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LWW
08-16-2011, 11:33 AM
This time we will address the myth that US incomes are unchanged in 30 years while the Eurabian social democracies are providing the model we should pattern our economy after:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Paul Krugman recently wrote in a column for the New York times that Europe has an economy as dynamic as the US, and that the US should be "Learning From Europe". His main argument for this was that from 1980 per capita income only increased slightly faster in America than EU.15 (in fact the US grew 72% and EU.15 grew 66%).

Other economist, such as Tyler Cowen and Greg Mankiw pointed out that Krugman ignores the much higher levels of per capita income in the US. This is important for two reasons. First, it is known in growth theory that in well functioning economies poorer regions/countries grow faster than richer ones, since they can adopt "low hanging fruits". It is remarkable that the US grew faster than Western Europe despite starting off at a higher level. Second, and most importantly, when measuring the productive powers of an economy it is the level that matters, not growth. Albania may have grown faster than Singapore one year, but no one would argue that Singapore is less productive than Albania.
From a policy perspective, if America follows Paul Krugman and Barack Obama in "Europeanizing" the American economy, what is most likely to happen is that levels of income will drop to Europeans ones (or lower, taking into account demographic differences). Once this happens, it is hardly a consolation that America will grow at the same pace as Europe.

During the current recession, the US GDP fell by a 3.3%. Theoretically if the US adopts European policies and immediately decreases to the levels of EU15, its per capita GDP would fall by 26.5%, 8 times worse than The Great Recession! (in practice the convergence would probably happen through years of reduced growth).

Here I will make three comparisons, two that have been done before (but that Krugman and his readers needs to be reminded of), and one that I believe is original.

1. First, let us compare the latest publicly available per capita GDP of 18 western Europeans countries and the US. We see that the US per capita GDP is $45.500, compared to $33.500 for EU15. Each American produces 36% more than each member of the EU15.

http://2.bp.blogspot.com/_-EMpadQx4hM/S00Hh40TpEI/AAAAAAAAAAU/YAgQYg8as6Y/s1600-h/1.png

2. Second, let us compare the production of American States with European countries.
http://1.bp.blogspot.com/_-EMpadQx4hM/S00Qmu1LFCI/AAAAAAAAAA0/Ng553HPZOj4/s400/22.png
http://1.bp.blogspot.com/_-EMpadQx4hM/S00Q5IZ1sqI/AAAAAAAAAA8/tSxWbc1CwVM/s400/22.png
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If France were to became an American state, it would be the 50th poorest, below Arkansas.

The EU.15 as a whole, which Krugman presents to his readers an economy as dynamic as the US, would be the 49th poorest state, below Alabama, a State that Paul Krugman ridiculed in 2005. Few Americans consider Alabama a dynamic state, because of the low average income (even though, hardly surprisingly, the poorer southern states have much faster per capita growth rates than the rich states such as New York). Why than should we consider Europe a dynamic region?

Even the richer European countries do not fare well against American states (the exceptions being oil rich Norway, financial city state of Luxembourg, free market Ireland and capitalist utopia Switzerland). Denmark and Sweden barely inch ahead of Kentucky, below Louisiana, New Mexico and Missouri. Minnesota is 34.4% richer than Sweden.


3. These comparisons are still to generous to Europe. The United States is demographically more diverse than Europe, and for example includes a larger proportion of low skilled immigrants. We also know that some groups have cultural traits that make them more productive than others, such as trustworthiness and work ethics among Scandinavians. I believe that the most fair comparison of American policy environment and formal institutions and European ones would compare apples to apples, and take cultural differences into account.

Of course America did not did not drop out of the sky, it is largely populated by Europeans. All western European nations sent a considerable share of their population to America. Therefore I will compare each European group in America with each host country (some host countries have in turn taken in large groups of non-European immigrants. I will deal with this issue later, although it does increase the advantage of the US by a few percent). The implicit theory behind this comparison is that formal institutions (such as tax rates) and informal institutions (such as work ethic) determine income, that immigrants bring some of their informal institutions with them, and that we therefore should control for what economists refer to as "fixed effects" for each national group.

I discuss method and some problems below. All countries are included, except Spain, which Census does not include (due to the problem with separating European Spanish with people from Latin America who speak Spanish). I believe generally the figures to be most reliable for groups with large immigrant shares, but less reliable for the British.

