Argentina, Chile and China

Scott Alexander recently linked to a graph showing PISA scores by country and by income deciles within countries. Three that caught my eye were Argentina, Chile and Uruguay. These are three countries with populations of Western European descent, and are also the only three countries in South or Central America with per capita GDPs above $20,000.  But the Southern Cone does appalling bad at taking PISA exams, scoring among the lowest of all countries on the list.  Argentina is even lower than (much poorer) Brazil and Tunisia, something I would not have expected.  Argentina also scores extremely low on indices of “Economic Freedom”.

Argentina’s an interesting case to think about.  It’s a sort of composite of the worst of Chile and the worst of China.  Chile scores extremely high on economic freedom, the only developing country in the top 10 (unless Estonia is viewed as developing).  Argentina ranks 156 out of 180.  China’s sort of the opposite of Chile.  It ranks pretty low on economic freedom (#111), but (probably) pretty high on PISA scores.  I say “probably” because the scores being reported are for Shanghai, which is definitely smarter than the average Chinese city or village.  Indeed Shanghai scores above any other country in the world, including high achieving city-states like Hong Kong and Singapore.  Nonetheless, based on other studies I’ve seen, I am confident that China would still do pretty well on a more national PISA exam.  Perhaps about at Vietnam’s level.  (Vietnam is roughly comparable to Finland, and far above the US, UK or Sweden.)

So Chile and China each have one good trait and one bad trait.  Argentina has the bad trait of each.  Argentina’s a classic example of a glass half full/half empty situation.  From one perspective, you might expect Argentina to be rich.  It’s mostly settled by Western Europeans (I think it might be the most Western European country in all of North and South America), and those countries are usually pretty developed.  But Argentina’s per capita GDP seems to be either lowest in the world for ethnic Western European countries, or second lowest (I had trouble getting racial data for Costa Rica.) A hundred years ago it was among the world’s richest countries.  It has a world-class port, and rail lines fanning out across some of the world’s most profitable farmland.  It’s got lots of mineral resources.  It’s technically sophisticated, completing Latin America’s first nuclear power plant way back in 1974.

Chile’s population is also primarily Western European, but considerably less so than Argentina.  Chile also scores very low on PISA, but not as low as Argentina.  And of course Chile has far more economic freedom.  (Just to complete the Southern Cone, Uruguay is in between the two in terms of education and economic freedom, and also GDP/person.)

China is poorer than the Southern Cone.  But that may be misleading; as it’s clearly growing faster and hasn’t reached the “middle income trap” that the Southern Cone seems to have reached.  China’s high PISA scores are consistent with the high scores in other ethnic Chinese/Japanese/Korean/Vietnamese areas, but NOT other parts of Asia.

I’d like to claim that some combination of economic freedom and PISA scores explains wealth, but I see too many exceptions.  Mexico scores higher than Argentina on PISA tests, and also far higher on economic freedom, but is poorer.  Why?

Sweden is much richer than Finland, despite doing dramatically worse on PISA, and being fairly similar on economic freedom.  Maybe the answer here is that PISA and “economic freedom” don’t always measure what we might assume.  Take the Heritage Economic Freedom Index.  Argentina is down there with countries like Uzbekistan, New Guinea, Niger, Haiti and Afghanistan.  I don’t know about you, but if I were opening a new winery, I think I’d prefer the Mendoza area to Afghanistan or Niger.  Indeed reading the Heritage description of Argentina makes me wonder why it ranks so low. As far as PISA scores, I wonder if they measure the sorts of skills required for a modern economy.  According to The Economist, Swedes are the most computer literate of this set of countries, despite scoring relatively low on PISA tests.

Screen Shot 2017-02-18 at 8.21.06 PM I do think both the Heritage rankings and the PISA scores are correlated with what we think they measure (which might be ease of starting businesses and keeping the wealth you create for the Heritage index, and ability to do complex jobs for PISA).  The question I have is whether the outliers we see, such as Argentina and Sweden, are due to flaws in these two metrics, or because there are other factors that influence development, which go beyond economic freedom and intelligence/education.

At the bottom, I have (IMF) estimates of GDP per person in 2016 for the top 91 countries.  A few things worth noting:

1.  The US continues to be inexplicably rich.  Among “normal countries” (i.e. not oil rich, tiny, multinational dominated and/or city states) only Switzerland scores higher.  And number three (Netherlands) is more than 10% lower than the US.  We are no longer top 10 in economic freedom, and our PISA scores are mediocre.  So why are we so rich?  Because we are large?  But lots of small Northern European countries are high on the list.

2.  Spain finally surpassed Italy, after many decades of gradually catching up.  Wait, wasn’t Berlusconi going to Make Italy Great Again?  Seriously, I wonder if a combination of population density and regulatory complexity make if much harder to do major projects in Italy than Spain, like large new real estate developments.  Can anyone confirm?

3.  South Korea is now very close to overtaking Japan.  That may be partly due to the fact that Koreans have lower taxes and work more hours.

4.  China finally overtook Brazil, and it looks increasingly like they will overtake Mexico by 2030, (allowing me to win my bet with Talldave.)

