My cite used Purchasing Power Parity as a measurement.
A couple of things to point out…some of which have been noted already.
- Median income is one measure of prosperity. It can be distorted on the high end for smaller countries that benefit enormously from overdependence (and luck) on a commodity like oil, or guano.
Apples-to-apples comparisons should probably include reasonably large, diversified economies of the G-20 (or something similar).
Unbelievably, I actually agree with ** Der Trihs ** above, in the sense that he is defining a reasonably broad range of metrics. I doubt I will ever type the previous sentence again, for a long, long time.
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You are using a one-way test: lower taxes, less regulation, less of a ‘safety net’ (whatever that means) must drive higher income. You need to consider the opposite as well: more taxes, more regulation, more of a ‘safety net’ will drive lower income. There’s plenty of those data points to go around. We could start with Cuba, if you would like.
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More of a ‘safety net’ is an extremely slippery term, which given the tone of your post, I suspect you would prefer to define to your advantage. Be careful here. There are posters on this Board who would argue Cuba has more of a social safety net than the US.
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Correlation is a useful place to began analysis. Powerful correlations can be even more useful.
But you have to back it up with at least a hypothesis as to WHY one of the correlating variables is having an effect on the other. Otherwise, you end up with a one-of-the-original-NFL-teams-wins-SuperBowl-stock-market-goes-up type correlations, which is only good for laughs at cocktail parties (to misquote Cecil).
I’ll point directly here to the thread on the high-income-taxes-in-the-1950s-caused-prosperity-thread, which ground to a halt as soon as someone was asked to explain how and why high taxes could cause prosperity.
If you are going to argue that high taxes, increased regulation, and more of ‘safety net’ increases prosperity, you are going to need to back it up with some reasons why. Not just point to the enjoyable fun you had sipping a latte in a Paris cafe back on a summer trip, scraping your knee on your way to buy some wine, getting some free Bactine down by the Arc d’ Triomphe, and concluding that the French way of doing things is better.
I know you didn’t say that…it was a strawman I just created. But it’s usually the sort of data that statists bring to the table at dinner parties; at least the ones that I have been attending lately.
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Some economies have gone through large structural shifts in the past 50 years where they have swung a long ways from less regulation to more, and vice-versa. New Zealand. Ireland. Hong Kong. Some of the former Eastern Bloc countries in the Soviet Union. You might look to these examples for some insights.
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A wildcard in all of this is the banking system, as we are painfully learning today. Unfortunately, fiat money and fractional-reserve banking are the norm in every major developed economy in the world.
A true libertarian like Hayek or Rothbard would argue that this will always sow the seeds of ultimate disaster, since capricious control of interest rates and the quantity of money by a central bank is akin to balancing an upside-down pyramid on its point. You can do it for a while, if you’re good, but at some point it’s going to come crashing down and cause a world of hurt.
Since all citizens are mandated to use the fiat currency supplied by their respective governments, and since no major economy is on the gold standard, that is going to distort just about any ‘free market’ analysis you will try to do.
I have a much better way to show relationships between economic freedom and prosperity:
Take all the OECD countries, and plot them on a graph where one axis is year-over-year economic growth, and the other axis is a measure of economic freedom. If the ones with more regulation and higher taxes outperform the free economies, then you’ll have some good evidence that regulations lead to higher economic growth.
Unfortunately for your side, such a chart exists: Economic growth vs size of government in OECD nations. The trend is clear - bigger government means lower growth.
Here’s another fun chart: Economic Purchasing Power Vs Economic Freedom. It clearly shows that the most free countries have the highest amount of PPP.
Here’s a chart of economic freedom plotted against overall GDP: Economic Freedom vs GDP. That’s a pretty damning graph for those who think more government can improve the economy.
Does anyone have some statistically-significant counter-examples?
Your charts are nice, but it doesn’t really answer my question. I’m attacking the heart of “trickle down” theory. Does the economic growth trickle down to the middle classes? I submit that Per Capita GDP by itself is not a very good measure of overrall prosperity and median income gives us a better picture.
Economic growth equates to affordable, better technology. Money becomes more money based on an expansion of the marketplace.
So essentially, yes, his graphs do prove trickle down theory. More becomes available to the poor as economic growth increases.
Only if they end up with some of the money. Instead of none, or even getting poorer. And only if they don’t end up losing even more money; what’s the benefit of an extra few dollars from the free market if that same free market then takes all you have? And also there’s the question of sustainability; it’s no net benefit if the result of letting the rich do as they please is the kind of crash we see now.
My favorite: Big Macs.
Of course, however, Big Macs are somewhat subject to taxes (which I guess can be accounted for) and cultural tastes (which would have a much harder time to quantify). Although, Big Macs are also largely home grown, utilizing local resources which are an indicator of how much wealth the local economy can produce.
If a country can produce Big Macs cheaper than America, correcting for the above, then that country is the wealthier nation.
I have lived under actual proper socialism, socialistic is a silly word to use for social democratic free market systems. There are profound differences.
Yes, it does. However, hypothetical that are meaningless and random are… meaningless and random, thus useless.
Thanks Stone. A quibble so as not to overstate the issue; I do not think the data say that “more government can’t help” but rather a minimalist (as minimal as possible) approach is generally better. The graphs certainly show strong correlation, but with quite a lot of noise.
