Wednesday, January 13, 2010

Krugman deceives Yglesias (updated)

The gullible Matthew Yglesias defends Krugman's attempt to cheat:

"In general, rich countries normally stay rich and poor countries normally stay poor."


Theory and a mass of empirical evidence show that in general, richer countries grow slower and poorer countries grow faster (this is, by the way, simultaneously true with richer countries remaining richer. I will let clever Yglesias figure out the false dichotomy himself) .

The fact that America has not only kept its advantage over Europe but also even expanded the gap is extraordinary. The US is the exception, the only country in the top five 100 years ago that is still in the GDP top five (and yes, the snide remark aside, the US in 1900 had far more pro-market institutions than Germany or France). And even the gap between the US and Western Europe has closed in the last 100 years, it only stopped converging in the 1980s.


The pattern during the last 100 years has been for countries with functioning economies to grow faster the lower they start. If Yglesias was an trained economist he would know all this. Conditional Convergence is one of the most robust relations in growth theory. Krugman knows this, but Krugman is a liar, he just wants to maximize his ideological argument at any given point, deceiving his readers if he has to.


That's why Krugman has not explicitly made the claim that growth rate and levels are unrelated, he just ignored the levels altogether. He knows that writing what you wrote would make him look foolish to other economists. While Krugman knows what he is doing (he just doesn't care), m
y guess is that Yglesias is honest in his argument, following Krugman where Krugman himself carefully does not step. Matthew Yglesias is left standing with his naive post on growth theory, his just reward for trusting Paul Krugman.

Allow me to demonstrate. Krugman compares per capita growth figures for Europe and the U.S. between 1980 and 2008. I have plotted the per capita growth rate 1980-2008 and starting per capita income in 1980 for available OECD countries (Eastern European countries and unreliable Luxemburg are excluded). The U.S and E.U.15 are included in the plot, but NOT included in the simple regression line (the individual members of the E.U.15 are already there).



See any pattern?

Note that the US performance is above the linear prediction and the E.U15 slightly below. This is not in any way scientific, but using the simple linear framework the US, starting above average, "should" have grown by 46%, and the EU.15, starting around average, "should" have growth by 74%. In fact the US grew by 71% and the EU by 66%.

Here is another one with even more countries (more data available, I threw in Luxembourg so no one will accuse me of cheating, although their GDP figures are not reliable) from 1995-2008.


Still care to deny the relationship between growth and level?

Here is the same logic, applied to U.S states. There is only data available from 1990, so here I have plotted 1990-2008 growth and starting level in 1990.


Again, notice any pattern?

American states that started of richer in 1990 have grown faster since.


I pointed out yesterday that the E.U 15 has the same per capita GDP as Alabama. Being a poor American state, Alabama grow faster than the US average between 1990-2008. In fact it grew by 1.75% per year. During the same period the EU.15 managed to grew at 1.64%. (in other words Alabama per capita earnings grew by 37%, the E.U 15 by 34%). In the same period rich Maryland grew by only 1.39%. By Krugmans "logic", Maryland should be learning from Alabama.

Alabama has the same per capita income and slightly faster growth rate as the Social Democratic EU.15, which Krugman wants us to believe is a "Dynamic" region that the US should "learn from". Has Paul Krugman ever written a column asking us to learn from the economy of Alabama?
Of course not. That would be simply idiotic. Alabama is poor, and has a lower standard of living, just like the E.U 15. It only manages to grow faster than others because it starts off at such a low level (the EU doesn't even manage to do that).

Being poor and growing at average or slightly above average is not something that anyone (at least anyone not driven by dogmatic liberal ideology) would recommend as a shining example for others to emulate.


What is most scary is that the left either denies the American advantage or seems to think that the wealth advantage of the US is somehow god given. It is just a historical coincidence that the capitalist pro-market economy does better than the more leftwing nations. They can make American policy Social Democratic without making US economic performance Social Democratic.


PS. As a dysfunctional part of a well functioning economy, Alabama has more social problems with the same level of income compared to Europe. The quality adjusted standard of living is certainly higher in Europe, for a given level of GDP. On the other hand the standard of living of low income rural American states with small social problems such as Maine is probably higher than Europe, for a given level of GDP.


