Karl Smith, Matt Yglesias, and Greg Mankiw

Greg Mankiw linked to a post showing data for income inequality and tax progressivity.  Matt Yglesias argued that Mankiw is unreliable because the data he used is incomplete (income taxes only.  But actually it’s not just income taxes.)  Then Karl Smith presented the exact same data in the form of a graph rather than a table, and Yglesias praised Smith’s graph, while continuing to argue that Mankiw engaged in “malfeasance.”  I’m confused.  Here’s how Matt Yglesias interpreted the Smith chart:

 The rich pay a huge share of the total taxes in the United States because they have a huge share of the money.

But that’s not really what Karl Smith’s graph shows.  It’s not saying that if you make twice as much money you pay twice the taxes.  It shows something far more interesting, something that I was unaware of.  The graph shows that countries with more income inequality tend to adopt tax regimes with more progressivity.  I knew that was true between the US and Europe, but didn’t know it was also true within Europe.  That’s completely consistent with Mankiw’s (implied) claim that the US tax system is the most progressive.

PS.  The reason it shows progressivity related to inequality is that the line on Smith’s graph has a relatively flat slope.

Update:  On second thought  I may have erred in saying it was simply a function of the relatively flat slope; the intercept also matters.  Math isn’t my forte.

HT:  Commenter “example”


Tags:

 
 
 

41 Responses to “Karl Smith, Matt Yglesias, and Greg Mankiw”

  1. Gravatar of Morgan Warstler Morgan Warstler
    22. March 2011 at 08:33

    Matty reads like an ex-student of Mankiw.

  2. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    22. March 2011 at 08:36

    I remember pointing out something like this to DeLong about 8 years ago; that he should make up his mind what he wanted progressivity in appearance, or in fact. As I recall he didn’t like it.

  3. Gravatar of Brian Brian
    22. March 2011 at 08:51

    Patrick:

    Well said. I wonder then how DeLong would get along with Robin Hanson.

  4. Gravatar of ChacoKevy ChacoKevy
    22. March 2011 at 08:54

    Isn’t an analysis of simply the tax rates moot anyway? It seems to me that any analysis of the progressivity of any tax regime would have to take into account government services rendered. Matt mentions this real quickly, but doesn’t develop the idea in this post (he has in the past). Without getting into the efficacy of various countries and their programs, what looks like is needed is a look at the (cliche as the phrase has become) value proposition of each country.
    I don’t agree or disagree with anything anyone has mentioned yet, I just don’t get what anyone has asserted yet.

  5. Gravatar of Anthony Anthony
    22. March 2011 at 09:04

    That graph is terrible. The line spacing is different (every 0.5% vs. every 1% despite having more room). The graph is stretched out of proportion (20–40% on the Y axis is a different physical size than 20–40% on the X axis). This makes the slope misleading. Thankfully, some quick work in an image editing program can scale it back, allowing you to actually see the slope, which about 20° (and matches the value I calculate with a arctan, so is probably right).

    So, if countries with higher inequality (more towards the top) had more progressive tax systems (more towards the right), you’d expect the line to approach the right more quickly than the top: i.e., have a slope less than 1 (=45°). At least if you assume %paid/%earned by top decile is a measure of progressivity.

    I don’t think the y-intercept matters.

  6. Gravatar of W. Peden W. Peden
    22. March 2011 at 09:19

    Surely any worthwhile normative analysis of a tax system looks at revenues, not at tax rates. Official tax rates are window-dressing and little more than propaganda in many countries. Hence why some people claim that a flat tax with no deductions would actually result in a more progressive revenue stream in the US.

    Does Smith’s chart track revenue or rates?

    Chacokevy,

    The services rendered is a difficult one. I used to hold that taxes should be progressive because the rich benefit more from the services of government (in terms of net property protected) but this cannot be reconciled with the view that small states/anarcho-capitalism would be a Dickensian dystopia.

  7. Gravatar of William William
    22. March 2011 at 10:23

    I am still looking for an explanation of why you would run the regression this way and not the other way around. Smith uses tax share to predict income share. Wouldn’t it make more sense to use income share to predict tax share?

    Like Smith, I used Mankiw’s data, and got this chart (United States excluded from linear regression)

    http://tatulln.files.wordpress.com/2011/03/deciles_2.png

  8. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 10:26

    The graph shows a slight trend towards greater progressivity the greater income inequality is (at least for the top 90th percentile).