5.   Malaysia overtook Greece and will soon overtake Portugal.  It seems increasingly likely that Malaysia will escape the “middle income trap”.

6.  There used to be a lot of articles about how the former Soviet bloc’s transition to capitalism had failed.  But there are now 5 former communist countries that are richer than Greece and Portugal, with the Czech Republic leading the way.

7.  All you need to do is look at countries #31 to #35 to realize that GDP/person (PPP) can be extremely misleading.  I wonder about some of the figures.

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58 Responses to “Argentina, Chile and China”

  1. Gravatar of Jerry Brown Jerry Brown
    26. February 2017 at 14:31

    Why is America so rich? Maybe the old saying that the rich get richer is mostly true. Or maybe it has more to do with a fairly stable political system for over 150 years since the Civil War. Or sheer size and military might. Or abundant natural resources. Americans certainly start out life with some advantages compared to many others. Maybe we should be richer.

  2. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. February 2017 at 16:02

    As long as were talking about PISA, in Nema (brother of Tino) Sanandaji’s 2016 book ‘Debunking Utopia: Exposing the Myth of Nordic Socialism,’ there is a chapter titled, ‘Sweden’s self-inflicted immigration crisis.’ In which he writes;

    The PISA global survey has shown that Swedish students’ performance went from being close the the average of developed countries in 2000 to significantly below the average in 2012. No other country has experienced such a steep fall.

    He blames both the addition of lower performing immigrant children AND a change in Sweden’s teaching philosophy. He says that classrooms are now chaotic, with students assaulting both teachers and each other. Almost like American public schools in marginalized neighborhoods.

  3. Gravatar of Ryan Murphy Ryan Murphy
    26. February 2017 at 16:07

    Lags of economic freedom, as well as changes, tend to be important. Operationalizing that into an “economic freedom capital stock” seems to work: https://www.smu.edu/-/media/Site/Cox/CentersAndInstitutes/ONeilCenter/Research/AnnualReports/2013_annual_report_full.ashx?la=en

    Heritage’s index is very opaque, but I can walk you through every number in the Fraser index if you want, Scott. Argentina’s number is really, really bad there too.

  4. Gravatar of Benjamin Cole Benjamin Cole
    26. February 2017 at 16:09

    Hours worked is important.

    Income is not always living standards.

    Americans spend a lot on military, health and housing.

    I know “ordinary” couple in Barcelona who live better than, say, 85-90% of Americans. They have a view of the Mediterranean from their living room and six weeks vacation a year.

  5. Gravatar of Ryan Murphy Ryan Murphy
    26. February 2017 at 16:12

    Also, this link should provide at least summary information on the countries you discussed in the post: https://www.fraserinstitute.org/economic-freedom/dataset?year=2014&page=dataset&min-year=2&max-year=0&filter=1&most-free=1&quartile2=1&quartile3=1&least-free=1&countries=ARG,CHL,CHN,MEX,URY

  6. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. February 2017 at 16:20

    A little more from ‘Debunking Utopia’ (p.172-173)

    The rapid deterioration of immigrant neighborhoods is visible for all to see, and is quite astonishing. In early 2016 Swedish government television reported that the police in Sweden’s capital, Stockholm, were on their knees because young men who had migrated from the streets of Morocco and other North African countries were causing massive crime. According to the police, they frequently steal items, abuse security guards, and sexually assault women. ….

    Criminal shootouts, previously quite uncommon in peaceful Sweden have become commonplace…. The combined capitals of Denmark, Norway and Finland have a combined population of 3.3 million people, yet between 2010 and the first half of 2015, 298 people were wounded from shootouts in Stockholm and Gothenburg [with a combined population of about 1.5 million], compared to merely 70 in the three other Nordic capitals combined.

    IOW, Donald Trump was right, and the enemies of the people–ABC, NBC, CBS, CNN–were wrong.

  7. Gravatar of Matthew Moore Matthew Moore
    26. February 2017 at 17:02

    Is there any standard national measure of the personal returns to education?

    I suspect that a lot of national differences are demand driven, not supply.

  8. Gravatar of Potato Potato
    26. February 2017 at 17:46

    Scott,

    Argentina (a country I’ve visited many times and love), is a fascinating case study in politics. It’s a reverse Thailand. This is also brilliantly apropos of rural vs urban divides and the result in politics and policy.

    In Argentina you have a free market and conservative population in the country. It’s outvoted every year by Buenos Aires. But that’s not all. The divide is so strong that the language is different. Everyone that speaks Spanish fluently and travels in South America will tell you the same. There’s no argentine Spanish. There’s Buenos Aires Spanish and there’s non Buenos Aires Spanish.

    Thailand is similar but reversed. The middle class in the cities will vote for free market principles, and the countryside will vote for wealth transfers.

    We’ve been able to ignore this bullshit because our country has always risen above this nonsense, until now. Now we are following the same banana republic craziness, where idiots living in failing towns get to decide the policy for me. I have business interests across the globe, and these idiot peons could tank their own 401ks for nothing.

    But they won’t be the ones who are hurt. It will be them. If I take over an American factory I’m more likely than before to shut it down and immediately move production offshore, out of trumps insanity radius.