Additional data:

Some people in Marginal Revolution are denying conditional convergence in income. In order to convince more readers,
here are the p statics, R-square and correlation coefficient of simple linear regressions of starting per capita GDP and average growth, so you are not forced to rely on your eyes:

Growth 1980-2008,

24 OECD countries:

p=0.003

R-square=0.331

Correlation-coefficient= -0.575


Growth 1995-2008,

35 OECD countries:

p=0.000

R-Square=0.322

Correlation-coefficient= -0.570


Growth 1990-2008,

50 US states:

p=0.000

R-Square= 0.4206

Correlation-coefficient= -0.6485


I think most economist would consider a correlation of -0.57 pretty decent.

Remember that Conditional Convergence is not something I made up, it is the dominant theory with strong empirical support among the OECD countries (and regions within rich nations).


Krugman cannot be allowed to make up economics as he goes along, asserting whatever suits him that day (if he does, he better have data on his side).

Here is Bob Lucas, in the Journal of Economic Perspectives:

"the model fits the fact that in the postwar period growth rates vary much less among the advanced economies than among the poor and middle income economies. It presupposes the existence of an ever-growing "convergence club": a set of rich economies within which income inequality is falling, even in a world in which overall inequality is rising or not changing very much. It can be interpreted as implying a focus on conditional convergence, since conditional on both having left the stagnation state, any two economies are getting closer to each other."



Robert E. Lucas (2000). "Some Macroeconomics for the 21st Century" Journal of Economic Perspectives vol 14(1)

Here is a picture from a recent Lucas paper, for open countries:

Robert E. Lucas, (2009). "Trade and the Diffusion of the Industrial Revolution," American Economic Journal: Macroeconomics, 1(1)


Additional data and argumentsII:


I replied to Yglesias in the Marginal Revolution comment section. He wrote:

"I can't even tell what this argument is about anymore.

Initially, Jim Manzi said that Europe had grown more slowly than the US in recent decades, and that this shows that social democratic policies are bad. Krugman observed that it's not true that the US has grown faster than Europe.

Then Greg Mankiw came along and observed that some European countries with similar growth rates to the US, nonetheless have lower per capita GDP levels, implying that this is the economic problem with social democracy.

So I observed that the per capita GDP gap between the US and countries like Germany and Italy long predates the emergence of post-WWII social democracy.

Now you're "rebutting" this, I guess, with references to the conditional convergence literature. But what does this rebut. Go back and read my post and you'll see that, exactly as you're saying, the US-Europe gap was bigger in 1900 than it is in 2010. This makes it hard for me to see evidence for the claim that the adoption of social democratic policies in the postwar era can be to blame for European countries having lower per capita GDP than we have in the United States. The existence of the gap is longstanding and has declined over time even as a substantial "leisure gap" has opened between the US and Europe.

I note that this whole debate could be made much simpler by people saying "what Jim Manzi wrote was wrong, but I still think there are other reasons to believe that free market economic policies are superior.""


I wrote:

"Mattew,

1. You are making erroneous claims to begin with. Krugman did not only question Mazis claims about growth. He went much further. Here are Krugmans claims:

" the image of Europe the economic failure is so ingrained on the right that it’s never questioned,"


" the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works."

If you want to evaluate "economic success", you simply cannot rely entirely on growth rates. Levels are what we ultimately consume. By that measure Alabama is an economic success story and Delaware is economic failure.

Krugman pay no heed to the fact that Americans each year, each month, each day produce 36% more than Europeans.

The difference between levels is 8 times as high as all the yearly output lost in the recent crisis. This makes Europe an economic "failure" when compared to America.

And if Krugman thinks a 36% is too low to count as success, he should explicitly say that. Instead he simply IGNORED the most relevant figure for his claim.

2. Krugman's argument ignores a salient fact about growth theory, that with functioning economies poorer countries grow faster that richer ones. This has been the trend the entire century. When it comes to America and Europe, this has been true for the entire post-war period, up until the 1980s.

Here something strange happened. Not only did Europe stop naturally (according to growth theory and historical patterns) converging, it started to lose ground. the US grew 6% faster than Europe, when the lower starting level of Europe suggested it should grow.

This phenomenon has been noted by economist, and policy makers in Europe. They are discussing ways to turn it around (the Lisabon Strategy), with explicit reference to this pattern.

Instead Krugman pretends the entire controversy is due to faster population change. But of course economists and policy makers across the world are not stupid, they knew how to adjust for population growth. The striking fact was Europe stopping to converge in a per capita basis.

Note, the pattern of convergence did not stop. Within Europe and for other OECD countries it continued. Only America was doing better than it should have based on levels alone, and EU.15 worse.

