Where is America’s Denmark?

Update:  I’d recommend that people read Lars Christensen’s post instead; it is far more interesting.

In 2007 I did a paper where I showed that Denmark is the most civic-minded, egalitarian, free market -oriented, and happiest place on Earth, and I argued these four “firsts” were not a coincidence.

Denmark’s reputation for civic virtue has almost become a cliche.  Here’s Tyler Cowen:

The technologies and prices of fifty years from now may require much higher moral standards of us — “every man a Denmark” — than the world of today.

A few years back a paper by Algan and Cahuc argued that Denmark’s “flexicurity” labor market (ease of hiring and firing combined with very generous social insurance) only worked because the Danes were so darn honest.  When asked; “is it acceptable to take government benefits to which you are not entitled?” Danes were more likely to say “no” than any other nationality.

Denmark is a sort of social democratic paradise.  So if you were looking for an American counterpart, you’d probably pick some place like Massachusetts, right?  Nope, the actual answer is quite surprising.

So where is America’s Denmark?

By almost any measure, Utah is the most civic-minded place in America.  The rates of charitable donations and volunteerism are higher than anywhere else.  So perhaps Utah is the answer.

Even better, Utah has the most equal distribution of income of any state, just as Denmark has the most equal distribution of income of any country.  (BTW, there are many states with a higher percentage of white non-Hispanics.)

I know what you must be thinking; “Nice try, but Utah is run by right-wing Republicans, and hence is nothing like welfare state Denmark, with its generous unemployment benefits.  If Utah really was like Denmark, they’d take advantage of those virtuous civic values by offering the highest income replacement ratio for the unemployed of any state in America.”

But they do!

PS.  Unfortunately, Utah is only the 4th happiest state.  But how can anyone be expected to compete with Hawaii?

PPS.  I knew Miles and Lars had something in common.

PPPS.  In an earlier post I argued that New Hampshire was the Denmark of America.  I changed my mind. But on cultural attitudes I suppose it is a better prospect.

PPPPS.  What’s my point?  Honest people  =>  Generous unemployment benefits.


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17 Responses to “Where is America’s Denmark?”

  1. Gravatar of Ashok Rao Ashok Rao
    9. June 2013 at 06:25

    I lived in Iowa for a while, across a few towns. It has the 5th lowest inequality in the union (which is not saying much, it’s still really high @ .427). Not sure about consumption inequality.

    A lot in my experience there suggests Iowa would be the pick, but I know the rural areas are worse. So I’d submit the more urban version of Iowa: Minnesota.

    It has the highest HDI aside from New York (which isn’t a fair comparison because NY is the least equal state by far), 4th lowest poverty rate, relatively excellent education, pretty equal (.441), and high life expectancy.

    But I actually reject the question “what’s the Denmark of America”. If you’re born in the bottom 30%, your social safety net is burned in whichever state. Higher education is unaffordable without loans (in Denmark they *pay* you to go), and chances are you don’t get parented because it’s a single-parent household working multiple jobs.

    It’s just nothing like Denmark on any scale.

    I’d rather group the “Denmark” of America by a demographic, rather than geographic. Don’t know what it would be, “top 33%” sounds too easy.

  2. Gravatar of Saturos Saturos
    9. June 2013 at 07:00

    How to solve economic problems — make people more virtuous. Gee, thanks, economists.

  3. Gravatar of ssumner ssumner
    9. June 2013 at 07:15

    Ashok, I don’t know about Denmark, but in Sweden the government pays 100% of the tuition. Yet Swedish students leave college with debts almost as large as American students. So don’t assume that students don’t go deeply in debt just because the government pays for their education. In any case, both countries have very high tax rates–so the students also have to pay back their “debt” from going to college with higher taxes. One way or another the public pays for everything, and the government pays for nothing.

    And one other thing–income inequality data is almost meaningless, as I’ve pointed out in dozens of posts. It doesn’t measure economic inequality.

    Saturos, Don’t you want to hear how I propose to make people more virtuous?

  4. Gravatar of Tom Hannaford Tom Hannaford
    9. June 2013 at 07:25

    Perhaps I’m off the mark here (might be a better question for Danish Native Lars), but could one view Denmark’s model as an example of why some sort of “Mincome” system of welfare would be vastly superior to our current safety web? Admittedly I’m not up to speed on much of Denmark’s policies outside of the basics, but it seems like much of their welfare is essentially cash based combined with an extraordinary amount of economic freedom (at least compared to the usual Nordic “cradle to grave” stereotype), Though the cultural aspect does seem to be one of those angles that doesn’t get enough attention in the public sphere…

  5. Gravatar of Brenb Brenb
    9. June 2013 at 07:48

    How about Vermont?

    According to the American Community Survey between 2010-11 it was the only state to register either median income growth or poverty reduction.

