European Versus American Way of Life

25 08 2009

Bryan Caplan, an economist at George Mason University, has published a blog post entitled:  “Touristic Bias: Why Americans Overrate Europe, and Europeans Underrate America”.

His basic argument is that while a typical European city centre is more picturesque than the average American city, Americans have a better quality of life than people in Europe. Most Europeans, he points out, don’t live in tourist destinations like the Left Bank in Paris. I thought that Caplan’s article was interesting but a little short on statistics, especially when you consider that he is an economist. The absence of really basic stats like life expectancy and the murder rate is really noticeable. Some of the people who commented on his blog replied to Caplan by citing figures that show the American-style suburban car culture that Caplan praises is actually pretty widespread in many European countries. For instance, a reader in Sweden pointed out that some European countries have roughly as many cars per capita as the US (500 per 1000 inhabitants). This fits with my own observations: the UK has massive Tesco supermarkets that are roughly the same size as any Wal-Mart, drive-thrus, and roadside restaurants that are basically the same as the US chains. The cars are bit smaller, but car culture is entrenched. Outside of London and a few other the UK’s other big cities, it would be rare to see a man of working age on a bus during the middle of the day, which would also be the case in the US or any other New World Anglo-Saxon country.

When I read the column, I was left wondering whether Caplan has ever lived and worked in a EU country. I checked his CV and turns out he hasn’t, so I’m not certain why he thinks he is more qualified to write this article than the zillions of academics who have lived and paid mortgages in multiple countries. (I would be interested to hear the Australian perspective on this debate). I have a lot of respect of Caplan and his research, but I think that this particular piece is poorly thought out. Not his best work. A powerful piece of evidence that Caplan could have cited in support of his position but which he did not is that the most EU countries, including the UK, experience net emigration to the USA (i.e., more Britons move to the US each year than Americans came to Britain). I’m perplexed as to why Caplan didn’t cite this data, which could have bolstered his case.

Another big problem with Caplan’s piece is that Europe, unlike the United States, consists of many radically different countries (Sweden versus Moldova). I know that some people like to talk about the EU as a sort of United States of Europe, but it’s not a single country. If you want a fairer comparison, contrast life in the EU with life in the three NAFTA countries: the gap between Manhattan and southern Mexico is probably as great as the different between London and, say, Tirana.

The other flaw with Caplan’s piece, which appears on a pro-free-market or libertarian website is that he appears to suggesting that because life in the market-oriented USA is better than life in the more socialist EU, this somehow proves that deregulation and the free market are the way to go. (He doesn’t say this explicitly, but this appears to be the thrust of his article).

There are several problems with this argument. 1) Caplan hasn’t proven than life for Americans in better than life for (West) Europeans. 2) Life could be better in the US simply because of lower population densities rather than because of differences in how societies organize themselves. New Zealand, Australia, and Canada are essentially more socialist versions of the USA (wide open spaces with a bit more social spending). 3) I’m not convinced that all Europeans countries are less “free” economically than the USA. Some EU countries have policies that American libertarians admire. The USA can be very statist in some areas and some of most prosperous EU countries (e.g., Denmark) are actually quite market-oriented, at least according to the measures used by an international organization of free-market think tanks.

Update: Megan McArdle of the Atlantic Magazine has posted some thoughts on Caplan’s piece. (McArdle’s piece is better thought out than that of Caplan and the resulting discussion thread contains posts of higher average quality, in my opinion).  I liked the fact that she mentioned Toronto in her post for several reasons. First, I’m from there. Second, bringing a third territory, in this case (Canada) into the discussion helps us to clarify our thinking about the differences between the US and “Europe”. It is hard to compare two thing unless you have at least one other thing as reference point – this is true in geometry and true when comparing countries.

The New GM and the Redefinition of Nafta

1 06 2009

We now know who will control the equity of the new General Motors. Ownership will be divided as follows.

60 per cent U.S. government.

12.5 per cent The Canadian and Ontario governments.

17.5 per cent United Auto Workers.

10 per cent Unsecured bondholders.

0 per cent Existing GM shareholders.

0 per cent– government of Mexico.

I’m wondering what the implications of this arrangement for Nafta are. During the 1990s, Canadians got used to the idea that North America consists of three countries, not just Canada and the United States. These three countries shared an integrated automotive market. (The three amigos summit, an annual meeting of the leaders of the three nations, was premised on the  idea that North America really was part of North America). Mexico lacks even a token stake in the new, reorganized GM. The symbolism is striking. Moreover, because the Mexican government hasn’t a seat at the table, it will be powerless to prevent manufacturing jobs from being repatriated back to the USA by the new, more politicized management of GM. (Canadian governments acquired an equity stake largely to avoid such job losses– I don’t know if it will work. Americans are, sadly very nationalistic. When push comes to shove, they may well prefer to save jobs in Michigan at the expense of non-Americans in Ontario).