3. Up until now I am pointing out distortions so blatant that even the left cannot deny them. Now a subtle argument, that I don't really expect non-economist liberals to accept:

The central debate is about the effects of Social Democratic policy on living standard. Economic theory basically predict that your level increases each year with technological improvement, and also converges in response to exogenous changed.

Once the convergence is finished, the country will again grow at the rate of technological improvement, but with a different level.

If we for example believe that high taxes reduce hours work by 10% and that this is reflected fully in GDP, the effect of a tax increase is to first lead to a few years of reduced growth (lower than what it should be, not necessarily negative) and, once the economy is 10% below where it would have been, to AGAIN start growing at the rate of technological change.

Do you see now why Krugmans comparison of growth rates is deeply misleading? Once the effects of Social Democratic policies have taken hold already (they certainly have had plenty of time), there is no reason we should expect Europe to grow slower. But that does not mean they had no cost! They still produce less, year after year.

The standard theory of the right is that taxes reduce living standard, reflected in a few years of lower growth followed by a lower level. If bad American policy also reduced the long run rate of technological increase it will do so by the same numbers for the US and Europe alike.

This debate would be much simpler if Krugman acknowledged that the policies he proposes would, as a best guess compared to Europe, lead to a 35% decline in American per capita income. Once his policies have taken their toll on the economy the growth rate would return to normal, but at levels forever below where they would have been."


Funny that Yglesias does not link the fact that the "leisure gap" opened precisely at the point in time when Europe started to tax labor, subsidize not working, and stooped growing.

Let me just add for the sake of being pedantic that unlike what Yglesias claims the US-Europe is not smaller now than in 1900. Partially because of Europes weak performance since 1980, the gap between the 12 western European countries is actually slightly bigger now than 1900. I don't want to push this mistake, since it is not central to Yglesias argument (he looks at Nationmaster, he should have looked at the original data by Maddison).

A few more world on convergence, while we are at it. Here is western European per capita GDP as a share of US, from 1950-2006.



Notice the early consistent convergence. At some point in the 1970s or early 1980s the convergence stops. I use 1980 here, the year Krugman chose to prove Europe was a success story.

There are two leading possibilities. One is that the US is naturally better at making goods and services than Europe, and that the earlier convergence was merely recovery from WWII.

The other possibility is that it reflect policy differences, with the convergence stopping a few years after Europe started to diverge from the US. Social Democratic Europe is "stock" at permanently below the US (or until the US also becomes a Social Democracy).

I just want to show you another picture, to remind people about how "normal" conditional convergence looks like. Instead of comparing western Europe and US, it compares outlier Switzerland with western Europe in the post war period. This is what Europe's experience compared to the US should have looked like, if we believe Americans are not inherently superior to Europeans (I certainly don't), and if there were no policy differences between the two regions.

Looks different, doesn't it? The question Yglesias should as himself is why it looks different. Just coincidences that we can ignore for the sake of discussing policy, or are deeper economic forces in play?


80 comments:

  1. "PS. As a dysfunctional part of a well functioning economy, Alabama has more social problems with the same level of income as Europe."

    Wow, did you really just refer to the USA as a "well functioning economy"? Do you realize that we are in the worst economic crisis since the Great Depression? Did you know that the modern USA is a phantom pyramid-scheme economy built upon debt, fake paper-wealth, and mass-consumerism?

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  2. "Do you realize that we are in the worst economic crisis since the Great Depression?"

    Yeah, obviously the last 100 years or so of economic history are negated by this business cycle.

    Still, it is true that the recent history of US debt is very interesting - I would love a new Tino post about another one of Krugman's recent columns - the one about lending, subprime and defaults. The amount of bluster in that one was humongous. I would especially like it if Tino dug out the stats on commercial real estate lending default rates over time.

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  3. Then there are the effects of higher taxation and higher prices on disposable income and purchasing power so GDP per head doesn't reveal the whole picture at all. Stack together state income taxes, municipality taxes and VATs and suddenly the government consumes more than 50% of your income.

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  4. This comment has been removed by the author.

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  5. Do you assert that Alabama's social problems are independent of a lack of social democracy?

    Do you assert that GDP among high-income countries is an accurate measure with which to compare living standards?

    If much of American GDP is spent on activities that don't happen in Europe (e.g. higher fuel usage due to urban planning, excessive military spending), how is it an accurate measure of living standards?

    Why is it good for a country to prefer huge military spending, but bad for a country to prefer leisure, in your measure of quality of life?

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  6. Why is it good for a country to prefer huge military spending, but bad for a country to prefer leisure, in your measure of quality of life?

