Economic (Mis)Education in Europe

[Yonoz]

I think it's safe to say by now that at the bottom line, the people (or policy makers) of France don't value economic growth as highly as Americans. My questions are: How much of an influence does an economic policy have on actual economic growth? What effect does a liberal economic policy have on growth? Is there a longer lasting effect? How do we tell whether it's a bubble or sustainable growth (without waiting for it to burst)?

 

[Art]

To boil down the economic argument I've been making to the "greed is good school of economics" is silly. First, of all, what it says is that people pursuing their own self-interest (profits, wages, etc) often benefits others greatly. Second, it says that people act in their self-interest, regardless of whether you have Capitalism, Socialism, or some other system. In other words, Politicians, beurocrats, etc, all act in their self-interest which has many negative political ramifications. Third, it also says that people usually need to have property rights and own the fruits of their labor, which is tied into my first point. Four, it says that people spend their own money much better than people spend other peoples money. There's probably many other points that can be made, but I will stop there.

If your argument doesn't represent the outdated Adam Smith 'greed is good' school of thought then what economic theory does it represent. It certainly walks like a duck and quacks like a duck and yet you claim it isn't a duck so what do you call it?

 

[Art]

I think it's safe to say by now that at the bottom line, the people (or policy makers) of France don't value economic growth as highly as Americans. My questions are: How much of an influence does an economic policy have on actual economic growth? What effect does a liberal economic policy have on growth? Is there a longer lasting effect? How do we tell whether it's a bubble or sustainable growth (without waiting for it to burst)?

That's if you concede socialist countries have lower growth rates than capitalist ones (France's being currently higher than the US) and that where they do have lower growth it is an inherent fault with socialism rather than other specific problems such as Europe's massive debt repayment after WW2 or the result of economic warfare by capitalist countries trying to undermine socialist gov'ts to gain access to publicly ran assets and in case their own citizens look for the same benefits.

 

[Economist]

If your argument doesn't represent the outdated Adam Smith 'greed is good' school of thought then what economic theory does it represent. It certainly walks like a duck and quacks like a duck and yet you claim it isn't a duck so what do you call it?

I'm just saying that it's usually more complicated than simply "greed is good." Don't get me wrong though, because individuals pursuing their self-interest actually does create a lot of the "good" you see in the world. That's more than I can say for anyone who simply states (more like implies) that they are acting in others self-interest out of their compassion and benevolence.

 

[W3pcq]

People generally are motivated by self interest, this is one of the first things you learn in econ. The point of a Democracy is to protect us against this trend of human nature.

 

[CaptainQuasar]

People in capitalist countries like the US do not.

People in capitalist countries do not fear unemployment? Or protest? Your eyes are dazzled, man. Those things sure as heck happen, even in the U.S.

That just doesn't make any sense. These "other kinds of prosperity" require a functional economy to fund them. If you don't have that, you don't have any kind of prosperity.

So France has a nonfunctional economy and no prosperity whatsoever? This is news to me.

Americans love capitalism and yes, you may even say they are addicted to it. But only in the same way that a runner gets addicted to running. They are addicted to doing something beneficial.

You have been very successfully opiated and anesthetized to not question whether it's all beneficial.

Socialism causes a long-slow decline. You can have great short-term success by raping your country's people.

But for long-term success you really need to get into raping the people of other countries, eh? Dude, don't you realize that by asserting that socialism makes people evil and capitalism makes people good you're simply parroting 1950's propaganda?

Russia's war in Afghanistan was nowhere near the scale of the Vietnam war.

And so not surprisingly, the analogy isn't based on casualties or bombs dropped. They were both grinding, ultimately futile, decade-long conflicts that sapped the strength and resources of the agressor nations.

Are you really going to stand by "not a big deal" on that one? If so I'm entirely entitled to use the label "vigor" in place of "malaise".

Sure - why did it bankrupt theirs and not ours?

Certainly because we had a stronger economy and greater wealth in general. But your interpretation of Cold War victory as a sign of righteousness and an anointment of all things American is silly - it's more often than not the more barbarous, less sophisticated, less virtuous nation that is the victor in war.

