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Kuznet Curve


“Simon Kuznets, the winner of the 1971 Nobel Memorial Prize in Economic Sciences, suggested that in the early stages of development income inequality tends to rise, whilst in the latter stages of development, income inequality tends to fall. Hence, if we plot a graph of income inequality against gross domestic product (GDP) per capita, we will see that it forms an inverted “U” shape. Such a graph is called the Kuznets’ curve.” Syed Yusuf Saadat Centre for Policy Dialogue Bangladesh

“On the contrary it showed that Kuznets’ conclusions were only accurate for the period that he studied, and could not be generalized for other periods.” Syed Yusuf Saadat

It seems those interpreting the curve have no idea what it actually means.

Simple explanation in this economic reality,

Inequality dissipates with income exceeding $120K per household, thereby, increasing transparency, liberty, and environmental standards.

So these guys throw in the kitchen sink of “decay” theory to sell a model of conformity.

“In the early to mid-1990s Gene Grossman and Alan Krueger conducted several studies which examined the relationship between economic growth and environmental quality.”

They basically rebranded the kuznet model, plagiarism really, and renamed it, “Environmental Kuznets Curve (EKC) Hypothesis.”

“Specifically, the EKC Hypothesis suggests that as income within a country grows, so does environmental degradation, until a certain turning point level of income is reached. Once this turning point is reached, environmental quality improves. This relationship suggests that as countries develop, they eventually reach a point when they gain more utility from a cleaner environment than from additional emission-intensive development.”

Testing the Environmental Kuznets Curve Hypothesis for Emissions full pdf

The economic environmental addition known as EKC is THEORY.

“In this framework, the EKC postulates that low income levels are correlated with a growing deterioration of the environment, but after a certain threshold point of the income per capita, the relationship between the two variables becomes negative again. In this way, this hypothesis is supported by the argument that
higher levels of development imply a change in the economic structure in favor of industry and services, where production processes turn to more efficient and environmentally friendly technologies that help to preserve natural resources and reduce significantly the environmental deterioration. Similarly, the EKC shows the development of an economy over time. In a first stage, the economy is based on the agricultural sector with a strong impact on the quality of the environment. In a second stage, the industry is developed and, although it generates a higher level of wealth, it causes a great damage in the environmental’s quality. After a threshold point, the economy sustains its growth in efficient and cleaner technologies, mainly in the services sector. Thus, the EKC hypothesis emphasizes that the economic growth is a precondition for reducing environmental pollution (see Beckerman 1992).”

The Environmental Kuznets Curve full pdf

If we head on over to the Bank of Finland (Suomen Pankki) and listen to Governor Olli Rehn, Bank of Finland, Panel at University of California, Berkeley August 23, 2022,

“The total market cap of crypto-assets reached a peak of close to USD 3 trillion in late 2021. It has since declined to less than USD 1 trillion during the market turmoil this year. As was to be expected, the sharp revaluations of crypto-assets have led to a number of casualties and heavy losses for many investors.”

“Let me next turn to central bank digital currencies. At the ECB, as in a number of other central banks across the world, we are looking into the possibility of introducing a CBDC, a digital euro. The investigation phase started in late 2021 and is expected to be concluded in October 2023. Once the investigation phase is completed, we will decide whether to embark on actually building a digital euro.”

“It is important to note that a digital euro would complement cashnot replace it – by allowing central bank money to be used in digital form also for retail purposes. We will continue to safeguard citizens’ access to and the usability of cash across the euro area, even though its role as a medium of exchange has been diminishing rapidly, at least in some countries.”

And finally,

“A digital payment landscape without a monetary anchor provided by the central bank would simply confuse people’s understanding of what qualifies as money….The bottom line is that the central bank should always provide the monetary anchor for the economy – and this would be the primary reason if the ECB were to decide to issue a digital euro.”

https://www.suomenpankki.fi/en/media-and-publications/speeches-and-interviews/2022/governor-olli-rehn-beyond-crypto-mania-digital-euro-as-monetary-anchor/

How’s that for an economic forecast.