    It would be improved if a line marking the boundary between regressive and progressive tax distribution were included. Note that only two nations of the 24 OECD nations included have regressive tax structures at that percentile: Poland and ??? (I wonder who the other country is?)

  9. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 10:33

    Excuse me, I see I should have looked at Mankiw’s post. Iceland, Switzerland, Belgium, Norway and Poland are all “regressive” by this measure. But Poland leads the pack.

    Woohoo, we’re number one! (Em, er, I think.)

  10. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 10:44

    I should also mention that Mankiw’s post makes the conventional observation (at least I think so) that despite the fact Eurpean tax systems are less progressive than the US they actually result in greater equality because of higher expenditures on social security and services.

    I’m a big fan of the European model. It is both more growth friendly and more progressive. It makes my consequentialist/utilitarian heart proud.

  11. Gravatar of David Pearson David Pearson
    22. March 2011 at 10:47

    Scott,

    This OT, but I thought you might find it interesting. It is an FT article that describes how the Chinese are using copper inventories to speculate on the price of the commodity.

    http://ftalphaville.ft.com/blog/2011/03/10/510676/chinas-copper-as-collateral-addiction/

    Here’s another one along the same vein:

    http://ftalphaville.ft.com/blog/2011/03/15/514921/simply-amazing-commodity-collateral-shenanigans-in-china/

    Something tells me those copper inventories would quickly disappear if the Fed removed the “extended period” language. Is this real demand or the effect of easing?

  12. Gravatar of cassander cassander
    22. March 2011 at 11:56

    Mark A. Sadowski> Which European model? There are at least 3.

  13. Gravatar of ssumner ssumner
    22. March 2011 at 12:01

    Morgan, He’s usually pretty good.

    Patrick, He doesn’t like commenters who disagree with him.

    Brian, That would be interesting.

    Chacokevy, Sure, all of that matters, I was just pointing out that Yglesias’ trashing of Mankiw wasn’t really called for.

    Anthony. Suppose everyone had an equally progressive system. Those where the top group earns 20% of income pay 30% of taxes, those where the top group earns 30% of income pay 45% of taxes. That’s a straight line, with a slope less than 45 degrees, but still all systems are equally progressive by assumption.

    W. Peden, They are using revenue.

    William, If you throw out Poland you get a much steeper line. But Mark Sadowski would object.

    I wasn’t looking at any causal relationship, just correlations. But I suppose I took the income shares as given, when in fact a more progressive tax system will tend to make before-tax income more unequal.

    Another factor making European incomes more equal is that they often don’t have to pay for college education and medical school, hence professionals earn less of a bonus. That actually means that much of the difference in equality is spurious. Also we have more low skilled jobs done by immigrants.

    Mark, Good points, just don’t read my previous response to William.

    David, I have trouble seeing how extended period language by the Fed leads to copper hoarding in China. Copper prices depend on the trend rate of inflation, plus the relative price of copper. Obviously Fed policy has little effect on the trend rate of inflation, and the relative price of copper is driven by growth rates in developing countries.

  14. Gravatar of ssumner ssumner
    22. March 2011 at 12:16

    Cassander; Poland. No seriously, I’d guess he’ll say the Nordic model.

  15. Gravatar of Morgan Warstler Morgan Warstler
    22. March 2011 at 13:49

    http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

  16. Gravatar of W. Peden W. Peden
    22. March 2011 at 14:18

    Prof. Sumner,

    Then that does surprise me. I had always been under the impression that European countries tend to have lower rates on high rate taxpayers than the US, but better revenues from the said taxpayers.

  17. Gravatar of Doc Merlin Doc Merlin
    22. March 2011 at 14:18

    Leads me to an interesting question can the progressively be the cause of the inequality?

  18. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 14:41

    Cassander,
    I’m referring to the EU. The EU is generally more dependent on consumption taxes and less dependent on taxes on capital income than other advanced nations. This type of tax structure has been linked econometrically to higher rates of long run GDP per capita growth. The higher levels of spending on social services also probably encourages greater accumulation of human capital, which is also linked to higher rates of growth.

    Unfortunately, good fiscal policy is for naught if the ECB is following a contractionary monetary policy. Fortunately for Poland, unlike every other member of the EU (yes, even including Sweden, Scott), their central bank managed to keep NGDP growing smoothly throughout the “global” Great Recession, not even suffering a mild recession.

  19. Gravatar of Morgan Warstler Morgan Warstler
    22. March 2011 at 15:28

    @Doc, I think it is the rise in public employee pay.

