And yet it's useful to keep the concepts in mind when people make comparisons of market-based allocations of resources with those dictated by tradition or by kinship ties. Sharing works well among people "from our own tribe and family." Market interactions are a way by which self-interest elicits empathy, or at least, cooperation.Now comes a lengthy Wonkblog entry from Washington Post columnist Steven Pearlstein, in which kinship ties in Denmark provide him with a basis for comparing and contrasting Bernie Sanders style social democracy there and in the United States.
According to economists, however, the question is not whether it is theoretically possible for Americans to adopt Scandinavian policies and still be prosperous. The issue is whether Americans would be willing to accept the trade-offs that go along with such a system — higher taxes and unemployment rates, open trade, slower growth, more income redistribution — and whether Sanders has overestimated the benefits and underestimated the costs of adopting it.Perhaps that's tribalism. The horror! Or perhaps it's the presence of mediating institutions. Or both, working together.
“There’s nothing wrong with it other than that Americans are not Danes,” said Princeton’s Alan Blinder, a top economic adviser to President Bill Clinton.
“The number one reason these policies are feasible in Denmark is that the country is extremely homogenous,” said Jacob Kirkegaard, a Dane who is a senior fellow at the Peterson Institute for International Economics in Washington. “The perception among the electorate is that the government will provide for me and for people who, in a linguistic, cultural and ethnic sense, are just like me.” And because Danes view themselves as “shareholders” in the state, he said, government is viewed as benign and trustworthy.
Luigi Zingales, an Italian economist now at the University of Chicago, contrasts high-tax, high-trust socialist countries such as Denmark and Sweden with high-tax, low-trust countries where populations are ethnically and culturally diverse, politics are fractious and government is incompetent and corrupt. In terms of social trust, he said, the Americans are somewhere in between.The article does not consider the normative implication that encouraging people to buy into America might be sound policy, even in times not of war.
“The danger for the United States is that it would wind up looking more like Italy and Greece than Denmark and Sweden,” Zingales said.
Rather, the article gets into the policy specifics, perhaps including the rent-seeking.
Health economists predict the Sanders plan would reduce incomes for doctors, hospital administrators and drug company shareholders, much as happens in other countries. Warren Gunnels, Sanders’s policy director, acknowledged as much but argued that Canadian and British doctors and nurses still live “very comfortably.”We return, though, to the political economy of public policy, and it appears that the wise thing to do might be to bet on the emergence.
Moreover, in the newly globalized economy, there is a greatly reduced inflation risk. If wages are pushed high enough, [University of Texas economist Jamie] Galbraith says, there are plenty of students, retirees, stay-at-home parents, underemployed freelancers and Mexican immigrants who could be lured back into the American workforce.Incremental change is another way of saying mutation, selection, and adaptation.
That, however, is not what generally happens in Denmark and Sweden. In those countries, higher wages, free tuition and universal health care come in an economic package that generally also includes modest growth, higher unemployment, limited immigration and significantly higher middle-class taxes. The problem with the Sanders program, say its critics, is that it promises all the good parts of the Scandinavian model without any of the bad parts — all dessert, no spinach.
As Denmark’s Kirkegaard sees it, in the modern world, existing social, economic, political and cultural institutions are so complex and interdependent that it’s not possible to bring about radical change in one area without changing everything else. And even if Sanders did manage to pull off all those changes, he said, the process would generate disruption and uncertainty that would slow the economy for years.
“Revolutions in advanced economies are extraordinarily costly,” he said. “That’s why incremental change is preferred.”