Paul Krugman demonstrates a laughable misunderstanding of economics in his blog post “Having It and Flaunting It” yesterday. He mistakenly claims “status competition…is a zero-sum game … where a lot of our economic growth has simply been wasted, doing nothing but accelerating the pace of the upper-income rat race.” The drive for status and the rat race it accelerates is not zero sum. Quite the contrary, it produces risk-taking, investment, and innovation. Would we ... Read More
Social Security Significantly Impacts Distribution of Wealth
In a post about a survey released this month showing Americans are much less concerned about income inequality than Europeans, despite similar perceptions about the distribution of income in their countries, Paul Krugman described Americans as “delusional.” He sees this delusion stemming from racism that results in a “unique suspicion of and hostility to social insurance and anti-poverty programs,” which “empowers right-wing groups … [to] issue a lot of propaganda ... Read More
Americans Much Less Concerned about Inequality than Europeans
A survey released this month by the Cologne Institute for Economic Research finds Americans are much less concerned about income inequality than Europeans. Despite similar perceptions about the distribution of income as the Germans and French, only 30 percent of Americans believe “differences in income in [their country] are too large” versus 50 percent of the Germans and 70 percent of the French. Why might Americans be much less concerned about inequality? ... Read More
America Spends 25 Percent More per Capita on Social Welfare than Any Other Country
Despite popular misconceptions, Organisation for Economic Cooperation and Development (OECD) data confirms America spends more on social welfare than any other country—$13,500 per capita in 2009. This is nearly 25 percent more per capita than the second largest spender, France, and 35 percent more than Germany, Sweden, and other high-spending Scandinavian countries. Several factors obscure this truth. Europe taxes benefits more heavily, whereas benefits are often ... Read More
New IMF Study Casts Doubts on the Value of Increased Infrastructure Spending
A study published recently by the International Monetary Fund, "Public Investment as an Engine of Growth," examines the impact of accelerated infrastructure investment on growth and productivity in “126 lower- and middle-income countries.” It finds “no robust evidence that the investment booms exerted a long-term positive impact on the level of GDP.” It does find some evidence, that spending increases GDP at the time of expenditure, albeit “probably very little,” but the ... Read More
Financial Times raises concerns about integrity of Piketty’s data but effects likely inconsequential
First, liberal economists damned Thomas Piketty’s book, Capital in the Twenty-First Century, with a stream of faint praise by applauding the quality of Piketty’s data while admitting to concerns about the quality of his economic logic. Then, Larry Summers took Piketty’s logic to the woodshed. Marty Feldstein followed by denouncing Piketty’s interpretation of the U.S. data. Meanwhile, Bonnet et al found that Piketty’s findings were entirely attributable to real estate, ... Read More
The Economist reports on the failure of European innovation
The Economist reports: “Venture capital in Europe has delivered returns of just 2.1% a year since 1990, according to Thomson Reuters, making it perhaps the worst investment class outside Japan (American VC managed around 13%).” The article suggests that overfunding by European governments has driven down returns, but indicates this didn’t occur until after 2007, which would not account for near-zero returns stretching back to 1990. A more precise argument would ... Read More