    Best article of the day:

    http://blogs.forbes.com/charleskadlec/2011/03/21/coming-soon-an-uncontrolled-800-billion-federal-spending-increase/

  20. Gravatar of Kevin A Kevin A
    22. March 2011 at 16:37

    Scott, thank you for saying this.

    I just want to highlight that this sentence: “The graph shows that countries with more income inequality tend to adopt tax regimes with more progressivity.” is exactly correct. The regression shows that the more income the top decile make as a percentage of GDP, the more progressive the tax structure.

    The equation of the regression line is: 0.4071X + 15.512 = Y

    Lets two hypothetical countries, one where the top decile earns 20% of total income and another earns 50% of total income.

    According to the regression line, the 20% country pays only 11.52% of total taxes. In other words, its regressive.

    The 50% country, according to the regression, pays 84.72% of total taxes. Or, very progressive.

    As you mentioned, its interesting but does not remotely address the issue at hand. I wonder why either Karl or Matt thought this was a refutation of Mankiws/Tax foundations point.

  21. Gravatar of MikeDC MikeDC
    22. March 2011 at 16:51

    Something I don’t get about progressive income taxation is that they always pick statistically arbitrary numbers. Everyone talks about the “Top 1%” of income earners, but if you really look within that 1%, there’s a larger measure of inequality between the top 0.01% and the rest of the top 1% than there is between the rest of that top 1% and the rest of tax filers.

    Of course the top 1% are wealthy, but my a realistic margin, the top .01% and top .1% are very different from other .9% of that group. The former (something on the order of 14,000 filers, earn an average of $27M. The 120,000 households after them “only” have an average income of something like $3.2M. Still enough to never have to work another day in your life, but really orders of magnitude less wealthy than the top 0.01%

    The rest of that top 1%, which is something on the order of 1.25M tax filers, averages something like $710,000/yr. Obviously, that’s a wonderful sort of income, but it’s not the sort of income someone could simply retire and stop working on. These are folks who are very well off versions of everyone else. They still have to think about their jobs, retirements, investments, their debts, and their kids down the road.

    In short, most of these folks probably still work for a living, and thus, as a practical matter (if you’re going to support an income tax at all), probably ought to be treated a bit differently than the lucky few people who can legitimately be considered the potentially “idle wealthy”.

  22. Gravatar of Doc Merlin Doc Merlin
    22. March 2011 at 17:23

    @ Morgan Warstler

    Re: the link

    Um, wow, thats bad news. Thats really bad.

  23. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 18:26

    Cassander,
    I forgot to ask you. What do you consider the 3(+) European models to be?

  24. Gravatar of Mark A. Sadowski Mark A. Sadowski
    22. March 2011 at 19:06

    Scott,
    Totally OT. I almost forgot to mention the following.

    Alice Rivlin (Vice Chair of the Fed from 1996-1999 for those of you who don’t know) delivered the annual University of Delaware Hutchinson Lecture tonight on “Debt, Deficits, and Democracy”.

    It was interesting but the best part by far was the Q&A session. There were many questions (mostly from undergraduates) and they kept it short so I didn’t get a chance to pop my question (I was going to ask her about IOER). But Professor Burton Abrams of our department asked her about the relative role of monetary and fiscal policy in this recession. She said (this is an almost direct quote) “monetary policy has done all it can do”. (Sigh.)

    If only I had a chance to grill her some more.

  25. Gravatar of cassander cassander
    23. March 2011 at 00:33

    Mark> I’d say that there is the Nordic model, the Anglo Saxon, and the mainline French/German model. Southern Europe and the Mediterranean are also pretty different, but I hesitate to call Greece or Italy a model for anyone. They’re more just the franco/german model done poorly.

    And a lot of people consider the higher welfare spending under a VAT a bug, not a feature. Hidden taxes are easier to raise, so I want my taxes as visible as possible. If it were up to me, tax day and election day would be the same day.

  26. Gravatar of Mark A. Sadowski Mark A. Sadowski
    23. March 2011 at 01:31

    cassander,
    Are you European? Although you distrust the VAT, you’re slicing and dicing it much finer than anyone on this side of the Atlantic would (and only someone further east, or a lunatic like myself, would be up at this hour). What would you say are the defining characteristics of each model? (I’m not trying to give you a hard time, I’m genuinely curious what you think.)

  27. Gravatar of William William
    23. March 2011 at 04:34

    Scott,

    I guess my re-graph is more in response to Yglesias and Smith than to you. Obviously either way you can see the higher share of income -> higher share of taxes link.