  9. Gravatar of James Chartouni James Chartouni
    26. February 2017 at 18:23

    Scott,
    Could you clarify what you mean with point 7 at the end?

  10. Gravatar of Benjamin Cole Benjamin Cole
    26. February 2017 at 18:44

    Potato-

    I enjoyed your post, but let me tell you rural Thailand is not much subsidized, but rural America might be the most heavily subsidized economy on earth.

  11. Gravatar of Rick G Rick G
    26. February 2017 at 18:59

    GDP/capita largely measures the quality of institutions over the last several decades, which in turn measures the quality of the governance and citizenry over the several decades before that. In contrast, PISA scores measure the intelligence/education of students *right now*.

    Since Sweden has had heavy immigration in recent decades of young people from countries with low PISA scores, without too much impact (yet) on insitutional quality, that would explain the Sweden exception.

    I don’t know enough about Argentina to say whether there is a similar phenomenon there, except to say that it’s trajectory relative to the rest of the continent has been similar to that of Spain/Portugal/Italy relative to the rest of their continent, which is down.

  12. Gravatar of ssumner ssumner
    26. February 2017 at 19:14

    Ryan, What do you make of the fact that Heritage’s written description of Argentina doesn’t sound that bad? I’m not saying the number is wrong, certainly they’ve got lots of bad policies, but I found the contrast to be rather odd.

    Potato, Thanks for that info.

    James, I meant that GDP/person does tell you much about the economy, as those 5 places are very different in all sorts of ways (starting with living standards, but also including productivity and lots of other things.

    Rick, You said:

    “GDP/capita largely measures the quality of institutions over the last several decades”

    Look at countries 31 to 35 on that list.

  13. Gravatar of ssumner ssumner
    26. February 2017 at 19:15

    Everyone, If you look at Sweden’s PISA scores by decile, compared to Finland, it’s pretty clear that the low scores are not caused by recent immigrants.

  14. Gravatar of Taylor Taylor
    26. February 2017 at 19:51

    Isn’t Ireland both richer than the United States and “normal”?

  15. Gravatar of ssumner ssumner
    26. February 2017 at 19:56

    Taylor, If I claimed that I’d have 100 people complaining that Ireland’s GDP is completely distorted by multinationals. I’m no expert, just telling you what I read.

    Although Ireland shows up as richer than Switzerland, obviously the Swiss people are much richer than the Irish.

  16. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. February 2017 at 20:00

    ‘Everyone, If you look at Sweden’s PISA scores by decile, compared to Finland, it’s pretty clear that the low scores are not caused by recent immigrants.’

    Not all of it, but some of it is. The rest is the change in Sweden’s educational system;

    http://www.thelocal.se/20131213/pisa-tumble-no-surprise-in-chaotic-schools-sweden-educationp

    ————-quote————-
    In Sweden, a new generation of teachers had low grades when they went to school. The high-achievers and the ones who went on to university and by and large shunned the profession. A controversial story in the Dagens Nyheter newspaper earlier this year argued that even those with a grade of 0.1 out of 2.0 could qualify to become a teacher, due to a quota system in which students are admitted through the higher education entry exam “högskoleprovet” rather than based on their grades from high school. Administrators at Linköping University teacher training told The Local at the time that the quota (about one third of all students) was probably too big.

    READ ALSO: Awful grades no barrier for would-be teachers

    The situation is, in fact, quite disastrous. In another story published earlier this year, the Expressen newspaper spoke with university staff who felt that students today were less knowledgeable and were not as able to work hard in school compared to previous generations. Krzysztof Bak, who teaches literature at Stockholm University, explained that “the courses we had that were on a B level during the 1990s are now on a D level”. As knowledge has deteriorated, what was once an advanced introductory level course is thus today seen as advanced graduate-level. This is hardly encouraging for a knowledge-intensive country such as Sweden, aiming to compete internationally with high wages and generous benefits. Both welfare and wealth risk being depreciated as knowledge slips.

    At the same time, this situation comes as no surprise. Sweden has with time moved from a well-functioning school system that focused on discipline and academic achievement, to one where classrooms can be chaotic, and where pupils on average study few hours.

    Bert Stålhammar, retired education and learning professor, recently reflected on going to school in the 1940s. Stålhammar argues that many of the suggested reforms, – smaller classes, more funds, greater resources – would matter little unless schools deal with the chaos.
    ————endquote————

  17. Gravatar of Bob Bob
    26. February 2017 at 20:08

    Spain is moving forward because the crisis finally forced the country outside of the dreadful local maximum it had in the labor market, which only created either terrible temporary jobs or long term jobs that were just way too expensive to move out from, leading to low growth in employment. Spaniards, for good reason, were afraid of what would happen in the short run with just liberalization, but they had few options giving that the financial and housing crises left the country in ruins.

    Today it’s far easier to hire and fire, and just that has helped the economy a bit. However, the road to becoming a ‘real’ country is still long, because too much employment is low value, and the internal devaluation made Spain undesirable for their talent: A lot of us emigrated.

    Spain will become a proper developed country when there’s more firms that think globally. You can’t pay a software developer 150-300K, like they do in California, if a firm is just doing work for a state government, which was only requested because the firm’s owner and a government higher up happen to be drinking buddies. Any stimulus has to try to be like a US incubator that won’t even touch your idea unless they think there’s a chance of a 1 billion dollar company coming out of it.