Again, I'm not saying that the Soviet Union was the superior here as far as barbarity, sophistication, and virtue go. In fact I think victory or defeat in war says nothing at all about superiority or inferiority of national values. I'm pointing out that through this blithe unalloyed aggrandizement of everything American in relation to the Soviets you're being the mouth-puppet of CIA spin doctors who have probably been dead for decades.

It's like Economist said about France - they may have gotten a little better, but they should have gotten a lot better.

Like, say, more capitalist Angola or Brazil did during the same period?

May I point out that in addition to the depredations of Stalin and the Communist Party's violent and brutal political machinations during its existence and an economy based upon a Victorian understanding of capitalism and economics the Soviet Union suffered somewhere around 25 million or 30 million dead in WWII, more than half the Allied total fatalities and probably twice the Axis total fatalities, part of which they incurred in fending off a substantial invasion by both Nazi Germany into their national territory? But they still rolled right into carrying out their own version of the Marshall Plan in Eastern Europe, not to mention reconstruction aid and military support of the Red Army in China?

Like I said, capitalism as implemented in the West definitely has many advantages and has lead to more prosperity than there was in the Soviet Union. But your dismissal of Soviet communism as some sort of total abject economic failure isn't the result of careful, impartial examination and reasoning. It's willing blindness. It simply shows that you have swallowed state propaganda hook, line, and sinker.

There is a reason one ideology spread across the world and the other didn't.

Let me introduce you to Scientology and a bunch of other ideologies that have spread across the world if that's how you pick your principles.

By the way - Marxism and other Soviet ideologies haven't spread across the world? What the heck are you talking about? Almost every country I'm familiar with has one or more functioning Marxist and communist political parties that participate in the political process - what's the corresponding American ideology party?

We're certainly not slapping China, for example - China's figuring it out on their own.

This is an example of exactly what I'm talking about. All that's happened in China is that the Communist Party there has decided they probably don't need to bother with communism to retain political control over the country. Your equation of capitalism in China with freedom just means that you're taking as much of their opium as you are of the American sort.

Believe me, the people controlling China want capitalism to be an opiate even more than U.S. interests want it to be. In fact their shift towards a capitalist economy is pretty much a recognition that capitalism will make a better opiate than communism did.

 

[opus]

Wow! I guess I didn't know how economically illiterate they are in Europe, until I read this article: http://www.foreignpolicy.com/story/cms.php?story_id=4095




I guess I can't blame them, when the public schools are teaching this unsubstantiated garbage.

I am convinced that you are troll, calling an entire country, often regarded as the birthplace of that classical liberalism you spew constantly, "illiterate".

So get off your high horse. Obviously you had to point that it is "public" schools teaching this "garbage" and of course not the private schools in France which would never do such a thing because of perfect market efficiency and processes that would result in a level of education far superior to the public system.

That was sarcasm, by the way, much like the smug tone of your post.

 

[Yonoz]

That's if you concede socialist countries have lower growth rates than capitalist ones (France's being currently higher than the US) and that where they do have lower growth it is an inherent fault with socialism rather than other specific problems such as Europe's massive debt repayment after WW2 or the result of economic warfare by capitalist countries trying to undermine socialist gov'ts to gain access to publicly ran assets and in case their own citizens look for the same benefits.

Not necessarily. I think it's obvious from the previous posts that Economist and Russ value economic growth more than you and other European posters.

 

[Anttech]

Not necessarily. I think it's obvious from the previous posts that Economist and Russ value economic growth more than you and other European posters.

parce que?

 

[Yonoz]

parce que?

Because of statements like these:

I can't believe there are still people who subscribe to the 'greed is good' school of economics. I thought that nonsense died out at the end of the 80's after Thatcher turned the UK into an industrial wasteland riven by economic divisiveness and social unrest

Would anyone say economic development has no cost, especially no human cost? Is it "some kind of free lunch," as they say in French?

I think the French textbook isn't wrong; although it may be selective. It could have added "despite these costs, lack of economic growth is even costlier."

It may not technically be wrong, but its purpose is: conditioning people to accept a life of mediocrity. French malaise will kill France as surely as Russian malaise killed the USSR.

The stress of a capitalistic lifestyle is better than the hunger, low life expantancy, etc, of the alternative lifestyle.

 

[Art]

Because of statements like these:

I strongly support economic growth so long as the increase is in the median where it actually does some good and I do not accept that running a fair and caring society through the implementation of socialist policies is a drag on economic growth. In fact investment in public health and education are essential growth enablers.

