2. One attempt to estimate an "imaginary Europe," along with other Europe-U.S. comparisons.
3. Papers about the U.S. are more likely to be published.
4. Charles Rowley on macroeconomics: a personal anecdote which reflects his approach to economics.
5. Why we sit through movie previews.
6. Via Chris F. Masse, why hasn't scientific publishing already been revolutionized?
7. Where puffins go during the winter.
Re:#2 Hat tip, Steve Sailer (don’t deny it, Tyler).
The problem with all these US vs. Europe comparisons is that GDP per capita does not mesure the standard of living and was never intended to. (And if you want to compare output you would need to use nominal GDP not adjusted GDP)
To compare standards of living someone needs to come up with the following statistic: net purchasing-power adjust income (after taxes)+value of gov’t benefits+some measure for leisure for the median citizen in terms of income. Until we have something like that all these comparisons are meaningless.
#5 is wrong – most people DO enjoy watching trailers before movies (ads for other products aren’t so well-liked, of course). The other reasons provided, while generally true, are all secondary explanations.
I enjoyed the second link a lot. Interesting take. For those who want to read more about US-Europe comparisons I would recommend Olaf Gersemann’s “Cowboy Capitalism”.
http://www.amazon.com/Cowboy-Capitalism-European-American-Reality/dp/1930865627
#5 might be a better theory of why we sit through the lame slide shows before the trailers start. Trailers are generally enjoyed as an art form in their own right, though it’s difficult to explain why. If they weren’t, though, this wouldn’t be funny: http://www.theonion.com/content/video/wildly_popular_iron_man_trailer
#4 is excellent.
In re: Where puffins go in winter–
I found that to be absolutely fascinating. I suppose that makes me terminally weird. Nevertheless, it is always amazing what creative ways researchers come up with to gather real data.
Obligatory Economics note: Economists should do more of that, too.
Another voice believing #5 is completely wrong. The first commenter at the site does a very effective take-down.
His comments also imagine that the theater is full. I find this a very strange assumption because there is only one time in my life I was in a full theater. I plan to go when there are very few other patrons so the Lovely and Gracious can talk to me during it without disturbing anyone, the tickets are cheaper, and we get the best seat in the house almost every time, all while missing half the ads for movies I have almost no interest in.
Clearly, all this means I am strange compared to the average, but the model still fails utterly to explain my rational behavior.
wlu2009: I would have to disagree. Government benefits is not the same as government spending -I was thinking more of what the median citizen receives in terms of benefits (health care, education, transfer payments etc.) Secondly, average gdp per capita does not take into account distribution -which is why i wanted to look at the median income (obviously there are other ways to do this, say average income of the bottom 70%). Even so it would obviously not be a perfect measure, but significantly better than GDP per capita.
When it comes to leisure, I’m not sure how much choice people on either side of the pond really have – on both sides it’s a at the very least a choice heavily constrained by financial requirements and the requirements of your specific job.
Right, but national defense, while important, does not affect standard of living. That is how measuring economic output differs from measuring the standard of living.
I agree with everything you said in the last post about leisure, but I think my whole initial point was that the choice of leisure vs. work is always a function of a whole series of constraints, so it’s not clear to me that the choices Americans made are less distorted, even if tax rates are lower in the US. How many Americans would get a five-week vacation annually if they demanded it from their employers? We just don’t know that since both Americans and Europeans make their choices constrained by the system they live in, in which my guess is that tax rates play a very minor part.
National defense may affect standard of living, but then only indirectly and in the long run and even then only to a limited effect. I don’t think the fact that the US spends more per capita on defense than other countries is a plus for American living standards.
On leisure, I just don’t think people make their decisions that way, certainly not in Europe where the amount of vacation time is more a function of law and collective bargaining than individual decisions. Even in the absence of regulations and collective bargaining, your argument would imply that people with higher incomes should take less vacation time since the time they spend working has a higher return – this just doesn’t seem to be the case.
As far as Krugman response goes this article uses the mean income, not median. It also doesn’t take into account all the services that Europeans enjoy, like free health care and convenient public transportation. It doesn’t take into account any other standard of living or quality of life issues. Smells fishy to me.