    As far as government interaction, doing any work is about having buddies in the government that let you take shortcuts: It’s the exact same behavior you see modeled when looking at developing countries. Corruption means that inane regulation is ignored by insiders, while outsiders are stuck: It’s the place the US would be heading under a permanent president Trump. Given that insiders can ignore regulation, there’s no real pressure to do reforms, and progress only happens when the EU forces the country into sanity.

    If you want proof of corruption, look no further than Spain’s news last week, where we finally see a prison sentence for former IMF chief Rodrigo Rato, along with the king’s brother in law, Urdangarin. You’ll find coverage in english for those, and that’s just the tip of the iceberg when it comes to Spanish corruption. One that won’t get cleared up, because the PM himself is involved, can be searched for by looking for the former treasurer of the PM’s party: Luis Barcenas.

    Therefore, if anything, I wonder how deep the problems must be in Italy if they manage to do worse.

  18. Gravatar of Ryan Murphy Ryan Murphy
    26. February 2017 at 22:28

    Scott, it looks like they are overreacting to the post-Kirchner government. If their reaction is justified, it will start showing up in EFW in the 2018 report.

  19. Gravatar of Andy Andy
    26. February 2017 at 22:38

    Case Finland and Sweden is good example on why making conclusions using these type of simple metrics is often so difficult.

    I’m from Finland and believe me we have talked about this a lot during the past decade. In 2007-08 Finland and Sweden were about equally rich per capita (Finland grew faster during 90s and early 2000s).

    But then three things happened: Nokia cluster basically lost to Apple and Samsung in the smartphone revolution. At best Nokia’s share of Finland’s exports was 20%, and share of Finnish GDP was 5%. No other developed country has been so dependent on one company and when Nokia went down it had major effect to whole Finland’s economy. In general Sweden has a lot more diversified economy.

    Second reason, the Euro crisis and ECB sadomonetarism. Swedish krona has depreciated related to Euro 15% since 2012. It’s nice to be a Swedish exporter nowadays.

    Third, Russia’s problems have affected Finland quite a lot with exports decreasing due to trade sanctions and Russians becoming poorer in general.

  20. Gravatar of HW HW
    27. February 2017 at 00:16

    2015 PISA results have been out for a while now. It includes four Chinese regions: Beijing, Shanghai, Jiangsu, and Guangdong, which adds up to some 232 million people.

    Reading scores are close to the OECD average, math and science comparable to South Korea.

  21. Gravatar of Joe S Joe S
    27. February 2017 at 03:47

    You mention the ‘world-class’ port and rail lines in Argentina. I work in agriculture. I have traveled to Argentina only a few times, but I don’t believe the port at Rosario is near world-class (anymore) and I’m certain Argentina’s rail infrastructure is sub-par. I’ve been told that you can only fill most ships about 80% full because the river hasn’t been properly dredged for years. They have to take the ships around to Bahia Blanca to finish loading. As for rail, they use old, small and poorly maintained locomotives and grain cars. A typical car holds about 2,000 bushel, versus 2,500 in the U.S. But the big difference is a typical train in the U.S. (say from Southern IN/OH to NC) will carry about 100 grain cars. Their locomotives are just too small and their rail too poorly maintained – such that they can only haul about 20 cars at once. The reason for the lack of maintenance or reinvestment is that both the rail itself as well as the cars and locomotives are owned by the federal government. Private companies operate based on a government ‘concession’ for a fixed period of time. The concessions of those I spoke with expire by 2020 (with some hope of privatization going forward). Also, labor laws force the trains to stop every 8 hours to allow employees to get off and new employees to get on (unlike in U.S. where the sleeping quarters would be on the train). One company I’m familiar with owns multiple small hotels or houses along their rail routes just to deal with this issue. The vast majority of grain in Argentina is hauled by independent truck contractors for good reason. Their farm gate production costs (particularly soy and rice) are generally cheaper than the U.S., but the cost to get to market is higher.

  22. Gravatar of W. Peden W. Peden
    27. February 2017 at 05:41

    Interesting post. I agree with Ryan that there’s an important point about levels and changes in levels here. I’d expect economic freedom to be correlated with income and wealth (also distinct, as you often note!) but only in the very long run. By contrast, there are at least plenty of episodes where big changes in the level of economic freedom has corresponded with big changes in the level of income.

    I really like the idea of an economic freedom capital stock. It’s not just that the effects of increased economic freedom can take a while to manifest, but also people take time to adapt to economic institutions.

  23. Gravatar of Brian Brian
    27. February 2017 at 09:20

    The Argentinian nuclear plant was actually a Canadian export that had also been exported to Pakistan and India in earlier years.

  24. Gravatar of Ray Lopez Ray Lopez
    27. February 2017 at 10:29

    Blah blah blah. Sumner misses a golden chance to quote the below in his blather, so I’ll do it for him:

    “The great midcentury economist Simon Kuznets is said to have said that there are four kinds of countries: developed countries, underdeveloped countries, Japan, and Argentina”

  25. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    27. February 2017 at 10:36

    Thomas Sowell has an interesting explanation for the situation Argentina finds itself in, in his 2015 ‘Wealth, Poverty And Politics: An International Perspective.’

