China Hukou system

[William Meyer]

There is an interesting chinese policy called hukou.

https://en.wikipedia.org/wiki/Hukou

Appears to be a solution to baumol's cost disease.  Justified?

[Joe Leote]

I never heard of Baumol's cost disease. Online overviews summarize the concept: productivity gains in technological sectors of the economy drive up wages to those productive workers but then wages rise for the relatively unproductive sectors of the economy such as government, health care, education, etc. The linked hukou article says China sought to solve a different problem: historically the cities with factory jobs would attract too many poor folks from rural areas causing a large population of urban poor to cause social problems in the growing cities. I suppose rational agents (political economists) can debate public cost benefit analysis used to justify any government policy.

Joe   

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[William Meyer]

I must read some unusual stuff as I had gotten the idea baumol was a favorite topic of everyone's.  

Seems that by forcing the itinerant work force to use cheaper rural services would keep their wage increase demands down which in turn should keep at least a partial lid on wage inflation spiral in the city?

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[Joe Leote]

The City (London, UK financial sector) and New York City (US financial sectors) generate financial instruments from thin air via financial networking relationships. Both rural/city production and distributed demand for economic output in a financial economy are coupled to financial instrument generation best understood as the outcome of financial deal flows.

In this context I have only conducted one political-economic thought experiment: Making New York City into its own 51st State. Until conducting online research today I was not aware that this proposal has a long history. Instead, I heard a remark by a NYC official years ago arguing that the city financially subsidizes upstate New York via the tax burden. As a common sense person, and an electrical engineer, who also studied law as applied folk psychology, I thought, "New York City is a concrete tombstone without the flow of water, electricity, food, and other goods from the rural areas into the region." In other words, financial relations generated between the city and the rural areas are always partly driving the political-economic outcomes. The city is subsidized by the rural production. The rural production is motivated by financial instrument generation typically accelerated by populations living in cities.

Joe 

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