Median individual income in the US, for adults who work full-time, year round, comes to about $40,000. Considering many people don’t work that, the real median is even lower.
“The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006.” So in reality, half of all Americans of working age live on less than $26,036 per year.
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
Source: http://www.census.gov/prod/2004pubs/p60-226.pdf
This question has been bugging me for some time now. I’m just an amatuer economist, but I think I understand the theory behind why comparing GDP growth between economies of differing levels is a bad idea. However, I don’t understand why it’s give that those at lower levels will naturally rise quicker than those at higher levels. Sure, if ideal economic conditions prevail and no new economic levels are created, it does make sense to me. Economies at lower levels just need a few factories here and there and they can rise quickly.
But when have ideal economic conditions ever been present? And why is the huge gains in technology not factored into any of these US/EU comparisons? Since 1980 the US has had as close to ideal economic conditions as can be expected with the great advantage of a recent bubble that is not being accounted for in any numbers I’ve seen used. We’ve also been at the forefront of gains in new economic levels. Why would we assume that others will immediately skip over the levels the US has been leaving behind? How does being the world’s current financial center skew the results? More practically stated, when Beijing becomes the financial center of the world, how will this affect comparisons between the EU and US? Is this the reason that the UK has such poor numbers as per #1?
So I guess my ultimate question is, why are smart economists trying to simplify comparisons between the US and the EU when incredible complexity is so abundant?
From Adam:
Of course it does. Those services are included in GDP- nothing is free (including healthcare in any country, nor does it appear as manna from heaven. If Europeans have those services from government and Americans do not, then it simply means that Europeans devoted a portion of their output to having those provided by government and Americans did it some other way.
Dan,
What? It may or it may not, but my only point is that European GDP/capita isn’t understated with respect to US GDP/capita because it ignores government provided services- the production of those services are included in those numbers by definition.
Yancey – Though he worded it poorly, I’m fairly certain that Adam’s point is that GDP is not the greatest indicator of quality of life. Tino’s comparison of the EU-15 to Alabama clearly shows that comparing GDP between highly disjointed communities provides nothing interesting. If Alabama were an independent country, few would choose to live there over the EU-15. That’s because the quality of life in the EU-15 is much greater than Alabama, regardless of GDP. So yes, health care expenditures are recorded in GDP, but given the various systems, $1 ppp spent on health care in France is not the same as in Britain is not the same as in Alabama (or the entire USA). And of course $100 spent in those same systems will vary the results again, as will spending $100,000.
Now, I see that you picked your quote from Adam out of context to make a point, but that point is invalidated by the larger argument that Adam and I are hoping to convey.
Tyler – with tenure and all, you can’t be blamed for being in the same department as Rowley,
but to dignify the blog of this raving lunatic who has just pretty much called for the assassination of Obama:
http://charlesrowley.wordpress.com/2010/01/03/descent-into-tyranny/
with any positive attention is really sad.
(Rowley is also a character assassin, who uses the journal he edits for completely unfounded attack on respectable (and extremely collegial) researchers:
http://crookedtimber.org/2009/07/28/anger-and-greif/
#4 is just Rowley (who?) patting himself in the back.
But that’s to be expected. Caballero, a reputed economist of the orthodoxy, was recently praised in this blog for his analysis of the crisis. Yet people still clap when they hear claims that macro lost its way. Macro is alive and kicking.
mulp,
Two things: First, the stats here are adjusted for Purchasing Power Parity. So if price levels are higher in the US for healthcare and other things (that is, same dollar buys less) that is factored in. GDP is a measure of how MUCH is produced, not how much you pay for it.
Second, on outsourcing, in your hypothetical example, all the resources freed up by outsourcing to Asia can now produce other things they they have a comparative advantage in. People who would have been doctors become engineers, or chemist, or whatever.
Without a basic knowledge of GDP accounting or international trade you just sound silly.
He also fails to mention that US has higher Corporate tax rates than some European Countries:
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
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