    In which he points out that Argentina was just as poor as the rest of the Spanish ex-colonies in Latin America, in the 19th century, inspite of its rich soils and mineral deposits. That changed when the government sent agents to Europe encouraging immigration from Northern Italy, Germany and Russia. I.e., people from different cultures with different attitudes about working, saving and investing.

    That’s when Argentina became an exporter of wheat and other commodities, as well as manufacturers. Inevitably, the Spanish majority in Argentina began to resent the greater prosperity of the productive newcomers. Result; Peronism and a steep decline from being to one of the richest countries in the world to a basket case. Which it remains today.

  26. Gravatar of dd0000 dd0000
    27. February 2017 at 10:51

    As HW mentioned, the PISA scores published this past December included a broader population for China and the scores were still remarkably high (though obviously not as high as Shanghai alone). Several other intelligence-type studies have shown the general Chinese population, even in the less wealthy areas, scores remarkably high for its wealth (ditto Vietnam).

    The newest PISA also shows Buenos Aires standalone scores as the rest of the country’s scores were voided due to rampant cheating. Buenos Aires, the center of wealth in Argentina, is right between Greece and Kazakhstan in math results.

    The list breaks down rather typically at the top: East Asian countries, Finland, then Northern Europe.

    The most impressive country was Estonia – having raced ahead to surpass its genetic cousin Finland in both Science and Math. Not surprising, I think, given that Estonia is a freer-market Finland (though with greater Russian population). I could easily see the country battling for the top with the East Asian countries in a decade or so, as it becomes wealthier. Intelligent population + free market policies seems to be a good mix for nurturing human capital (see: Hong Kong, Singapore, Switzerland).

    A fascinating experiment would be to see where North Korea would fall in these rankings. I would wage a hefty sum that it would be better than people expect.

  27. Gravatar of ssumner ssumner
    27. February 2017 at 11:15

    Bob, Thanks for that info.

    Ryan, That’s plausible.

    Thanks HW, I forget that these are just math scores.

    Thanks Joe, I should have said “formerly world class port”.

    W. Peden, That makes sense. However it’s also important to note that if the current economic freedom levels imply a much higher or lower steady state wealth, that should show up in GDP growth rates.

    Brian, Thanks for that info. The next question is how much technical sophistication is required to run those plants.

  28. Gravatar of ssumner ssumner
    27. February 2017 at 11:17

    Ray, At the time both were transitioning, but in opposite directions.

    Patrick, Interesting theory. Keep in mind, however, that Spain itself is a developed country.

  29. Gravatar of Cooper Cooper
    27. February 2017 at 12:31

    Isn’t part of the issue that Latin American countries don’t like to trade with each other?

    They’re focused on trying to export to countries half a world away instead of building regional industrial networks that can compete globally.

    Half of NAFTA’s trade is to other countries in NAFTA. 60% of the EU’s trade is with other EU members. Half of ASEAN’s trade is with other countries in East Asia.

    Latin America, meanwhile, conducts only 20% of its trade with its neighbors. http://www.cepal.org/en/infographics/foreign-trade-latin-america-and-caribbean

    The unwillingness of Latin American countries to open their markets results in the wasteful spectacle of Argentina trying to produce its own smartphones and Brazil demanding local content for its offshore oil drilling projects.

  30. Gravatar of ChargerCarl ChargerCarl
    27. February 2017 at 12:33

    Spain isn’t so bad. Housing costs are about half the US average and they demolish the rest of the world when it comes to efficiently building rail infrastructure.

  31. Gravatar of ssumner ssumner
    27. February 2017 at 13:34

    Cooper, It should be noted that the Pacific Coast of Latin America (including Mexico) is ahead of the Atlantic Coast in terms of free trade.

    ChargerCarl, Not China!

  32. Gravatar of ssumner ssumner
    27. February 2017 at 13:38

    dd0000, Thanks, very interesting comments. It sounds like Argentina improved, if it’s close to Greece. But I suppose the deletion of the rural areas calls that into question. Interesting.

  33. Gravatar of CharerCarl CharerCarl
    27. February 2017 at 13:46

    Actually Scott I think Spain does beat China:

    https://pedestrianobservations.wordpress.com/2011/08/22/construction-costs-third-world-edition/

    China tunnels at about $150m/km, where as Spain averages $40-60m/km.

  34. Gravatar of ssumner ssumner
    27. February 2017 at 13:57

    ChargerCarl, Maybe, But I’d like to know more. For instance, the new subway lines I’ve seen in China are higher quality than the ones I recall in Europe–but then I don’t know about the newer European lines. For instance, China has those sliding glass walls, which make platforms safer. Chinese lines move large volumes of people, I don’t know if that requires bigger stations.

    As the article mentioned, the Beijing Shanghai line (as long as NYC to Chicago) is 86% elevated. That’s a long bridge !)

    Spanish efficiency was also hurt by the decision to build the first line to Sevilla, which isn’t economical. But it’s a nice train.

    One thing we can all agree on is the US—which has some astronomical construction costs.