    I'm not sure Europeans really *prefer* leisure, I think it's just the system they operate in, where they make less money than Americans but are given more vacation time. How much of this is actual preference is probably minimal. It's not like workers generally negotiate with employers for a preferred monetary/vacation mix of compensation. Most people take what is offered.

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  7. 1. "Do you assert that Alabama's social problems are independent of a lack of social democracy?"

    Yes, but that is a ideological call (I can't use figures to prove this). Welfare state policies in America lead to a worsening of social problems in the 1960-1990 period.

    At any rate no American state has social democracy, why don't you have social problems in New-Hampshire or Wyoming? The answer is culture and demography, since policy is almost invariant across American states.

    2. "Do you assert that GDP among high-income countries is an accurate measure with which to compare living standards?"

    It is the best measure that we have, a measure Krugman were happy with a few days ago, as long as he could spin it in his direction. More importantly, there is no clear bias in the direction of Europe. Let me state a few biases:

    * Europe has less inequality, so the median is closer to the mean (but again the difference is smaller comparing Americans of European descent).

    * Europe has less crime.

    * Europeans live longer.

    Biases in favor of the US:

    * Americans have more freedom. People typically enjoy freedom.

    * Money spent under free choice can be better assumed to increase utility than money spent because of laws or by politicians. Both are counted equally under GDP however.

    * GDP assumes that government inputs are used as efficiently as the market. My bias is that on average government is less efficient than the market.

    * European-American informal institutions are on average better functioning than Europe, which is partially why they produce more wealth. The same informal institutions increase non-market activity. For example the civil society is much stronger in America than Europe.

    American military spending is only 2 percentage of GDP points higher than Europe. You are right that this should be deducted from GDP. However so should European foreign aid, which is about 0.5 percentage points higher than the US.

    If you want to go into meaningless details such as "fuel usage", sure why not:

    Americans commutes to work (per worker) take less time than European. I have the figures for this if you want.

    Europe has better food, and healthier lifestyle.

    Americans have the lingua franca and world currency.

    Americans can enjoy being the super-power of the world for a few more decades (if you think this doesn't matter, look at how bitter the French are).

    Americans are more patriotic and love their country more.

    Americans have higher rates of self-reported life satisfaction than Europeans on average (of course someone could argue that it is only because they are richer). I personally don't believe in cross-country comparisons of self-reported happiness, I think it only measures the difference between expectations and outcome.

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  8. This comment has been removed by the author.

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  9. By the way Edward, my point is not that Europeans enjoy leisure more, I believe they (excluding northern Europeans) dislike work more and enjoy leisure roughly same.

    In relative terms that economist usually work with (preferences are ordinal) this distinction does not matter. But my claim is stronger: I make a cardinal comparison of the utility of work. My objective evidence for this is weak, so I will not push it, just my view.

    PS. The average vacation in the US is 3.9 weeks according to Alesina et al., 7 for Europe.

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  10. Nice analysis. Would anyone care to concede that maybe, just maybe, variability (evident across countries as well as across states) suggests that more than just policies and institutions are responsible? Would anyone care to offer a regression or similar analysis that shows the impact of specific institutions? Otherwise, saying "the US and Europe are different" seems both obvious and not particularly useful, yet. I do agree that it's an interesting starting point.

    I find it ironic that those who most stridently insist that the US has better growth tend (about which I don't argue, btw) to be those who most stridently insist that we're being ruined by liberal Democrats, high taxes or whatever their pet peeves might be today. For the record, I'm not arguing for higher taxes, stimulus spending or anything else -- just observing a pattern, which may be inaccurate anyway.

    Best regards,
    Jim

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  11. * Europe has less crime.

    Would be interesting to break this down further. I suspect you are more likely to be pickpocketed in Europe but more likely to be shot in the US. I believe the UK, for example, has higher property crimes and thefts than the US.

    * Europeans live longer.

    True, but how much of this is due to behavior and how much due to systemic differences? If lower life expectancy occurs through an expression of free will -- smoking, eating bad food, alcohol, drugs, bungee jumping -- how bad of a thing is that?

    If lower life expectancy occurs because of inferior health care, that is unquestionably bad. If it's due to a preference for a different type of lifestyle, it's less so.

    Also, there is the racial/genetic factor. Hawaii is the US state with the highest life expectancy at 83 years. DC is the lowest at 73 years. Coincidentally Hawaii also has the highest percentage of Asian Americans. Asian countries also tend to have high life expectancies. DC, on the other hand, is a majority black city.