    But in claiming the US is “on target” I think it makes more sense to put income share on the right side, and see whether the top decile is paying more or less of the taxes than you would expect given their share. My only point is the US is “above the line”, i.e. more progressive, if you do it this way (even omitting Poland), not “on target”.

  28. Gravatar of John Thacker John Thacker
    23. March 2011 at 08:21

    The European model certainly taxes the middle class more and redistributes more. To me, one important thing about the chart is that it debunks the “easy” belief of the center-left and left in the USA that we can achieve more redistribution and address inequality by taxing only “the rich” more, and not the middle and upper-middle class. (The center-right and right have their own comforting myths that allow them to avoid making tough choices, of course.)

    Observing the budget battles recently, it’s not difficult to note that the President and most of his party have been okay with proposing and endorsing cuts to heating oil for the poor and to Pell Grants, but have *really* been exercised by proposed cuts to upper-middle class programs like NPR, high speed rail, and the benefits of at least solidly middle class public employees, as well as other middle-class programs like Medicare or Social Security. The USA has a lot of “taking money from the middle class to give to other middle class” programs.

    One might think that Democrats could find a winning issue by responding to Republican suggestions for $61 billion in budget cuts by proposing cuts in programs that benefit the rich. That they’ve failed to do so suggests something, whether it’s that there aren’t many such programs, that such programs are popular with the American people, or that Democrats don’t really care about inequality nearly as much as they just care about having a larger government.

  29. Gravatar of ssumner ssumner
    23. March 2011 at 13:50

    Morgan, Yes, home appliances are a big deal.

    W.Peden, They may collect more revenue in total than we (as a share of GDP) but their total taxes are higher, so they might still be less progressive.

    Doc Merlin, Yes, progressivity certainly increases pre-tax inequality.

    Mark, But don’t forget that Europe is considerably poorer than the US, partly because higher labor taxes result in much lower hours worked, something like 25% lower in France.

    Kevin, Thanks, and the causation also goes the other way, progressive taxes lead to more (pre-tax) income inequality.

    MikeDC, You said;

    “Of course the top 1% are wealthy, but my a realistic margin, the top .01% and top .1% are very different from other .9% of that group.”

    Good point, and I’d go even further. I have no problem with viewing the top 1% as wealthy, but it’s by no means obvious that society views them that way. Many are viewed as upper middle class, particularly if their wage income is low and they get in that bracket because of a onetime stock sale, or house sale, or small business sale, producing a big capital gain. Or a farmer who averages $140,000 but suddenly gets $300,000 one year due to very high crop prices. Or a realtor having a great year. You’d find many “wealthy Americans” in average homes driving pickup trucks. That’s not to say they aren’t wealthy, I consider myself wealthy compared to 98% of humanity. My point is that they aren’t all fat cats in Beverly hills, as the term ‘wealthy’ seems to imply. So the top 0.01% better reflects the Lifestyles of the Rich and Famous-type wealthy.

    Mark, That’s depressing about Rivlin. No wonder we are in such a mess. Fortunately Bernanke knows the Fed can do much more. Now if only . . .

    William, It’s been so long since I took stat that I forgot the intuition of why switching the axis mattered.

    John, I think your final sentence nails it. We not as bad as Brazil, but our government spending is excessively tilted toward the affluent.

  30. Gravatar of Mark A. Sadowski Mark A. Sadowski
    23. March 2011 at 19:00

    Scott wrote:
    “Mark, But don’t forget that Europe is considerably poorer than the US, partly because higher labor taxes result in much lower hours worked, something like 25% lower in France.”

    Yes, in areas of Europe where productivity is higher than in US (e.g. Norway, Ireland, Luxembourg, France, Belgium, the Netherlands) people work fewer hours per year. But I’m not convinced this isn’t a cultural choice (shorter workweeks, longer vacations, more time spent in school, earlier retirement). After all, life is too short to spend all of it working. Overall IMO the research is inconclusive as to the causes of this discrepancy.

  31. Gravatar of Mark A. Sadowski Mark A. Sadowski
    23. March 2011 at 19:02

    And I forgot to mention longer lifespans.

  32. Gravatar of Kevin A Kevin A
    23. March 2011 at 19:23

    Hmmmm scott, the graph says nothing about causation, only that there is a correlation between the two. Why do you think causation is one way versus the other?