The GDP per capita for Americans from EU.15 is $53,000, compared to $33,500 for E.U15 itself. Those of European descent in America on average produce 58.6% more than they do in Europe.

http://1.bp.blogspot.com/_-EMpadQx4hM/S00PAivXUEI/AAAAAAAAAAk/bangxl04qZk/s400/3.png

In absolute terms, the $19.600 per capita wealth gap between Americans of European descent and Europe is as large as the gap between the Europe (the EU.15) and Turkey. In percentage terms the gap is almost large as the one between western Europe and Hungary.

Being the habitual cheater he is, Krugman asks his readers to compare America to Paris, London and Frankfurt.

"For those Americans who have visited Paris: did it look poor and backward? What about Frankfurt or London? You should always bear in mind that when the question is which to believe official economic statistics or your own lying eyes the eyes have it."

If you stop and think about this for a second the problem becomes apparent. These are not representative cities, they are three of the absolutely richest areas of Europe!

According to Eurostat, which contains GDP per capita figures for European regions, each inhabitant of London produces 65.3% more than the UK average. The figure for inner city London, the area most American visiting would see, is an 279%. That is not a typo. Inner city London is the richest region in Europe. Paris has a per capita income 272% higher than the French average. Lastly Frankfurt, the financial hearth of continental Europe, has a per capita GDP 278% higher than Germany as a whole. (Stockholm earns 37% above the Swedish average, for those curious).

These figures overestimate the wealth disparity somewhat, since cities contain more jobs than people, especially important for financial centers (one reason why Luxembourg is so rich). But statistics are not fooling us, central Paris is rich, which our eyes would confirm. The suburbs and most of the rest of France is not. The correct comparison for Frankfurt would be Manhattan, not the US average.

A meaningful question is not if 3 of the richest cities of Europe (randomly chosen by the dear professor for the benefit of his readers, no doubt) are backward, it is if typical Europeans earn less than typical Americans. Which they do, which the data confirms, and which an in-depth journey in Europe or a comparison of starting wages of various professions would verify. The lesson? Trust your eyes, just never trust Paul Krugman.


Suggested by Tyler Cowen, I also constructed a "virtual Europe". This is what would happen if each European country had a per capita GDP level of their descendants in America (so instead of multiplying the Italian-American income by 17.8 million Italian-American we multiply it by 58.9 million Italians). The per capita income of this "virtual Europe" would be $53.600. Soon Europe will attempt a new version of the (largely failed) Lisbon Strategy. They should keep this figure in mind in setting their goals.

The total GDP of EU.15 is 13 trillion dollars. Assuming Spain performed at an average level, an EU.15 working at American wealth producing figures would have a total GDP of 21 trillion dollars! If we believe all the differences in outcome between Americans and Europeans is due to culture and policy (Krugman has no problem assuming all differences in health outcomes is policy alone), the loss in income for Europe from following Krugman's advice instead of current American policy is 8 trillion dollars, every year.

Milton Friedman famously said that there is no poverty among Swedish-Americans. Indeed their poverty rate is only 6.7%, half the national average. It would be interesting to compare absolute poverty between Swedes in Sweden and their American cousins.

For one country, Sweden, I have calculated the figures when excluding immigrants to Sweden. This reduced the American advantage from 55.4% to 50.5%. If we believe that this is representative of Europe (Sweden has a higher share of foreign born than most other European nations) the American advantage should be around 53%.

Krugman's dogmatic ideology aside, there is no doubt which economy that is most "dynamic".
</div></div>

Truth versus jibber jabber. (http://super-economy.blogspot.com/2010/01/dynamic-america-poor-europe.html)

Soflasnapper
08-16-2011, 12:22 PM
I see the jibberjabber. But where is the truth as a contrast?

Each American produces 36% more than each member of the EU15.

NO THEY DON'T. That is absurd.

That may be the average difference, but dividing gdp into per capita doesn't mean each American is producing that much (or much of anything).

If you get sick, and our extremely expensive double-the-per-capita level of health care cost compared to any other country yields a bill for a medium hospital stay of $300,000, is that really productivity? Well it does add to the gdp, but it isn't production, but an overcharged cost burden.

Our military budget alone throws off a phantom 'production' per person of $2,500 a year ($750 B/300 million people), which no one 'produces' except a very small number of persons employed in such areas of production.

