The Chait-Manzi debate

Paul Krugman links to some of the key pieces, or trace through Chait's blog or Manzi plus Krugman has a NYT column today on this.  I won't go through the debate as a whole (i.e., no mention of military spending or ideas as an international public good), which covers many of the basic "U.S. vs. Europe" issues, but here are a few relevant points:

1. For this debate, "levels" are more important than growth rates.  The United States has higher per capita income than most of Europe, although I don't mean to suggest that Europe is an economic disaster.  You also can try to "argue back" some of that difference by citing social indicators or leisure time, but don't focus on the growth rates.

2. If you see the United States compared with Europe, ask if the same analysis also compares the United States to the highly successful Singapore or for that matter Brazil.  If not, be wary.

3. It would be an interesting exercise to construct an "imaginary Europe," so instead of the current gdp of Italy you would sub in the output of a comparable number of Italian-Americans, and so on.  The Swedish-Americans in Minnesota get subbed in for the Swedes in Sweden, and so on.  I've never seen that done but I would like to know the answer, both with respect to per capita income and social indicators.

4. One question is whether the U.S. or Europe does a better job of elevating poor immigrants to higher income levels.  You would think egalitarians would be obsessed with this issue, but they're not.  In fact most of them hardly mention it.

5. There has never, ever been a well-functioning social democracy — in the European sense — with the size, population, and diversity of the United States or if you wish make that any two of those three.  How about any one of those three, noting that Canada isn't really such a large country?  That doesn't mean it's impossible, but keep that in mind the next time you hear talk about evidence-based reasoning.

6. Per capita growth rates or levels can be misleading, for some of the reasons mentioned above.  A country which adds a lot of low wage labor through immigration, for instance, will look worse than it ought to.  And if you cite "higher average productivity" in some parts of Europe, you are neglecting the differences between average and marginal and also the allergies to low-wage jobs in places such as France.

7. One view is to see significant pockets of poverty in Appalachia and decry there is nothing comparable in Denmark.  Another view is to see those same poor people and compare them to the poor of the European continent, which includes places such as Belarus and Albania.  Both approaches can be misleading exercises.

8. Countries have to start from where they're at.  If you're constructing policy advice, you can either build on what a country is really good at or you can try to revise the internal culture of the country.  If you're going to do the latter, come out and say so.  Most of my policy recommendations are based on the former approach, namely strengthening what (the better-functioning) countries already are good at.  I'm not suggesting that countries never change, but getting such changes right by deliberate policy interventions is very hard to do.  I wish to stress this point applies to the pro-U.S. as much as the pro-Europe side.

I'd like everyone to have a sign, which they would hold up when appropriate: "My policies seek to revise the internal culture of my country."  That's OK, but you're raising the bar for your own ideas and don't fool yourself into thinking otherwise.

Addendum: You'll find related points here.


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