  6. Gravatar of Ashok Rao Ashok Rao
    9. June 2013 at 08:23

    Scott you said “And one other thing–income inequality data is almost meaningless, as I’ve pointed out in dozens of posts. It doesn’t measure economic inequality.”

    Yes, I prefer consumption inequality as well. Also, fwiw, wealth inequality is worse in Scandinavian countries. (And none of this measures free Internet surplus).

    Also, I know about the Swedish debt thing, but they’re able to pay their debt off very well, nothing like the US. Education expenditure is also lower there, and we should emulate some of that (personally I prefer lots of technical local colleges, where students can stay with their parents… a 14th grade with specialized learning if you will).

    In Denmark the “public” always pays, but no one is suddenly going to get screwed over by a massive tax bill. We don’t have that kind of background insurance in America. (You and I both support some form of universal healthcare, ofc).

    I’m very unconvinced, as it’s not clear in my first college, that we should be encouraging college as we do, but that’s another story.

    All said and done, there are still many reasons to prefer living in America. In a modified veil of ignorance, were I to pick the best country to be at the 50th percentile, I would still pick America. Definitely not scandinavia, perhaps Switzerland.

  7. Gravatar of Robert Robert
    9. June 2013 at 08:29

    Friedman visited Iceland in the autumn of 1984, met with prominent Icelanders and gave a lecture at the University of Iceland on the Tyranny of the Status Quo. He participated in a lively television debate on August 31, 1984 with leading socialist intellectuals:

    Milton Friedman in response to an equality question on the Iceland TV : “The question is do you have equality because you have a very small and highly homogeneous population that living together for a long time and has been able to achieve the relevant degree of equality or do you have equality because it’s has been impose on you from a welfare state.”

  8. Gravatar of Russ Abbott Russ Abbott
    9. June 2013 at 10:23

    I posted a link to this post on Google+ (http://goo.gl/vxGwz) and then added this comment.

    In other words, free-ridership is one of society’s worst problems. The resources it has to devote to preventing free riders from exploiting it are resources that can’t be used for more productive things.

    This is connected to the issue of multi-level selection. An organization that doesn’t have to defend itself from its own components will have more resources to use for other purposes. But if free-ridership is bred out of the components of a organization (like bees ants, etc.?) will that organization lose the ability to innovate? Is there an optimum level of free-ridership? These are larger questions than I can explore here.

  9. Gravatar of Lars Christensen Lars Christensen
    9. June 2013 at 10:56

    Scott,

    Yes, Miles and I indeed have a lot in common. And you are on to something – Utah in fact is “Danish” in the sense that a large share of the original Mormon settlers in Utah in fact came from Denmark. And guess what Miles is 1/8 Danish. In fact Miles grandfather was called Elmer. That happen to be my sons middle name.

    Last year I spoke at Brigham Young university. At my presentation I was asked how the Danish welfare model could work. My answer was “because you are like us”. Ever since I visited Utah last year I have been thinking about the early Mormon society as an anarchic form of a welfare society. A society where collective goods problems are solved through common norms. Denmark of the 1950 and Utah of the 1860 probably have that in common. That is not surprise – a lot of the people in both places of cause were Danes. As Miles grandfather and my grandfather.

    My argument was that the “original” welfare state really just is a form of the Mormon style welfare system. Everybody in society are very similar and as a consequence there is little difference to a “one-size-fits-all” tax funded system and a private based system like the Mormon private based welfare system.

    The interesting thing here is that the original Mormons in Utah established a anarchic welfare system that basically covered everybody. That has worked fine and I believe that is not really that different in the foundation form the Danish Welfare system.

    However, I am less optimistic on the future of the Danish welfare model. First of all I think it is extremely important to notice that the Danish model really was largely private sector based until the late 1960s. In fact until the mid-1960s the size of the public sector in Denmark (and all the other Nordic countries) was smaller than in public sector in the US (as share of GDP). Hence, when Milton Friedman wrote Capitalism and Freedom (in 1962) Denmark really was closer to his ideal than the US.

    In the end of the 1960s the public sector in Denmark started growing very dramatically until the early 1980s. In that period Denmark also started its relative income decline.

    Finally I would note that in a society where everybody “normally” works and are very similar people would tend to be “honest” and not misuse public benefit systems and because your neighbours come knocking on your door and tell you to get your act together if you want to be invited over for BBQ etc. That undoubtedly was the case in Denmark until the early 1970s. However, that changed in the 1970s.

    Two things happened. First of all, unemployment rose dramatically in Denmark in the early 1970s as a result of the first oil crisis AND a sharp increase benefits levels.The second, Denmark saw a sharp increase in immigrations from the late 1960s and until the early 1980s. That changed Denmark from an extremely homogeneous society. These two factors in my view removed the implicit social threat that your neighbors would think of you as an idiot if you remained on the dole for years.