The gdp growth here in this country has much to do with an INCREASING POPULATION, increasingly less out of 'old' stock (multi-generational American families), and increasingly more out of immigration and children of these immigrants. No country in Europe has an increasing population to the degree ours does, if any have any at all.

Which is why an entirely inappropriate line of argument is raised here. When the claim is about US incomes not growing, this discusses nothing about US incomes, or its level of change or no change, but instead concentrates on a poor measure of income-- the gdp level.

The gdp increases are not tracked by the same or similar income levels increases, because the share of gdp going to the majority of the people has been falling (because their incomes haven't gone up even though the gdp did).

We now see that this entire exercise is an example of changing the subject, a non-sequitur comment, a misdirection or red herring tactic, and extremely dishonest as any correct way to dispute whatever may have happened to US incomes. Which have remained unchanged, have you heard of that?

LOL!

Leaving us only the question, did LWW KNOW this was an entirely phony line of argument, and simply pass it on in dishonest fashion, or DID HE NOT REALIZE that a discussion of gdp has no application to the issue of income?

This is a hard question, which I cannot actually answer. Let's ask the man himself! LWW?

LWW
08-16-2011, 04:00 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">I see the jibberjabber. But where is the truth as a contrast?

Each American produces 36% more than each member of the EU15.

NO THEY DON'T. That is absurd.

That may be the average difference, but dividing gdp into per capita doesn't mean each American is producing that much (or much of anything).
</div></div>

They are referring to a statistical average my my fine barking friend.

Are you so desperate to defend the party that you will argue that since every one of the 300M+ Americans produces more than every one of the 300M+ Euros ... then the statement is false because the writer assumed the reader wasn't a total moron and that they would understand that it was a reference to a statistical average?

I guess you must be.

LWW
08-16-2011, 04:06 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">Leaving us only the question, did LWW KNOW this was an entirely phony line of argument, and simply pass it on in dishonest fashion, or DID HE NOT REALIZE that a discussion of gdp has no application to the issue of income?

This is a hard question, which I cannot actually answer. Let's ask the man himself! LWW?</div></div>

Here's what he would say. You either:

1 - Didn't actually read the data.

2 - Can't comprehend what it tells you.

3 - Are so brainwashed that you can't wrap your head around it.

4 - Are lying to defend an ideology and agenda ... one whose shining example, France, is poorer than Arkansas.

Ever been to Arkansas?

cushioncrawler
08-16-2011, 04:43 PM
The whole world iz dizeezed with krappynomix. Most countrys will die -- or praps at least 1/3 of countrys -- sort of like any plague, eg the black-death.
mac.

Soflasnapper
08-16-2011, 05:25 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">Leaving us only the question, did LWW KNOW this was an entirely phony line of argument, and simply pass it on in dishonest fashion, or DID HE NOT REALIZE that a discussion of gdp has no application to the issue of income?

This is a hard question, which I cannot actually answer. Let's ask the man himself! LWW?</div></div>

Here's what he would say. You either:

1 - Didn't actually read the data.

2 - Can't comprehend what it tells you.

3 - Are so brainwashed that you can't wrap your head around it.

4 - Are lying to defend an ideology and agenda ... one whose shining example, France, is poorer than Arkansas.

Ever been to Arkansas? </div></div>

Your 'data' and 'conclusions from the data' also say that Washington DC is 'richer' than California, Switzerland, and the entire US!

Since that is beyond stupidity (more money and wealth in Los Angeles County than in DC, let alone all the expanse elsewhere in California, still less the country of Switzerland or the entire US), you should have realized at the very TOP OF THE LISTINGS that this methodology was bankrupt to show what it claims to show. (BTW, there is NO "production" (of economic goods or services) in DC I can think of, other than the normal service businesses you find anywhere.)

BTW, as of '07, when some of these figures were dated, we were creating a large amount of phantom GDP in the form of 'financial products,' i.e., toxic waste CDOs, MBSs, overheated real estate markets building spec homes for the flippers, and etc. This wasn't real gdp, but elaborate time bombs by which we substantially destroyed our economy, and theirs. Still, they were 'exported' to foreign parties, banks and countries, and added in to our 'gdp.'

eg8r
08-16-2011, 07:23 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">If you get sick, and our extremely expensive double-the-per-capita level of health care cost compared to any other country yields a bill for a medium hospital stay of $300,000, is that really productivity? Well it does add to the gdp, but it isn't production, but an overcharged cost burden.
</div></div>Would you not agree then that those other countries that have government sponsored HC are not including their costs because to the average layman they think they HC is free yet they pay exorbitant taxes for this "free" HC.

eg8r

LWW
08-17-2011, 03:53 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">[Your 'data' and 'conclusions from the data' also say that Washington DC is 'richer' than California, Switzerland, and the entire US!

