributed across a population, even significant changes in the functional distribution of income would have little impact on the size distribution of income.

Cooper, Richard. "Growth and Inequality: The Role of Foreign Trade and Investment." Working Paper 01–07, Weatherhead Center for International Affairs, Harvard University, 2001.

Cooper, Richard N. 2001. “The Kyoto Protocol: A Flawed Concept”.
Cooper, Richard N. 2001. “Chinese Economic and Budgetary Prospects”. Abstract

Market exchange rates can move around a lot, particularly but not only around currency crises. For this reason, they can properly be averaged over several years for international comparisons. However, the Chinese yuan has been fixed at roughly 8.3/dollar since 1994. In my view it is modestly undervalued, as evidenced by the steady growth of China's foreign exchange reserves, the result of central bank market intervention to keep the yuan from appreciating. China has also had a significant trade surplus in recent years. However, it still maintains controls on outflows of domestic capital. And it is about the enter the WTO, following which under the access agreements China must reduce its import barriers much more than its trading partners do. Many Chinese are fearful of withering foreign competition. If these fears prove to be valid and widespread, the yuan might have to depreciate over the next five years, although my guess is the required depreciation will be modest, e.g. 10-15 percent. Moreover, WTO membership may result in more inbound foreign investment, thus mitigating the required depreciation or even eliminating it altogether. The bottom line is this: the market exchange rate provides a much better basis for converting Chinese GDP into dollars than does some artificially constructed ppp rate. Following the pattern of Japan and Korea, the real exchange rate of the rmb might appreciate over time, as China develops, but that process will occur at a modest rate, over decades.

437_senatetst.pdf

Paper presented at Congress public hearing "Chinese Budget Issues and the Role of the PLA in the Economy," December 7, 2001.

Cooper, Richard N. 2001. “What's New in the New Economy?”. Abstract

The "new economy" has become a buzzword to characterize the American economy, with positive connotations but imprecise meaning. Sometimes it is used to refer only to selected high technology sectors, specifically computers, semiconductors, software, and telecommunications. But usually the term implies significant changes in the US economy as a whole. At its most dramatic, the term suggested that the traditional business cycle has been banished, inflation and unemployment have been brought forever under control, US long–term growth rates have increased significantly, and the high–value stock market was not over–valued and indeed would continue to rise.

More modestly, it suggests that the structure of the US economy has changed fundamentally, with the implication, inter alia, that monetary and fiscal measures affect the economy differently from the way they did in the past. Finally, it suggests that US productivity growth has returned to, or at least toward, the high levels it enjoyed in earlier years, before the slowdown of the mid–1970s.

This paper will discuss the factual bases for conjecturing that the United States might indeed have a "new economy," review the controversies and evidence surrounding that claim, and suggest how the emergence of a "new economy," if indeed there is one, might affect economies elsewhere in the world, including the Asia–Pacific region.

436_paftad_september.pdf
2000
Cooper, Richard N. 2000. “China into the World Economic System”. Abstract

China in 1978 embarked on a major economic transformation, seeking to alter the stance of the previous 30 years and engage economically with the rest of the world in several dimensions—trade, foreign direct investment by private firms, external borrowing by government from both private and public sources, education. Each of these represented a major change in policy. The transformation in the intervening 22 years has been dramatic and palpable, as can be seen in the sky–lines of the major cities.

Published in Journal of East Asian Studies 1, no. 1 (February 2001).

1999
Cooper, Richard N. 1999. “The Asian Crisis: Causes and Consequences”. Abstract

This paper focuses on Thailand, partly because that is where the dramatic events started, to identify the problems in Thailand that gave rise to its crisis. Important details differ from country to country. Focussing on Thailand will give some flavor of what was happening, with some similarities with other countries.

Cooper, Richard N. 1999. “Exchange Rate Choices”. Abstract

This paper will suggest that the responses that have been given by many economists concerning exchange rate policy over the past few decades are inadequate and possibly quite poor advice to decision–makers.

Cooper, Richard N. 1999. “Prospects for the World Economy”. Abstract

This paper explores four factors which we hardly notice from year to year, but which accumulate relentlessly over time, such that by 2015 they will have profoundly transformed the world as we now know it. The four factors are population growth, growth in per capita income, increasing international mobility among national firms and individuals, both made possible and driven by technological changes in transportation and communication, and the aging of existing political leaders (as well as everyone else).

US Secretary of Treasury Rubin was doubtless not aware when last year he urged a review of the international financial architecture that he was opening a Pandora's Box, unleashing a torrent of metaphors. My remarks will be organized under four architectural headings, ranging from standing pat, to renovating the wiring and plumbing, through replacing the roof and facade, to dismantling the existing structure to the foundation to make room for a new common currency.

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