For example

Flexibility and Adaptability of workforce when faced with new challenges

Ireland 8.43
USA 7.43
Portugal 6.92
Netherlands 6.86
UK 6.60
Spain 6.21
Czech Republic 6.20
Germany 5.56
Japan 5.53
Hungary 4.87
France 3.85

Source - IMD World Competitiveness Yearbook 2007.

Irelands total investment in knowledge (including investment in public and private spending on higher education) increased by an average annual rate of over 10% over the past decade compared with averages of around 3% by the EU and the OECD.

Surveys show that foreign investors consider the quality and the 'can do' flexible attitude of Irish people to be two of the country's greatest advantages.

http://www.idaireland.com/home/index.aspx?id=33
btw note France makes #11 on the list (of 55 leading countries) which debunks the notion of them being overly resistant to change.

Further corroborating data from the same link

Labour Productivity (PPP) - GDP per person employed per hour. (US$)

Ireland 45.33
USA 43.99
UK 38.57
Netherlands 38.22
Germany 37.06
Spain 33.84
Japan 31.10
Hungary 24.72

Source - IMD World Competitiveness Yearbook 2007

Worker Motivation

Ireland 7.18
Netherlands 7.16
Japan 7.15
Germany 6.98
USA 6.75
UK 6.13
Czech Republic 6.00
Hungary 5.30
Portugal 5.02

Source - IMD World Competitiveness Yearbook 2007

Skilled Workforce

Science and Technology graduates per thousand in the 20-29 age group.

Ireland 23.2
France 19.6
UK 16.2
USA 10.2
Germany 8.2
Portugal 6.3
Netherlands 5.8Source - Eurostat 2003.

Also note Ireland's rankings in motivation and productivity which debunks the notion that socialism with it's safety nets breeds malaise.

The skilled workforce data is also interesting. The high tech industries which generate the highest earnings require high skilled workers and so are more likely to locate in areas with the required skill sets available. France scores highly in this category which bodes well for it's future.

 

[Anttech]

Because of statements like these:

If you leap any further Yonzo you will end up in Cyprus. :D

That is to say, it seems to be your statement is unfounded. Since it seems to me that Art for one is arguing that the Adam Smith ideology is counter Economic growth, when taken to the extreem

 

[Yonoz]

I strongly support economic growth so long as the increase is in the median where it actually does some good and I do not accept that running a fair and caring society through the implementation of socialist policies is a drag on economic growth. In fact investment in public health and education are growth enablers.

Having grown in a socialist community, I can testify to the capitalist notion that contentment breeds laziness. Competition drives progress. In a "fair" society, why would anyone choose to be a garbage collector? (BTW, how much does your municipality charge for garbage collection?)
It's therefor a matter of personal preference where to put the balance between "fair and caring" and economic growth. Your preferred balance leans towards the former, while Economist's and Russ' leans towards the latter. In any case, a successful society has to avoid being out-competed or self-divided.

 

[Yonoz]

If you leap any further Yonzo you will end up in Cyprus. :D

That is to say, it seems to be your statement is unfounded. Since it seems to me that Art for one is arguing that the Adam Smith ideology is counter Economic growth, when taken to the extreem

Meden agan, my Greek friend
We agree, then - Art is arguing Economist and Russ lean too much towards the capitalist extreme of a hypothetical capitalism-socialism spectrum.

 

[Art]

Having grown in a socialist community, I can testify to the capitalist notion that contentment breeds laziness. Competition drives progress. In a "fair" society, why would anyone choose to be a garbage collector? (BTW, how much does your municipality charge for garbage collection?)
It's therefor a matter of personal preference where to put the balance between "fair and caring" and economic growth. Your preferred balance leans towards the former, while Economist's and Russ' leans towards the latter. In any case, a successful society has to avoid being out-competed or self-divided.

And the best way to not be out-competed is to have a highly educated, healthy workforce.

See the tables I appended to my last post.