  35. Gravatar of ssumner ssumner
    27. February 2017 at 14:07

    I would add that it’s not at all clear that a PPP adjustment is appropriate when looking at construction costs.

  36. Gravatar of Philo Philo
    27. February 2017 at 14:46

    What caught my eye? Peru! Colombia! Qatar–and it’s at the very top of the income ranking! And, of course, China and Korea.

  37. Gravatar of Benjamin Cole Benjamin Cole
    27. February 2017 at 17:31

    Side note to Scott Sumner:
    “In his book, Roger (Farmer) takes the anti-natural-rate argument a step further, asserting that the natural rate of unemployment rate is not unique. There is actually a range of unemployment rates at which the economy can permanently remain; which of those alternative natural rates the economy winds up at depends on the expectations held by the publicabout nominal future income. The higher expected future income, the greater consumption spending and, consequently, the greater employment.”

    And limit SSDI and VA disability payments…print more money…shrink government

  38. Gravatar of Benjamin Cole Benjamin Cole
    27. February 2017 at 20:10

    The Post’s View Opinion:

    “Trump is already losing the long-term fight in Iraq”

    –30–

    The above is a headline from a WaPo editorial today.

    Gee, I thought 14 years in Iraq was the “long-term.” I guess it was just the first inning, and now Trump has screwed up the next eight innings.

    You think the WaPo is tight with the DC foreign policy-military complex?

    Why not? 50 to 100 years of throwing money at Iraq is a good plan.

    Nw topic—

    So, which is more damaging to an economy: Taxes on productive behavior, or taxes on imports?

    If you had to choose only one, which would you choose?

    Seems to me, taxes on imports would be less damaging than taxes on productive behavior, that is working and investing.

  39. Gravatar of Ray Lopez Ray Lopez
    27. February 2017 at 21:21

    OT – Headline in WSJ for 2/28/17, Asian edition: “WSJ 2/28/17 – THE FAILURE OF JAPAN’S RADICAL EASING”. The article goes on to say the Japanese love to save no matter what central banks do. Our host’s solution? “Print more money!” And if nothing happens? “Print even more!” And if nothing happens?… “Print even more until something does!”. That’s our host’s sophisticated NGDPLT in concrete steps. Am I right professor?

  40. Gravatar of Ray Lopez Ray Lopez
    28. February 2017 at 09:41

    OT- our host is contradicted by Cato scholar Lawrence H. White, see: https://www.alt-m.org/2017/02/28/no-fiscal-case-feds-large-balance-sheet/ (“The Fed has also been carrying ***significant default risk*** by holding $1.7 trillion of its portfolio not in Treasuries but in mortgage-backed securities”) . Recall our host has said numerous times there’s no harm in the Fed expanding its balance sheet from $1T to $4T, even if they bought toxic junk paper. Who to believe? Cato savant Larry White or some obscure former Bentley College educator who was discovered by Tyler Cowen? I know who I’m betting on (in any prediction market).

  41. Gravatar of Doug M Doug M
    28. February 2017 at 10:40

    Worth noting, that Argentina was one of the wealthiest countries in the word one century ago (whether measured per capita or total).

    It is the poster child of how bad governmental institutions can ruin an economy.

  42. Gravatar of Don Geddis Don Geddis
    28. February 2017 at 12:13

    @Ray asked: “That’s … NGDPLT in concrete steps. Am I right professor?

    No, you’re wrong. But we no longer expect that your years of reading this blog can impact your understanding at all. You’re obviously here for your own entertainment, not for your education.

    But since you ask: no, you have not correctly described NGDPLT.

  43. Gravatar of TheManFromFairwinds TheManFromFairwinds
    28. February 2017 at 12:33

    “The question I have is whether the outliers we see, such as Argentina and Sweden, are due to flaws in these two metrics, or because there are other factors that influence development, which go beyond economic freedom and intelligence/education.”

    As someone from Argentina, a pretty obvious metric not being caught by PISA is the quality of tertiary schools. If what you look to get from PISA is “ability to do a complex job” this only gets you half the way, as realistically no one is doing complex jobs with a secondary degree. Argentina is famous in the region for the quality of its tertiary schools (both public and private) with many students from all over South America coming here to study. At the same time we have graduation rates for secondary school of only 50%, so it’s hardly surprising we do not do well at PISA.

    Also are you sure China is not richer? Their factory workers now earn more:

    http://www.chinaeconomicreview.com/chinese-wages-higher-brazil-mexico

  44. Gravatar of Ravi Smith Ravi Smith
    28. February 2017 at 14:50

    Why is the US have an abnormally high GDP/capita? I’m sure I sound like a broken record, but I’d argue for the high level of federalism. The US and Switzerland both have lots of municipal liberty. I was in the US a few months ago and was blown away by the low quality of national politics, but high quality of local government. I was in Boulder and Seattle. Both places have lots of local initiatives and voluntary associations. Longmont (a town outside Boulder) created a public gigabit broadband network for $50 a month without subsidies. It is being copied throughout the state. Seattle is building a high quality rail network and upzoning for affordable housing. Both places seemed to have a high level of connectedness between local government, universities, and the business community. Decentralization allows for more experimentation and decreases the costs of failure.