  33. Gravatar of John Thacker John Thacker
    24. March 2011 at 03:12

    @Mark Sadowski:

    When you say “productivity is higher than the US,” you generally mean “productivity of the average person who has a job,” not “average productivity of all people, including those unemployed.” (Though that would be biased too, because, e.g., homemakers have productivity even if it doesn’t show up in GDP or the income statistics because the value they produce isn’t monetized but results in the household spending less outside outside the household.) Since in many of those countries unemployment is generally higher than the USA, higher productivity numbers can be the case of simply the less productive being unemployed.

    To avoid any international comparisons, note that in the USA productivity tends to increase rapidly during recessions and when unemployment goes up, because the least productive lose their jobs first. I certainly don’t think that rise in productivity means that the US economy was improving.

  34. Gravatar of Doc Merlin Doc Merlin
    24. March 2011 at 06:56

    @John Thacker:

    “To avoid any international comparisons, note that in the USA productivity tends to increase rapidly during recessions and when unemployment goes up, because the least productive lose their jobs first. I certainly don’t think that rise in productivity means that the US economy was improving.”

    Couldn’t have said it better. We need a productivity measure that counts the overall population not just the employed.

  35. Gravatar of ssumner ssumner
    24. March 2011 at 10:28

    Mark, You said;

    “Yes, in areas of Europe where productivity is higher than in US (e.g. Norway, Ireland, Luxembourg, France, Belgium, the Netherlands) people work fewer hours per year. But I’m not convinced this isn’t a cultural choice (shorter workweeks, longer vacations, more time spent in school, earlier retirement).”

    It’s not cultural, the French worked longer than we did in the 1960s, when they had similar tax rates.

    Lifespans are about diet, not economics. If you don’t believe me check out the super long-lived Hong Kongers and Singaporeans, who make Americans seem lazy by comparison. Danes have the same lifespan as the US, with a similarly bad diet.

    Kevin, I think causation runs both ways. I am pretty sure that causation runs from taxes to inequality, at a minimum, as theory would predict that.

    John, Yes, I’ve made that point too. We put our hispanic immigrants to work. The French don’t do that (as much) with their arab immigrants.

  36. Gravatar of Mark A. Sadowski Mark A. Sadowski
    24. March 2011 at 11:00

    John Thacker,
    In terms of making international comparisons in productivity it’s certainly possible that “higher productivity numbers can be the case of simply the less productive being unemployed”. However, one should not read too much into that as the US no longer greatly exceeds those parts of Europe in terms of the labor force participation rate, which has drastically fallen in the last decade in the US. I think a more important part of the story is higher rates of human capital and capital deepening as a result of generally higher rates of fixed capital investment in those parts of Europe.

    And the flip side of the economic output of homemakers is of course that the differences in GDP per capita we observe between those nations and the US is partly offset by a larger proportion of nonmarketed output in Europe. Certain kinds of services (meal preparation, childcare, laundry, housecleaning etc.) are still much less likely to be counted as part of GDP in Europe than in the US.

    And I would be extremely reluctant to draw conclusions from the behavior of productivity during business cycles (especially the most recent one). The phenomenon we observe here in the US is relatively unique, not only geographically but temporally. Prior to the 1990 US recession, productivity used to fall in recessions as firms “hoarded workers”. That is of course no longer the case. Similarly, thanks to work sharing and other policies, productivity tends to fall in those parts of Europe during recessions. As a result, of the six nations I listed above, both France and the Netherlands fell behind the US in productivity (GDP per hour worked)in 2009. But, if there is ever a real recovery on both sides of the Atlantic, I expect both of those countries to again exceed the US in productivity.

    Also I want to clear up your missconception concerning “… in many of those countries unemployment is generally higher than the USA…” Of the six countries I mentioned all had lower unemployment rates than the USA in December 2007 except France and Belgium. In fact the unemployment rate that month in Norway and the Netherlands was 2.4% and 3.2% respectively (in the US it was 5.0%). Similarly, today all have a lower unemployment rate than the US except France and Ireland. The unemployment rate in December 2010 was only 3.4%, 4.4% and 4.8% in Norway, the Netherlands and Luxembourg respectively.

    Scott,
    You wrote:
    “Lifespans are about diet, not economics. If you don’t believe me check out the super long-lived Hong Kongers and Singaporeans, who make Americans seem lazy by comparison.”

    You missinterpret my point. A longer lifespan contrubutes to a higher dependency ratio in Europe which tends exagerate the difference in GDP per capita. That’s just another reason why productivity is a better comparison for living standards.