 

[Yonoz]

I see Art's added some data to his post, I'll try and address it before dinner.
I see you put the following in bold: "Surveys show that foreign investors consider the quality and the 'can do' flexible attitude of Irish people to be two of the country's greatest advantages." This returns us to my previous question - how much actual influence does an economic policy have on the economy? One can argue as to the causes for the Celtic Tiger, but it certainly had something to do with Ireland being one of the poorest countries in Europe at its start: low labor costs. Add to that: English speaking populace, a timezone between Europe and the US, the internet (and telecommunication) boom. Now the ROI have to worry about keeping their place at the top - transition from a booming economy to sustainability, at a time when everyone wants a piece of the action. I guess we can wait. I'd still like to hear how much it costs to have your garbage taken away please, Art.

 

[Yonoz]

And the best way to not be out-competed is to have a highly educated, healthy workforce.

I don't think anyone's found out "the best way to not be out-competed", yet.

 

[Art]

I'd still like to hear how much it costs to have your garbage taken away please, Art.

Why? Still if you are that curious we have a choice here in my local area (although this information is fairly meaningless as each local authority has it's own structure). You can opt to pay euro 200 for 6 months unlimited weight or euro 0.39 per kilo. Alternatively you can forgo collections and take your rubbish to the tip yourself at euro 20.00 per car load.

Recycling (tins paper glass and plastics) and electrical appliances are taken away free of charge (The EU introduced a WEEE charge http://www.consultnet.ie/weee.htm when you buy a new appliance to cover it's future collection and disposal.)

Average annual cost per household is Euro 280.

 

[Economist]

I am convinced that you are troll, calling an entire country, often regarded as the birthplace of that classical liberalism you spew constantly, "illiterate".

So get off your high horse. Obviously you had to point that it is "public" schools teaching this "garbage" and of course not the private schools in France which would never do such a thing because of perfect market efficiency and processes that would result in a level of education far superior to the public system.

That was sarcasm, by the way, much like the smug tone of your post.

Come on opus, you know me well enough to know I'm no troll.

Yeah, I did point out that public schools were the ones teaching this nonsense, but I never said that private schools wouldn't also teach this nonsense. As far as I am concerned, private schools would generally give parents what they want, and therefore, if private schools were implemented in France now, many of them would probably use the exact same textbook I was criticizing. In time, who knows? If it turns out that I am right, and that the French textbook garbage is wrong, then much less private schools will teach it, precisely because less parents will want it (notice I did not say, all schools would abandon it). If I turn out to be wrong, then the reverse would happen.

I never said that private schools would be in anyway perfect, but rather that they can't do any worse than the public schools. The competition that would be created in a more privatized system (such as vouchers, which is far from a completely privatized system) would definitely do a much better job at teaching students than public schools are currently doing (especially in the poorest areas). You should go to the Harvard Economics Department website and look up a faculty member named Caroline Hoxby, as she has done a lot of research on this topic and found that the people who benefit most from vouchers come from poor families and the poorest neighboorhoods.

 

[Art]

Come on opus, you know me well enough to know I'm no troll.

You just blandly ignore any facts or data which contradict your opinions and barrel on regardless repeating the same mantra. Not sure if that qualifies as trolling but it makes discussions pointless after a while.

 

[Economist]

People generally are motivated by self interest, this is one of the first things you learn in econ. The point of a Democracy is to protect us against this trend of human nature.

I think you have a very romantic (and unrealistic) view of Democracy. First of all, I don't know whether the "goal/point" of Democracy is to protect us against the self-interest of others. Second, even if that is the "stated" goal/point of Democracy, one would need to see how close it comes to reaching that point. Democracies often allow one to pursue the ugly aspects of human nature in ways that are extremely difficult without Democracy and the force of government. Big businesses (such as Pharmaceutical companies, car makers, etc) and other sellers (such as farmers, doctors, cab drivers, etc) do this by restricting who can enter their field, in order to give themselves monopolistic powers (and therefore charge higher prices at the expense of consumers). Likewise, there are still laws in some states which make it illegal for two homesexuals to engage in sexual activity (even in the privacy of their own home). Laws in the South before the civil rights movement restricted all kinds of freedoms for blacks that would have been very difficult without the use of Democracy. You say that Democracy "protects" us against others, but it seems to me that it actually does the opposite.