    Perhaps also worth noting is that North Dakota, the state with the highest percentage of Norwegian-Americans, also has a life expectancy of 79.8 years, which is almost the same as Norway (79.95 years).

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  12. Yes, Americans make more money. But while staying in US I failed to figure it out what "more" do they have? I am coming from EU-27 (not EU-15) and our GDP/pc is 3x less than US and I am an average earner there. I still drive BMW, have FTTH, have latest iphone and go yearly to the Caribbean. I come home at 3pm and have all afternoon to spend time with kids and friends. Yes, our houses don't look so nice from the outside as American ones (but usually have all modern appliances) and we usually live in block of flats but those are as expensive as American villas in suburbs and living conditions are approx. similar.

    So final question is - where is all that difference that is profitable for US people to work much more?

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  13. stevenn01:
    I would really like to know what country you live in. I live in Czech Republic and my family earns about three times more than average (partly because we have high paying jobs, partly because three out of four are working). Czech GDP pc is approxiamtely 50% of the american one. And still, I don't drive BMW, don't have latest gadgets and only go to Europe for vacation (backpacking mostly, but that is my personal preference). I have a decent living though.
    But average earner here CAN NOT buy BMW, go to Caribbean every year and almost no one is back home at 3pm (unless you of course begin work at 6am).

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  14. From your EU15 graph (conservative estimates):
    7500 GDP -> 0.03 Growth
    20000 GDP -> 0.015 Growth

    Next year GDP will rise by:

    Developing: 0.03 * 7500 = 225
    Rich: 0.015 * 20000 = 300

    Rich remain rich despite low growth.

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  15. That's convergence anon. In your example after 67 year the poor country has overtaken and surpassed the rich one.

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  16. See, the thing is, sure, maybe the U.S. has outperformed Europe because of its greater emphasis on free markets. There are plenty of economic models that might lead you to suspect this is true.

    Or, maybe, it is because the U.S. is a much more linguistically and legally homogeneous market, so its easier for new innovative technologies to spread rapidly there and drive economic growth.

    Or maybe, its because of a purely cultural emphasis on entrepreneurialism that would exist even if the U.S. was more of a high taxing welfare state. Or maybe, its because of the climate. Or because there's been less armed conflict in the vicinity of the U.S. than Europe for nigh on 150 years. Or because democracy has been around longer in the U.S. than nearly all European countries and so its institutions are more well developed there.

    I'm sure with a fair dose of mathematical creativity, and some appropriate cherry picking of the historical data, someone could construct a plausible case supporting any of the above explanations (well perhaps not the climate one.)

    This post, and Krugman's, and really pretty much all of macroeconomics really, boil down almost entirely to post hoc verification of pre-assumed, ideologically motivated positions. There's not a lot of genuine falsifiable predictive content. Which is fine, its an exceedingly tough area to make any scientific progress in, and the ideas generated are all very interesting and useful to have around and some no doubt will turn out to have some bearing on reality.

    "In general, rich countries grow slower and poor countries grow faster" is about the only thing written here that its possible to commit to with any kind of firmness. All the explanations I've seen as to why the rule fails in this particular case are speculative and tenuous, and so not really congruent with the kind of strident, self-assured language used to present them.

    Then again my blogging is often guilty of the same offence, so who am I to judge, really?

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  17. Yes, logarithms are handy.. The purpose is to illustrate that the rich will continue to surpass the developing for a long time (perhaps forever) despite having much less growth.

    You say 67 years..

    That is assuming the developing continue with 3% growth. It can be assumed that developing and rich will see a fall in their growth rates. (As has happened historically)

    The rich will continue to be rich as:

    1: The growth of the developing is much more dependent on sustaining the growth rate than it is for the rich. The developing will be unable to keep up.

    2:The GDPs converge much more quickly near the end. By this time the developing will have low levels of growth. Compounding will lose its power.

    3:I'm not sure how the growth rates were calculated. If they really are 'averages': You cannot take average growth rates and assume they are constant. For example, assume the GDP of the developing rises %10 to 110. Then, assume it falls %10 to 99. Despite loosing 1 GDP there is 0% average growth. Also, the volatility of the developing is higher than the developing.

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  18. The biggest change in Europe in the last 20 years has been in 'middle class' living standards. Even their managers can not afford the accommodations and lifestyle our 'average' office workers do.

    The beautiful graphs above do not tell the real story IMHO. My first guess is that it is hidden in the graphs by averages. The middle class, what is left of them, are getting the royal shaft in Europe.