We can pretty fairly conclude that there is probably an effect of diminishing returns to negative returns in both directions (too much as well as too little), but reflexively thinking Government is the solution is bloody well wrong (although as well reflexively damning all gov’t as well I would suggest).
There is also a nuance to admit re standard of living that is difficult to capture through GDP analysis.
C’mon…most of these are due to lifestyle choices, which is a direct result of our economic freedom. We have the choice to eat McDonalds for every meal and smoke a carton of Marlboros if we so desire. Actually, we could smoke more if the taxes weren’t so fucking high. Oh, we also have the freedom to borrow more than we can reasonably pay back. What does any of this really have to do with standard of living?
Hmmm… “proper” socialism. What’s improper socialism?
I simply want to use a single word to describe the governments of EU Canada Australia in relation to USA.
That I’m supposed to censor the adjective “socialistic” and replace it with a convoluted acronym SDFMS that’s nobody ever heard of is absurd.
Try “progressive”.
Most of those DON’T have anything to to with choices; they are imposed by coercion or fraud or just bad luck. Nor do most people in America have much “economic freedom”. Rather the opposite.
What’s wrong with SDFMS? Or do you not use that acronym too? I wouldn’t be surprised; not a leftist friend I know has ever uttered that convoluted phrase.
I don’t like the word “progressive” because it also has multiple meanings with culture and technology.
*“France is more progressive.” …
“uh…progressive what?”
“progressive government I’m talking about.” *
Whereas, “France is more socialistic” … concise and simple. There is no further “uh…socialistic what?” because “government” is already embedded into the word socialistic.
(I made da boldin’)
How do you know? I’m trying to think how my choices resulted in my not being able to work. I know I’m an anecdote, but I also know I’m not the only person who is disabled because of something (apparently) completely or mostly outside of my control.
I’m not trying to be, what’s the word, snarky (?). I really want to know what that is based on. I would like to know how much of poverty, for example, results primarily from bad choices. (Of course, I would also like to know how much of “bad choices” result from willfulness and how much come from circumstances beyond people’s control…)
Der Tris said:
Same question here. How do you know? Again, same me not tryin’ to be snarky but actually wanting to know.
Huh? Lifespan and general health are directly related to lifestyle choices. We have the money to spend on cigs, booze and fast food if we desire these. Obesity is epidemic in this country, thanks in large part to our wealth.
Bankruptcy can go either way. We also have (had?) the freedom to borrow MUCH more than we could reasonably pay back and many people made dumb choices. Keeping up with the Joneses can result in some bad decisions.
Public safety? Forget about economics. The more freedoms we have the less able we are to isolate and control all evil-doers. Getting robbed has less to do with gaining wealth than gaining the wealth of another without doing the work.
Vacation time? I don’t see how that fits into standard of living anyway. Coercion usually comes from government. Bad luck is just that and doesn’t belong in this conversation.
You are right about the anecdotal part. Der Trihs was referring to a population (I believe). I did not mention anything about individuals getting sick or becoming disabled. Unfortunately this happens everywhere and may fall under the bad luck category.
I did not discuss poverty.
Oh, sorry. I thought this:
was in answer to this:
I only responded and asked because I have been trying to challenge my beliefs on what causes people to make “bad decisions”, i.e., decisions that turn out to have negative effects, and how much control and therefore responsibility a person has over and for his or her choices.
I don’t know if I’m making sense here. It’s just that, I believe there’s a reason or causes for everything, including the choices people make. I don’t think a kid with with an IQ of 70 can just choose to work really hard and obtain an advanced degree, for example. But can every person with an IQ of 100 make that choice and successfully achieve it? I don’t think every single one of them can, but I have no earthly idea what portion could. Or why he could or could not.
My impression is that you tend more towards the school of belief that says most of people’s economic suffering is due to things within their control. My impression of Der Trihs’s beliefs are that more “bad decisions” result from circumstances beyond the individual’s control. Both or either of y’all, please correct me if I’m mistaken.
Proper as in real, my dear American. The proper term is Social Democracy. It refers to a system that incorporates some governmental programs for “social justice” but does not as proper socialism call for nationalisation or “workers” control of means of production. Socialistic is an ignorant term that confuses real socialism with social democracy, out of ignorance or malice.
Real socialism, involving heavy state ownership, is not the same thing as social democracy, as anyone who’s lived under actual real live socialism can attest. Lumping Canada, Australia, UK and EU as “socialistic” is simply ignorant.
To interrupt the squabbling, and achieve clarity, let me point out that we have two separate issues relative to national income and national wealth (flow and stock mind you).
First, is wealth creation.
Second is distribution, i.e. how it is shared about.
It seems to me that most respondents (Right and Left) are confusing the two together, and thus in a complete and utter muddle.
It is reasonable to observe that great wealth creation that is monopolised by an elite few does not serve the common good. It is also reasonable to observe that perfect distribution that kills off wealth creation does not serve the common good.
Ergo, any economic system that is successful has to try to achieve a balance between the two.
I think it reasonable to observe that two different countries / societies might reasonably make different choices regarding the trade off given preferences (although probably around a common “middle” ground).
So, to try to answer the neutral question behind the OPs skewed and hard Left biased OP, one has to try to clearly weigh Creation and Distribution efficiency (they may not be either/or choices in a perfect sense, but they probably do involve trade offs).