Links to Consider,10/7
Noah Smith on compositional effects; me on Christopher Lasch; Johan Norberg on Sweden's complicated history with socialism; The Zvi on many things
suppose society is made up of three equally-sized groups of people: Alphas, Betas, and Gammas (thanks to Aldous Huxley for the names). The Alphas have life expectancy of 90 years, the Betas 80 years, and the Gammas only 60 years. Suppose that at first, only Alphas go to college, so the college life expectancy is 90 and the non-college life expectancy is 70 (i.e., the average of 80 and 60). Now suppose the Betas start going to college. The college life expectancy declines to 85 (the average of 90 and 80), and the non-college life expectancy declines from 70 to 60 (because only the Gammas are now without college degrees). In this example, life expectancy for society as a whole hasn’t changed, nor has life expectancy for any of the three groups changed, and college itself has absolutely no causal effect on life expectancy. All that changed was an expansion in the fraction of people who go to college.
The point is that over time the membership of a group changes. For example, the “bottom 20 percent of the income distribution” in 1980 is not the same people as the bottom 20 percent in 2020. If you look at the households who were in the bottom 20 percent in 1980, their incomes may have risen a lot, so that most of them are no longer in the bottom 20 percent. The bottom 20 percent in 2020 may include a lot of new young households or new immigrant households.
I review The Revolt of the Elites.
If Lasch was able to spot the pathologies that have become so prominent today, perhaps it is because as a historian he saw the long-term trends that had led to them. One of these trends was the decline of small-scale production and the consequent loss of individual independence.
I will host a discussion of this book on Tuesday, October 24 at noon New York time. No charge, but advance registration required.
Sweden only began to experiment with socialist ideas after it was already one of the world’s most successful societies. Its success was based on a free market model developed after an episode of radical liberalization between 1840 and 1870 and the rapid growth it unleashed. As early as 1950 Sweden was the fourth richest economy in the world, and it was also one of the freest, with public spending below 20 percent of GDP. Government was smaller than in other Western European countries and taxes were slightly lower than in the United States.
Only in the 1970s and 1980s did Sweden expand government dramatically with more spending, taxation, and regulation. It is reasonable to say that during this time Sweden was moving towards socialism. But that was an aberration in Sweden’s history, an aberration that was not associated with success. On the contrary, this was the one period in modern economic history when Sweden lagged behind other industrialized countries.
…It ended with a deep financial crisis in the early 1990s that included a brief period when the central bank interest rate rose to 500 percent.
At that time, Sweden’s political parties decided, often in consensus, to return elements of the older capitalist model. They deregulated the economy, reduced taxes, shrank government, and introduced a set of fiscal rules that has reduced public debt substantially. The pension system was reformed and many government-owned businesses were privatized. Sweden abolished taxes on wealth, gifts, and inheritances.
At the same time, Sweden became a pioneer in privatizing welfare services, making it possible for private providers to compete with public ones on similar terms and funding, and giving citizens the freedom to choose between different providers of elder care, health care, preschool, and education, including for-profit businesses. Around a fifth of all taxfunded welfare services are now provided by the private sector.
Zvi Mowshowitz has a roundup that includes:
Visakan Veerasamy: one of my best 'party tricks' is that I can have an interesting conversation with any subject matter expert about anything for an hour despite me having 0 prior knowledge of the thing. core thing is to ask earnest "I'd love to learn more" questions
When I do this, the other person ends up doing almost all of the talking, and often says afterward that it was one of the best conversations that they ever had! Not sure how happy I should be about that.
substacks referenced above:
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One composition stat that most annoys me is the average wage. It ought to be possible to have a wage index the same way as we have a price index. Define a job and sample IT (them) with fixed weights.
It's hard for me not to call a country with 50% of GDP being government spending "socialist".
But I will admit that basically everyone is socialist. Excepting a few tiny countries like Singapore most countries spend between a low of 40% to a high of 60%. Sweden is right in the middle. If you consider "employer group health insurance" a de facto government program in the USA then the US also spend close to 50% of GDP on government.
So if we are all going to be mixed market socialist states where government is half the economy...we might as well be good at it.
Sweden is good at "socialism" of this type. More social insurance than welfare state. Mostly rule following middle class paying taxes to themselves. Better design programs, etc.
The government is probably going to tax/spend right up to the limit that they can get away with in the short/medium term. Then the question becomes how it's spent. I'd take "socialism" over say incompetent kleptocracy for the same price.