    As consequence while Denmark used to the work ethics as Utah mormons Denmark today is a “leisure society” with low work ethics. These I my view probably is the bigger threat to the “Danish model”.

    Finally, the strength of the “flexicurity system” in my view is mostly a myth. Yes, we have a very flexible labour market in Denmark with low levels of labour market regulation. There is for example no official state sponsored minimum wage and firing and hiring rules are liberal. However, high benefit levels is a massive burden to public finances and in the long-term the model will not survive in its present form.

    Denmark, however, still benefits from have a fairly homogenous society in the sense that it probably has positive impact on the political system. Hence, while the welfare state is massively overblown Danish policy makers over the last three decades in general have agreed on the overall need for scaling back the public sector and continue economic reforms. Hence, sense the early 1980s different governments have tried to reform the welfare state. Hence, had it not been for the policy mistakes of the late 1960s and early 1970s Denmark would probably have had a public sector of a similar size to Switzerland. Incredibly enough the present centre-left government has – much against its voters wishes – pushed from reforms of welfare benefits, educational reform and pension reforms.

  10. Gravatar of Denmark and Utah – Miles Kimball and me | The Market Monetarist Denmark and Utah – Miles Kimball and me | The Market Monetarist
    9. June 2013 at 11:25

    [...] Sumner has an interesting new post in which in argues that Utah is “America’s Denmark”. I like Scott’s theory [...]

  11. Gravatar of ssumner ssumner
    10. June 2013 at 06:44

    Tom, Good point.

    Brenb, Maybe, but I’m more interested in levels than rates of change. The data you cite suggests that Vermont is moving slightly in Denmark’s direction.

    Ashok, I agree with some of those comments, but I’m not sure why you say they are able to pay off their debts very well.

    Robert, Good point.

    Russ, Good point.

    Lars, Excellent!! Given how small Denmark is, what are the odds that the Mormons would have a heavy Danish contingent, if the relationship were random? Maybe 1 in 100? (Denmark has about 1% of Europe’s population.)

  12. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    10. June 2013 at 07:36

    The appearance by Friedman on Icelandic TV can be watched here;

    http://www.bing.com/videos/search?q=milton+friedman+iceland&view=detail&mid=03F122DD305B150C91C903F122DD305B150C91C9&first=0&FORM=NVPFVR

    And, about the reference to Vermont by Brenb, Friedman wrote a famous comparison in 1976, of Vermont and New Hampshire. New Hampshire won.

  13. Gravatar of Doug M Doug M
    10. June 2013 at 08:04

    Honest people => Generous unemployment benefits

    I would say that it is closer to:
    Trust => Generous unemployment benefits.

    Of course honest people should be more trustworthy. But also participating in more neighborly activities (civic-mindedness) will lead your trust in your neighbor. In is a self-reinforcing cycle.

    And when trust breaks down we say, “Look at those welfare queens abusing the system we created as a safety-net for hard-hard working Americans.” This attitude evolves to the point of view that the safety-net is, in fact, the problem.

    I think that this trust factor explains a lot of the anti-immigrant mentality. If immigrants won’t speak the same language and isolate themselves to their own community, trust breaks down, followed by a move to strip them of government benefits.

  14. Gravatar of Chandrasekhar Ramakrishnan Chandrasekhar Ramakrishnan
    13. June 2013 at 09:35

    Scott,

    Interesting observation. Another way to phrase this is that societies with a high level of trust between members can support a high level of inequality in their welfare systems (those who require more support from the government can draw more than those who require less). It seems to follow that societies where, for whatever reason, there is less trust between members, require a welfare system that treats all members equally. Sounds like an argument for the guaranteed minimum income as the right welfare system for the US.

  15. Gravatar of To Grow the Welfare State, Keep it Small | The Ümlaut To Grow the Welfare State, Keep it Small | The Ümlaut
    19. June 2013 at 02:03

    [...] of the things that make Nordic countries tick are their civic virtues. Scott Sumner, an economist at Bentley University, cites data from the World Values Survey, which indicate that [...]

  16. Gravatar of » To Grow the Welfare State, Keep It Small – GLOBALFINANCIALMELTDOWN.COM » To Grow the Welfare State, Keep It Small - GLOBALFINANCIALMELTDOWN.COM
    20. June 2013 at 21:17

    [...] of the things that make Nordic countries tick are their civic virtues. Scott Sumner, an economist at Bentley University, cites data from the World Values Survey, which [...]

  17. Gravatar of TheMoneyIllusion » Denmark and Utah, once again TheMoneyIllusion » Denmark and Utah, once again
    22. July 2013 at 10:29

    [...] month I did a post pointing to a number of surprising similarities between Utah and Denmark.  The NYT just found [...]

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