Murphy's Catch-Up Contradiction
Now I’m not saying Caplan was wrong about the Soviet Union, and I’m not saying this new guy is wrong about Europe. What I am
saying is that these two positions seem contradictory. When the Soviet
Union grew more slowly than the US, the GMU’ers said, “Ha! We knew it!
Only you commie lovers would have used the Solow model on a capitalist
and a socialist country.” Yet when Europe grew as fast or faster than
the US, the GMU’ers said, “So what? Using the Solow model we would
expect the capitalist and the social democratic welfare states to show
But things are not as they seem. If Samuelson and other Soviet growth optimists were just appealing to catch-up, they certainly wouldn’t have predicted that the Soviets would surpass the U.S. My claim wasn’t that it was crazy to think that the Soviet Union could temporarily have higher growth than the U.S. My claim, rather, was that “There was never a point in Soviet history when a sensible economist
would have seen communism as good for growth in any meaningful sense.” If Samuelson and company had said, “The Soviet Union has decent growth for the time being because its ability to copy more advanced economies outweighs the harm of its terrible economic policies,” my criticism would be less harsh (though I’d still fault them for trusting Soviet statistics, ignoring collectivization famines, etc.).
The same goes for Europe. Its relatively statist economic policies didn’t prevent it from exceeding U.S. growth for decades. But with better policies, Europe would still be gaining on us – or would have already caught up.