Welcome Back, McArdle
By David Henderson
Megan McArdle is back blogging regularly. I happened to come across this one: “America Really is Exceptional.” It’s very good. Some highlights:
I actually don’t think that the latter point is true; if you plucked an average American (mean, median, or modal) out of Kansas City or Aurora, and plopped them down in the middle of Gothenburg, the average American would be very unhappy. Yes, they’d have generous social benefits and lots of vacation, but they’d also be crammed into a small apartment in a very small country. They wouldn’t be able to afford services that average Americans take for granted, like lots of restaurant foods and extremely high levels of customer service, which means they’d spend a lot more time doing basic housework, childcare, and so forth. They would find it very expensive to fuel their car, and the insular, almost formal culture would make them crazy.
This is also true the other way, by the way; the average Swede would not be happy living in America. Sure, they’d have a huge house, filled with cheap consumer goods, and they could drive their car everywhere, particularly to their incredible array of dining options. But they’d miss their vacation and find America’s looser safety net both terrifying and inconvenient. They would hate the inefficiency of our government services, and miss their cozy circle of friends and family. Part of the reason that we have different systems from the Swedes and the Germans is that we place different emphasis on various possible sets of amenities, and of course, the availability of various amenities changes what we think of as the basic package for a decent life. In most of America it includes a house, preferably detached, and a car. In Sweden it includes a year of mandated maternity leave and a well-run streetcar system. Losing any of those amenities is usually more painful for people than getting whatever the other folks have–which is why most expats are some combination of young, unhappy in their home country, or wealthy enough to buy the stuff they miss.
Ultimately, it doesn’t matter whether much whether Sweden changes its economy in ways that reduce the return to innovation, because Sweden is never going to be doing most of the innovation that drives its economic results. This is no slam on Sweden, mind you; it’s just that, numerically, the overwhelming majority of new ideas are going to come from somewhere else. Germany is in the middle, but it’s still a fraction of the size of the United States. Small countries are like little islands floating on an ocean of trade and capital, while the US is more like the jet stream, moving all the water around.
And so what happens to US growth matters a lot, to us and to others; we’re almost a quarter of the world’s GDP. If we slow down innovation, we will feel it; so will other countries, as the global economy slows. This will perhaps not always be the case; India and China are huge, and if they get rich, their economies (and presumably, their rate of innovation) will dwarf ours. But right now it simply matters a great deal that we get growth right, in a way that it does not matter for smaller welfare states.
And an implication about how a self-interested rest of the world should have thought about the Affordable Care Act, which, if it does what it is meant to, will dampen the incentive for technological improvement in pharmaceuticals:
Or as I argued during health care reform, given how heavily we subsidize pharmaceutical development, Europeans were stupid to crow about the perceived inadequacies of US style health care. If they’d been smart, they’d have been running ads on television saying, “No, really, it’s dreadful–America wouldn’t ever want to try anything like it!”