    The USA ends the decade without producing a net job. France hasn't produced a net job in nearly a generation. The good news is USA will crawl out of its recession. France on the other hand, is about to bleed red ink into oblivion. Their structural debt makes USA's look friendly, as does every other country in the G20 except Canada.

    Western Europe is structurally failing. The only question now is whether USA will follow them. The last two Congresses and Presidents have done their best to do so.

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  19. I'd love to get a closer look at the claim that Europe has less crime. I wouldn't be surprised that it were true — despite the prevalence of rioting and the "carbecue" in the banlieus of France — but my understanding is that in the U.K. violent crime is actually significantly higher, unless things have changed recently.

    Charles Murray has written on the topic, noting that while homicide is greater in the U.S., it represents a small percentage of violent crime overall. I gather from Murray and other authors that crime tends to be very geographically and demographically oriented in the U.S. but that is less true of Britain, especially with regard to race (though violent crime is mostly committed by young males.

    Theodore Dalrymple has written extensively about the problem of declining civility and increasing crime and general barbarity in Britain. He seems to have a morbid proclivity for examining such things, but it seems pretty clear that it's impossible not to notice the increase in crime and general decorum in Britain, particularly in population centers.

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  20. 1. Growth comparisons are painfully subject to what periods are being examined. It's important to look at all periods over a long range. I did that here:

    http://www.asymptosis.com/europe-vs-us-who%e2%80%99s-winning.html

    2. Yes, growth correlations should arguably regress for starting points. (Which I didn't do in that post.) This makes Europe look less robust because they *should* grow faster.

    3. There are many other factors to regress for, though arguably convergence is the best documented.

    4. A crucial factor that is often ignored is hours worked per capita. Americans work 10% more hours per year than western Europeans. (Just pulled the OECD data and averaged '95-'08: An american worked 1,820 hours, a western european worked 1,646.)

    Europeans choose to trade off cubic inches and sqare feet for time with their friends and families--an extra 4.35 weeks per year.

    Since time with loved ones is hands-down the best predictor of life satisfaction, that sounds like a great deal to me.

    Can you say "family values"?




    UnitedStates
    1820

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  21. Steve:

    Americans work more than 10% more. The 10% figure is for employed, the US also has a higher employment rate.

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  22. "In general, rich countries normally stay rich and poor countries normally stay poor."

    All rich countries were first poor countries.

    ReplyDelete
  23. Excellent source, I really fallow post by post this amazing blog. I always enjoy and learn about the economy Edegra road in the world. Maybe you can write in the economy journal in London.
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  24. Another fine article!

    One issue you don't quite address here is the increase of immigrants in Europe. My guess is that starting around 1975, more immigrants from poorer, especially Muslim countries began going to Europe, and were not assimilated.
    Slowing the growth rate.

    And Europe's "nation states" are still bad at assimilating non-natives.
    (An American in Slovakia)

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  25. "Americans have more freedom."

    Except for the 6x higher incarceration rate than Europe. And the prison-like public schools. And the debt-slavery required to go to college. And the constant danger of going bankrupt from any illness that requires just a couple days in the hospital. And the need to earn lots of money to be able to retire, given that long-term employment and employer pensions are a thing of the past and Social Security is not going to pay even rent for most people. ($76 trillion in federal debt and unfunded obligations by GAAP accounting. And growing, fast.) And the fact that one can't realistically start a business that actually makes anything durable in the US without being undercut by a factor of 3 by cheap Chinese stuff, thanks to "free trade" that isn't. Retail is even worse.

    GDP is a lousy measure in every way, even if the stats weren't nearly as cooked as the 1930s Soviet numbers. The true inflation rate is at least 1.5% higher than the official numbers, too, meaning this recession has been really going on with short breaks for the past 10 years. Europe isn't in perfect shape, but the numbers are more honest, so the disparity is less than it seems. About 210 million of 300 million in the US have incomes below $20,000 (AGI). There is essentially no welfare aside from food stamps for men. In every major city thousands of people - 95% men - live on the streets. I live in a decent neighborhood a couple blocks from a prestigious private university in Atlanta and every night I look out my back door and see a homeless man sleeping on cardboard in back of the strip mall, and people dumpster diving for food behind the kebab shop and health food store. The true unemployment rate is closer to 20% than 10% and many people have been out of work for several years. Things are increasingly worn, crumbling, overgrown, dingy, dilapidated - it reminds me of the 70s, but with a different edge, no longer liberalizing and improving, but regressing and turning ever meaner.

    GDP isn't the economy, it isn't the society, and it isn't the real world.

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