  45. Gravatar of Major-Freedom Major-Freedom
    28. February 2017 at 16:18

    Ray wrote:

    “Print more money!” And if nothing happens? “Print even more!” And if nothing happens?… “Print even more until something does!”. That’s our host’s sophisticated NGDPLT in concrete steps. Am I right professor?

    Don Geddis replied:

    no, you have not correctly described NGDPLT

    Actually that is exactly right, because NGDPLT by design ignores the quantity of money, it ignores the rate of growth of the quantity of money, it ignores price inflation, it ignores capital malinvestment, it ignores interest rate distortion caused by the process of inflation itself, everything except total spending.

    Hence, it is in fact true that if money is printed and “nothing happens”, then NGDPLT specifically advocates and calls for more money printing, indeed whatever rate of money printing that will be followed by “something happening”, i.e. total spending rising at some arbitrary, anti-scientific, anti-market, anti-capitalist, arrogant, presumptuous, misguided, destructive, immoral, socialist growth rate.

    Fed prints a trillion dollars to finance terrorists or globalists, and total spending “doesn’t do anything”? Then print more! More fake, pretend, as-if-you-can-even-promise financing of “market projects” because the central bankers are just so disciplined and honorable and would never print money outside the official published manner

    Market monetarism is dirty hippie naive communism dressed up in a cheap suit.

  46. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    28. February 2017 at 16:47

    Some background music for The Donald’s speech tonight;

    http://www.nationalreview.com/article/445237/sweden-crime-rates-statistics-immigration-trump-fox-news

    ————–quote————–
    In their response to Donald Trump, the Swedish government has pointed out that the homicide rate in Sweden is lower now than in 1990. We should nevertheless note that the homicide rate has decreased in almost every Western country since 1990, owing to social reasons, changes in attitudes, and, in part, medical advances that save the lives of more crime victims. The homicide rate in Sweden has declined less than in the United States, Western Europe, and other Nordic countries, and has increased again the last few years. Between 1990 and 2015, the homicide rate in Sweden declined from 1.3 to 1.1 per 100,000. This drop is less than that in Western Europe as a whole, where the homicide rate declined from 1.3 to 0.6 in 2013, the latest year reported by the World Health Organization. In Finland, the homicide rate declined from 3.2 to 1.3 during the same period, and in Norway from 1.1 to 0.4. The rate was stable at 0.8 in Denmark. While the homicide rate inevitably varies in a small country year by year, Sweden appears to have transformed from one of the lower-crime countries in Western Europe to above average. We cannot say for certain how much immigration contributes to violent crime in Sweden. The numbers are collected by statistical agencies in Sweden, but they have not been reported since 2005 because of the informal taboo on linking immigration to crime.

    …. The last time there was an official report breaking down crime statistics by immigrant status and origin was in 2005, for the years 1997 to 2001. These statistics confirmed that immigrants were significantly overrepresented amongst offenders, in particular in committing violent crimes. The foreign born were four times more likely to be suspects in homicide cases than those with Swedish origin, and 4.5 times more likely to be suspects in rape cases.

    Since then, Swedish criminologists and politicians have made sure that no new statistics have been released. Not a single recent research study in Sweden has attempted to estimate the causal effect of immigration on sexual assault or homicide rates. Parliament recently defeated a motion to produce up-to-date crime statistics based on national origin. We simply do not know what percentage of sexual assaults or homicides were committed by immigrants last year in Sweden. The Swedish criminologists and government officials who adamantly deny the effect of immigration on crime don’t know these figures, and strikingly don’t want to know. Americans who are interested in this topic should focus on this surreal taboo against statistics, not cartoonish exaggerations that falsely portray Sweden as a war zone.
    —————endquote————

  47. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    28. February 2017 at 16:59

    ‘Seattle is building a high quality rail network and upzoning for affordable housing. Both places seemed to have a high level of connectedness between local government, universities, and the business community. Decentralization allows for more experimentation and decreases the costs of failure.’

    I’m a (mostly) lifetime resident of Seattle, and I can’t even fathom how anyone could be so misinformed about what is happening in Seattle.

    It’s so bad that even the egregiously leftish business/economics correspondent of the Seattle Times, Jon Talton, has recognized it;

    http://www.seattletimes.com/business/economy/mayors-bid-to-business-on-homeless-is-a-stretch/

    —————quote————–
    The 2016 Homeless Assessment Report to Congress by the Department of Housing and Urban Development showed that nationally, chronic homelessness continued to decline.

    Its rise in Seattle coincides with increased funding for what [Mayor Ed] Murray declared a homelessness “crisis.”

    This discrepancy raises the question: Is the city assessing whether its policies are exacerbating the problem and drawing people from elsewhere?

    I interact with street people almost every day and have yet to encounter one who is actually from here. Late last year, I was on a street in Phoenix when a homeless man noticed my Mariners cap. He told me he wanted to get to Seattle “because it’s Freeattle.” True story.

    Also, the term “homeless” is murky, encompassing many discrete groups and conditions.

    A woman working at minimum wage can lose her job and be evicted — this is an unsheltered person who can be effectively helped.