  37. Gravatar of Mark A. Sadowski Mark A. Sadowski
    24. March 2011 at 11:12

    And I noticed that Peter Whiteford, the author of the study that prompted this blog post (and many others), commented on this at Brad DeLong’s website. It was so good I thought I’d share part of it here:

    “Actually the table in the Tax Foundation website extracts from a larger table that includes a better measure of progressivity, which is the concentration coefficient of taxes which is the same as the Gini coefficient but households are ranked by their disposable income. This is a better measure since it includes all the population not just the top 10%.

    However, this measure shows the same ranking – i.e. in “raw” terms the USA has the most progressive system of direct taxes paid by households. People can access this better measure at http://dx.doi.org/10.1787/422013187855 .
    As other have pointed out, the progressivity of the tax system will be greater if the distribution of income is more unequal. Using the better measure and adjusting for inequality of market incomes it is actually Ireland that has the most progressive tax distribution in the OECD, but the USA is fairly close behind at number 2.

    It doesn’t include the whole tax system, but indirect taxes are much heavier in most other OECD countries, and not as progressive as direct taxes, so if you added indirect taxes in through some sort of modelling it is almost certain that the USA would still have the most progressive overall tax system. To take an example – most Nordic countries have VAT rates of between 20 and 25%, although food may be taxed at 12-14%. So if you included indirect taxes, the USA would almost certainly not change its ranking.

    As other have pointed out, this result is not new. It has been pointed out previously by Peter Lindert, for example.”

    http://delong.typepad.com/sdj/2011/03/karl-smith-the-united-statess-tax-system-is-not-especially-progressive.html#comment-6a00e551f080038834014e6011fb38970c

    The bottom line is that even when one uses other measures (the Gini coefficient) or counts taxes other than income and payroll, the US has a more progressive tax system than most other OECD members. One conclusion is of course that it is not the tax system that accounts for greater income inequality in the US.

  38. Gravatar of Mark A. Sadowski Mark A. Sadowski
    24. March 2011 at 17:04

    And evidently my previous post was redundant. Peter Whiteford already made most of these points here:

    http://www.themoneyillusion.com/?p=9351#comment-63506

    Thanks to Scott’s prolific output in posting blogs and in responding to comments I was caught flat footed.

    P.S. How does Scott do it? I have a theory that Scott Sumner is actually a corporation consisting of 28 Oompa Loompas led by a maniacal NGDP targeting Willie Wonka-like genius.

  39. Gravatar of Mark A. Sadowski Mark A. Sadowski
    24. March 2011 at 17:39

    “Oompa loompa doompety doo
    I’ve got a perfect puzzle for you
    Oompa loompa doompety dee
    If you are wise you’ll listen to me

    What do you get when you fail to target NGDP
    Using the Taylor Rule like a crutch as I see
    What are you at, falling into an economic rut
    What do you think will come of that

    I don’t like the look of it

    Oompa loompa doompety da
    If you’re open minded, you will go far
    You will live in happiness too
    Like the Oompa Loompa Doompety do”

    An Oompa Loompa medly:

    http://www.youtube.com/watch?v=ja8V8Mf4xLs&feature=player_embedded

  40. Gravatar of cassander cassander
    24. March 2011 at 23:55

    Mark> No, I’m not. Good old fashioned loudmouthed America.

    As to the differences, I see the European Continental model as essentially the fulfillment of the idea of the New Deal/Great Society state. Big Labor, Big Government and Big Business. Relatively high taxes pay for relatively generous social welfare programs run by giant bureaucracies and a heavy regulatory hand.

    The Anglo Saxon Model is basically an outgrowth of the continental model, but more Americanized. The Big Labor/Government/Industry trifecta is basically out of the picture, there’s less regulation and industrial policy, and taxes are a little lower. But those taxes still go to pay for a lot of social welfare run by large bureaucracies.

    The Nordic Model has even higher taxing and spending that the Continental model, but much less regulation. The Nordic economies are very free, and their provision of social welfare is much more decentralized. Instead of giant bureaucracies, they handle a lot of things through subsidy, vouchers, and local control.

    Laid onto american politics, I’d say that the left half of the democrats want the continental model,centrist democrats and republicans have basically accepted the Anglo model but to continue to quibble over details, and right half of the republican party has no coherent vision. No one in america advocates the nordic model.

  41. Gravatar of Scott Sumner Scott Sumner
    26. March 2011 at 05:20

    Mark, Now I see your point, but we have more kids, don’t we?

    Cassander–unfortunately you are right.

Leave a Reply