Please watch as this is highly related to this discussion (less than 2 minutes and 30 seconds):
http://video.google.com/videoplay?docid=5002146604154574832&q=milton+friedman+donahue&total=1&start=0&num=10&so=0&type=search&plindex=0

P.S. By the way, I am not anti-Democracy. I just think that many people have a romanticized view of it, and that it's not as great as many believe. On this issue, I have been very influenced by what John Stuart Mill called the "tyranny of the majority" as well as James Buchannans work on "Public Choice Theory" and Fredrich Bastiats book "The Law." These things have made me realize how inefficient Democracy is, as well, as the ugly aspects of Democracy. I think we need Democracy, but that we should keep it in check by limiting what can and cannot be decided by a majority rule. For example, should we be allowed to vote on Free Speech? Should we be allowed to vote on whether slavery should be legal? Should we be allowed to vote on who you can personally associate yourself with? Should we be allowed to vote on who you can do business (including trade) with? When is it ok to use democracy to limit the freedom and liberty of another human being?

 

[Economist]

You just blandly ignore any facts or data which contradict your opinions and barrel on regardless repeating the same mantra. Not sure if that qualifies as trolling but it makes discussions pointless after a while.

LOL. I try very hard to lay out solid arguments that are congruent with the facts, as well as answering any direct question in response to facts. I've noticed that often times I point out facts and data that contradict others opinions and they continue to "barrel on." Who knows, maybe I've even done that to you?

 

[Yonoz]

Why?

What I'd like to do is make a simple case comparison to see the difference in living costs, but I haven't found the time to find data to compare. I hope I'll get around to it later.

 

[Art]

What I'd like to do is make a simple case comparison to see the difference in living costs, but I haven't found the time to find data to compare. I hope I'll get around to it later.

That's what GDP PPP does.

 

[Art]

LOL. I try very hard to lay out solid arguments that are congruent with the facts, as well as answering any direct question in response to facts. I've noticed that often times I point out facts and data that contradict others opinions and they continue to "barrel on." Who knows, maybe I've even done that to you?

Okay then address the data I provided in my earlier post #81.

 

[mheslep]

What I'd like to do is make a simple case comparison to see the difference in living costs, but I haven't found the time to find data to compare. I hope I'll get around to it later.

That's what GDP PPP does.

Well GDP PPP speaks only to income in real terms, that is, the purchasing power of your income. It doesn't tell you how much or if one has to pay for health care, taxes, or garbage collection. Also, one has to be careful about GDP distribution in the country. The example of Equatorial G. was pointed out earlier - 500K poor people with an oil rich dictator makes the country wide GDP PPP look very good.

 

[Art]

Well GDP PPP speaks only to income in real terms, that is, the purchasing power of your income. It doesn't tell you how much or if one has to pay for health care, taxes, or garbage collection. Also, one has to be careful about GDP distribution in the country. The example of Equatorial G. was pointed out earlier - 500K poor people with an oil rich dictator makes the country wide GDP PPP look very good.

It equalises the cost of living using the CPI allowing direct comparison in per capita spending power between 2 countries so provided there isn't a huge disparity in wealth distribution between the countries being compared it is probably the best measure to use and Ireland and Israel have similar GINI indexes 34.3 vs 39.2.

 

[Yonoz]

Well GDP PPP speaks only to income in real terms, that is, the purchasing power of your income. It doesn't tell you how much or if one has to pay for health care, taxes, or garbage collection. Also, one has to be careful about GDP distribution in the country. The example of Equatorial G. was pointed out earlier - 500K poor people with an oil rich dictator makes the country wide GDP PPP look very good.

Also, Wikipedia's got a good bit on this: http://en.wikipedia.org/wiki/Purcha...es_with_PPP_comparisons_in_welfare_economics"
Looks like I'll be posting less now, the senior university strike ended today, we're going to have to catch up on a whole semester.

 

[mheslep]

It equalises the cost of living using the CPI allowing direct comparison in per capita spending power between 2 countries

No, GDP PPP equalizes gross product between two countries, and production is not necessarily equal to cost of living. Production will typically drive cost of living but so can other factors.

 

[Art]

No, GDP PPP equalizes gross product between two countries, and production is not necessarily equal to cost of living. Production will typically drive cost of living but so can other factors.

I suggest you check out the World Bank who compile these figures and read their definition and methodology. http://extsearch.worldbank.org/servlet/SiteSearchServlet?q=gdp ppp&dPgLang=ENG Many of those other factors you allude to are now included in the calculations. It may not give a perfect comparison in standards of living but it's the best indicator available and I would suggest more useful than comparing refuse collection costs.