    Other individuals, beset with addiction or mental illness, are no less precious in the eyes of the Lord. But they are more difficult to help. Many of the chronic homeless in this group require a continuum of approaches and support beyond simple housing. Some don’t want to abide by shelter rules, or are afraid of being victims of theft there. No one wants to be on the street when it’s freezing cold and raining, but some portion of the cohort once called hobos prefers freedom over a conventional life.

    ***One thing that’s clear is numerous nonprofits have a stake in ever-expanding funding of the “crisis.”*** [my emphasis]

    Whether the city is properly overseeing how the money is spent is a big question. Are the programs providing pathways to self-sufficiency and productive lives where possible? Or is even asking that being too judgmental?

    Considering the “crisis” has gotten worse here despite added funding, is the most intelligent response to ask that businesses pony up another $25 million on top of their taxes and payrolls?

    If so, use some of it to pay for rigorous, independent studies as to why this expansion in the homeless population is happening. Is our approach flawed or even making the problem worse? It’s important to know.
    —————endquote————

    But Seattle’s political establishment doesn’t want to know any more than Sweden’s do about their crime problem. Both might then have to end up shouldering some blame.

  48. Gravatar of Miguel Madeira Miguel Madeira
    1. March 2017 at 02:28

    About the Argentina being on of the richest countries of the world a hundred years ago – that was real (with a strong industrial base), or was simply a result of a moment of international high prices (namely because of Word War I in Europe) of the primary sector products (like meat) that Argentina produces (like when Equatorial Guinea was the richest country in the world a few years ago, before the fall in oil prices)?

  49. Gravatar of Ravi Smith Ravi Smith
    1. March 2017 at 04:50

    @Patrick Sullivan

    Seattle certainly has seen homelessness rise and houses become more unaffordable. Yet compared to San Francisco, San Jose or basically anywhere in coastal California, Seattle is building more housing and there is political momentum on the issue.

  50. Gravatar of Benny Lava Benny Lava
    1. March 2017 at 05:19

    That is a strange claim to say that the US isn’t oil rich. According to the Internet it is the #3 oil producer in the world: http://www.tradingeconomics.com/united-states/crude-oil-production

    Historically it has always been in the top 5.

  51. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    1. March 2017 at 05:21

    ‘Seattle is building more housing and there is political momentum on the issue.’

    Where are you writing from, the moon?
    The political momentum is what it has been for forty years; more taxation, more money for the city’s establishment to disburse to their favored friends, while traditional public services like police, fire, street maintenance get short shrift.

    Which is disastrous for ordinary to poor Seattleites, who can’t afford even a small apartment. If you’re lucky you live in a room in a big old house. I’m not exaggerating. If you don’t believe me, just get on a bus and listen to the people talk. As the Seattle Times’s columnist has.

  52. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    1. March 2017 at 05:34

    Here’s the political momentum in Seattle;

    https://www.youtube.com/watch?v=KhtPZpK7A5c

    She’s a city councilman…and a North Carolina St. Phd in economics.

  53. Gravatar of ssumner ssumner
    1. March 2017 at 06:18

    Ray, Sorry to tell you this, but that “toxic” mortgage debt is backed by the Treasury.

    Fairwinds, That’s a very good point—tertiary education also helps explain why the US excels in high tech, despite mediocre primary schools.

    My next post covers China.

    Ravi, Very good point. If was just the US you could write if off as just one observation. But as you note, Switzerland is also highly decentralized.

    Benny, We are a net oil importer, by a wide margin. Oil is simply not a big enough sector to explain our high GDP/person.

  54. Gravatar of Ravi Smith Ravi Smith
    1. March 2017 at 07:09

    @Patrick Sullivan

    Thanks for filling me in Patrick! I was only there for a couple days and must have been deceived by my short experience. Seattle does seem to be handling things better than San Francisco though. Civic engagement appeared high to me, but selection bias probably has a lot to do with that.

  55. Gravatar of Lorenzo from Oz Lorenzo from Oz
    1. March 2017 at 12:18

    How much is the US a big country, and how much is it 50 countries moving in close formation?

    US States are unusually powerful sub-national entities. The US may get big country Smithian advantages because it’s a free trade area and small country attentive-government advantages from federalism. (The US also has significant top-end talent-attracting effect.)

    Looking at the top 30 countries, it does seem federalism can be an advantage if your population is above 20m.

  56. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    1. March 2017 at 16:36

    ‘Civic engagement appeared high to me….’

    Oh, many citizens are engaged politically in Seattle–just as Tullock and Buchanan drew it up in ‘The Calculus of Consent.’ I.e., well focused special interests who have a cost/benefit advantage over the diffused general population.

    Squeaky wheels getting greased.

  57. Gravatar of ssumner ssumner
    2. March 2017 at 08:02

    Lorenzo, You said:

    The US may get big country Smithian advantages because it’s a free trade area and small country attentive-government advantages from federalism.”

    I’m willing to believe that, but if so then shouldn’t the EU be doing better? They have a big free trade area, and their national governments have more power than our state governments.

  58. Gravatar of Floccina Floccina
    17. March 2017 at 11:28

    Could Smart Fraction Theory be one reason why the USA so outperforms.

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