Since that is beyond stupidity (more money and wealth in Los Angeles County than in DC, let alone all the expanse elsewhere in California, still less the country of Switzerland or the entire US), you should have realized at the very TOP OF THE LISTINGS that this methodology was bankrupt to show what it claims to show. (BTW, there is NO "production" (of economic goods or services) in DC I can think of, other than the normal service businesses you find anywhere.)</div></div>

I refuse to believe that you are so stupid that you can't grasp the clearly stated fact that these are per capita averages and not absolute totals.

Nobody claimed that DC had more wealth than the entire USA ... but that on average it is wealthier.

For your take to be accurate, you would have to be a blithering moron ... which I don't believe you to be.

OTOH ... I do believe that you are so brainwashed towards the statist ideology that you will fabricate whatever you have to fabricate in order to defend the statist agenda.

Soflasnapper
08-18-2011, 10:03 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: eg8r</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">If you get sick, and our extremely expensive double-the-per-capita level of health care cost compared to any other country yields a bill for a medium hospital stay of $300,000, is that really productivity? Well it does add to the gdp, but it isn't production, but an overcharged cost burden.
</div></div>Would you not agree then that those other countries that have government sponsored HC are not including their costs because to the average layman they think they HC is free yet they pay exorbitant taxes for this "free" HC.

eg8r </div></div>

If the question is whether these countries' far lower per capita health expenditures get put into their gdps, the answer is yes, they do. Just at no more than half, and usually considerably under half, our per capita spending figure.

Soflasnapper
08-18-2011, 10:27 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">[Your 'data' and 'conclusions from the data' also say that Washington DC is 'richer' than California, Switzerland, and the entire US!

Since that is beyond stupidity (more money and wealth in Los Angeles County than in DC, let alone all the expanse elsewhere in California, still less the country of Switzerland or the entire US), you should have realized at the very TOP OF THE LISTINGS that this methodology was bankrupt to show what it claims to show. (BTW, there is NO "production" (of economic goods or services) in DC I can think of, other than the normal service businesses you find anywhere.)</div></div>

I refuse to believe that you are so stupid that you can't grasp the clearly stated fact that these are per capita averages and not absolute totals.

Nobody claimed that DC had more wealth than the entire USA ... but that on average it is wealthier.

For your take to be accurate, you would have to be a blithering moron ... which I don't believe you to be.

OTOH ... I do believe that you are so brainwashed towards the statist ideology that you will fabricate whatever you have to fabricate in order to defend the statist agenda. </div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Nobody claimed that DC had more wealth than the entire USA ... but that on average it is wealthier.</div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"><span style='font-size: 14pt'>If France were to became an American state, it would be the 50th poorest, below Arkansas.</span></div></div>

And the difference there, is?

Yes you did say that. And it's false. GDP is not a indicator of a nation's WEALTH. Or average income. Just how many transactions take place over a year's time.

I do understand these figures. Evidently you do not, or at least, you abuse them to mean things they do not mean. As when you say France is poorer than Arkansas, based on this silly gdp measure. That is not a reasonable inference from those numbers, and rather, a fraudulent claim.

I've already mentioned that on the defense budget alone, you get about $2,500 in gdp per person here in the US. As the French gdp is lower, and they spend roughly half the percentage of gdp on their military as we do on ours, that probably makes for a difference of $2,000 per capita gdp from our obscenely bloated military expenditures alone. The health care difference of approx. $9,000 per person here compares to no more than $4,500 there, with no better outcomes to point to here.

So a great part of the gdp difference is the waste, fraud and abuse of our overpriced services and public goods, which do not devolve to the population's benefit, and do not proportionately increase the average person's wealth or income.

Similarly, the US is about the 3rd or 4th largest producer of oil, all of which gets added to the gdp when sold. But except in the case of Alaska, the yields of money from oil sales do not generally go to the average person as income or wealth. Some tens of thousands are employed in this area of commerce, but the majority of the profits go to a very small number of persons, the shareholders of the oil companies, not the general populace.