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Monday, October 16, 2006

India and Italy

These days I am following two countries more or less systematically: India and Italy.

A strange choice some may say, perhaps I am simply interested in making a collection of countries whose first letter is 'I'.

Well no. I take India and Italy as different examples and test cases of one and the same phenomenon: the ongoing demographic transition. The interesting point is that Italy is at one end of the process and India at another. In both cases I am making counter-consensus calls (which we will soon see to be either right or wrong) and I am able to use this by deploying a theoretical structure which I am developing (for my research go here, and for some blog material try Demography Matters).

A good summary of my views on the current prospects for the Indian economy can be found in this post (which also contains comments by some very talented Indian economists, my feeling is that this post is something special) around the core issue of whither trend growth in India. A lot about the future course of the global economy may depend on the answer to this question.

At the same time I am following the Italian economy over at Italian Economy Watch. This situation here is rather different, since while trend growth in India is almost certainly accelerating as India begins to get hold of the demographic dividend which is available through the age structure changes she is experiencing, trend growth in Italy continues to drop steadily towards zero (and possibly beyond) as she increasingly enters the period where the elderly population 'demographic penalty' may come into play.

To make explicit what should be implicitly obvious: I am quite happy to treat these two examples as test cases for the theory. If these economies perform as I am expecting them to I will take this as some sort of support for the structure I am developing, if they don't then I will accept that I am getting something wrong somewhere. As Popper pointed out, you can never *prove* a theory, but you can certainly *disprove* one.

1 comment:

Joerg Wenck said...

Except that for disproving a theory - a hypothesis in chemistry, let´s say - you´d never choose the two elements most likely to conform to the hypothesis being advanced. What kind of test for generality is that supposed to be?

You are not playing by the rules - the rules of scientific discourse, that is. You follow the strategy of rhetorical insistence and narrative invention.