 

[mheslep]

I suggest you check out the World Bank who compile these figures and read their definition and methodology. http://extsearch.worldbank.org/servlet/SiteSearchServlet?q=gdp ppp&dPgLang=ENG Many of those other factors you allude to are now included in the calculations. It may not give a perfect comparison in standards of living but it's the best indicator available and I would suggest more useful than comparing refuse collection costs.

Yes I am familiar with the method. The PPP calculation can get complicated but at the end its still basically GDP/PPP. The 'other factors' I referred to above especially include government subsidies. Sorry to give http://en.wikipedia.org/wiki/Purcha...es_with_PPP_comparisons_in_welfare_economics" ala Yonoz here but I am short on time:

Differing levels of government involvement in social spheres further complicate development of good CPI baskets (and, consequently, PPP measurements). For example, in 1986, nominal GDP of the United States was almost 4 times larger than the nominal GDP of the Soviet Union (on a per capita basis). Direct comparison failed to capture, however, that the Soviet Union provided free ... higher education and free healthcare to all its citizens, whereas Americans had to pay for education and healthcare themselves. To properly account for differences in quality of life in this situation, the CPI basket would have to include these expenditures explicitly. More importantly, government subsidies can potentially have large effect on consumption levels (free higher education will result in more college graduates), making it difficult to choose weights for individual components of CPI.

 

[LydiaAC]

LydiaAC, I have read that in some places in Mexico Indians do not know how to speak Spanish, only the old Indian languages. Is this true? In the Indian towns do they speak Spanish or an Indian language?

I do not know exactly the number but the percentage of Indians who do not speak Spanish is significant. Most of them live in Indian towns. The gender distribution is not uniform: there are more women who does not speak Spanish than men. Indians who live in non-Indian cities learn at least a little of Spanish and in Baja California, a little of English.

I would like to comment about something related with capitalism. In a forum, a mother complained about Latin America Discovery Kids Channel because, although presents shows which promote good nutrition, they make publicity of non-nutritional food. A participant, who was fond of capitalism, reacted aggressively, and called her f*** communist and asked with sarcasm what she thought that the channel make money, if she thought that the channel could be sustained by the tomato farmers and so on.
I thought that, still in the spirit of capitalism, what that mother asked was not unreasonable. She was asking for a product "a TV channel who promotes good nutrition in shows and announcements". A TV business could opt for offering that product and maybe they must charge more money for it, because the publicity would be scarce. If the TV viewers and the TV business could find an arrangement which satisfy everybody, both parts would be better off. What does this have to do with communism?
To say that free markets are a way in which the humans can associate freely and without coercion is not the same that say that free markets are the only way in which humans must be allowed to associate. The above example is still in the logic of free markets but there is a lot of examples in which humans associate freely outside of free markets like in the case of open source software or Wikipedia.

 

[denverdoc]

Agreed, the free market premise that value has anything to do with price exercises tortured logic where we assume comfort of a few is a price many are willing to pay, and ignores the unholy incomes of many athletes, movie stars, CEO's compared to say a bus driver or school teacher. To me the value of a teacher is self evident, the CEO pawning unneeded crap thru ever more powerful media is not.

 

[Economist]

To me the value of a teacher is self evident, the CEO pawning unneeded crap thru ever more powerful media is not.

Well, it's not up to you to decide. The "value" of these professions have been worked out through numerous decision makers and markets processes. For you to sit back and say that you "disagree" with this outcome is to second guess the decisions made by a large amount of independent decision makers. And frankly it's arrogant and a bit elitist to think that you have the knowledge and judgement to be able to second guess this process.

 

[Smurf]

Well, it's not up to you to decide. The "value" of these professions have been worked out through numerous decision makers and markets processes. For you to sit back and say that you "disagree" with this outcome is to second guess the decisions made by a large amount of independent decision makers. And frankly it's arrogant and a bit elitist to think that you have the knowledge and judgement to be able to second guess this process.

Well I think it's arrogant and elitist of you to think you can second guess the complex historical processes involving millions of decision makers that resulted in the current economic ideas of Europe. HOW DO YOU KNOW it's not just part of a master plan leading us into an eternal utopia!? HUH HUH!?