Are Europeans as Wealthy as Americans?

I don't know, but this article suggests that Americans have more time in which to spend their wealth http://www.adamsmith.org/blog/regulation-and-in...

The second, from 2007, is by me.

Having driven in and around Paris, I suspect one of the other reasons you see so many motorcycles and scooters is that the traffic is terrible and there is a big advantage to cycles -- they drive on the shoulders and in between lanes of stopped traffic on the autoroutes and, in doing so, move MUCH faster than the auto traffic.

My first thought in sitting stuck in traffic on the périphérique and seeing motorcyclists zipping in between lanes was, "Those people are nuts! They're going to die! It's just a matter of time before somebody switches lanes without checking the mirror to see who's coming up in between lanes." But after some more time spent stuck in traffic, my second thought was, "If I lived here, I'd definitely do the same thing -- either I'd get where I was going quickly or I'd be put out of my misery quickly..."

All I wanna say is..."Go America!" :P

Bar graphs that don't start at 0 to exaggerate the differences... The oldest trick in the book :-\

Another thing is per capita income is not the sole measure of wealth. What about good public transport and free universal healthcare?

It's not free for god's sake. People need to stop calling it that.

I see no evidence those bases provide any protection. Why have them when we have all those floating bases AKA super-carriers?

Of course, Europe doesn't have to support 700+ military bases around the world.

Good point. They don't need to, which I'm guessing is your point. They enjoy the fruits of a relatively safe world with very little threat of direct attack bought by those bases without so much as a thank you.

Don -
What do you think of Mitchell's use of consumption data. That seems very odd. It seems to me if you want to talk in terms of consumption rather than income, you should use some sort of discounted value of all future consumption. Otherwise you're calling someone worse off because they value future consumption differently.

Of course, they want to fool themselves some more. Hey, let's disregard the fact that USA consumers enjoy a negative savings rate while paying for sunroofs they actually couldn't afford, while europeans are in double digits savings, printed in black.
"We've found in a huge dataset one figure that is higher than in Europe, therefore we must be so much richer".

What's next? a GMU professor claiming americans must be richer because they are able to enjoy and support more asset bubbles and ponzi schemes than in Europe?

This was a Cato writer, not a GMU professor (just so that we don't besmirch the good name of GMU!). However, I agree - GMU is often guided by many of the same narratives that can occassionally cloud sound analysis.

I think that Krugman needs to read his own paper just a little bit more. In the NY Times For Europe’s Middle-Class, Stagnant Wages Stunt Lifestyle. http://bit.ly/LJv1V

The other question is if France & Germany have such a great standard of living you would think that they would have positive net migration. France and Germany have negative net migration. But only twice has the US had negative net migration during the Civil War and during the Great Depression which was as close to European style socialism as US ever got.

Net migration within Europe as a tool for determining living standard? Looking in that way to the USA, California must be hell on earth and Nevada paradise.
Florida hell in summer, paradise in winter.

Don't know where you get your facts ,but
W-Germany has taken in millions of east-europeans since 1990, I don't believe they have seen a net emigration in the recent two decades.
And I certainly don't believe the emigrants are poor economic refugees looking for a better future abroad.
They're more probably the affluent types looking for better weather, just like those types in Florida this time of year.
And some greedy medical doctors, attracted by the insane USA salaries...
But the latter reason isn't really a free market success story, is it.

People have been far too cavalier about criticizing Krugman on this (as usual). He never said Europeans earn as much as Americans. What he has said is that (1.) social democracy doesn't hinder growth in the way that people claim it does, and (2.) differences in per capita GDP exist and are at least partially attributable to leisure preferences (ie - it's easy to say that Americans are "better off" when your measure of "better off" includes things that Americans value more but excludes things that Europeans value more).

Those two statements are still worth a challenge, but they're much more circumspect and careful than a lot of the counter-arguments that have been thrown on the fire. To my knowledge of what Krugman has written to date on this debate (and maybe I missed a piece), he hasn't even gone as far as saying that "social democracies perform better than the U.S.".

I don't have enough of a handle on the data to say whether I agree with Krugman on all points or not, but it sure would be nice if people addressed what he actually said rather than what they want to think he said.

This was by far the best response to Krugman's article to date: http://reason.com/blog/2010/01/14/mine-eyes-hav...

Krugman is being disingenuous at best. To your point 1 above, what he doesn't say is that poorer countries can grow faster than richer ones. That's why he ignores standards of living in his article. The strange thing is that USA continues to grow faster than western European countries even though they are poorer.

To point number 2, Krugman walks a fine line between a misdemeanor and a felony. Many people in western Europe take a pay cut to go back to work. They tax work at incredible marginal rates, subsidize not working, and push wages so high that unskilled people cannot get jobs. Leisure time for unskilled workers is a problem, not a sign of prosperity. By now unions are negotiating the same pay for less hours at least partly due to marginal tax rates on the extra hours.

So the causality of leisure and work can not be anything like Krugman implies. Cognitive dissonance for the participants aside, all the managers I have hosted from large European countries say exactly the same thing; "Jim, the people who work for you live better than I do." They can't stop talking about it. And when I mention that they also work longer hours, they all reply, "If we had your taxes and the chance to work, we would too."

"He never said Europeans earn as much as Americans".

he could: nominal GDP/capita are almost identical at current forex rates.


But since GMU economics professors like to fool themselves with PPP calculations (that exclude college education costs) and draw big conclusions, they somehow disregard the fact that GDP in europe is in fact in hard and real earned euros/pounds, not in PPP dollars.

And Europe has to import nearly all of its commodities, unlike the USA, which only this week overtook Russia as the worlds biggest natural gas producer, has the largest coal reserves, top ten oil producer, etc.
A free GDP boost.

geckonomist: "And Europe has to import nearly all of its commodities, unlike the USA"

All those giant oil tankers I've seen moving into the ports of Houston, Beaumont, Lake Charles, and New Orleans came from .... New Jersey?

That $100 billion in petroleum and natural gas that moved across our Canadian border in 2008 was ... exported?

geckonomist: "A free GDP boost."

Right. Free. All that natural gas in Texas, Wyoming, and Alaska was just sitting around in giant tanks, waiting for Americans to open the valves.

Native Americans had already dug up all the coal and built the railroads for us. So we just had to move the trains over to Wyoming and Montana, powered by our free petroleum, and pick the stuff up.

It also excludes leisure preferences by only considering consumption in the consideration of "well being".

I think the best advice on a question like this is to tread carefully. There is considerable variation in both Europe and the United States (as JCatalan poitns out), and there are LOTS of reasons for differing performance. I think so far Krugman's simple point has been the most convincing. And that simple point, as I read it, is: "social democracy hasn't threatened European prosperity in the way a lot of conservatives suggest it does". I personally still see a lot of problems with social democracy. I see a lot of problems with the American system too. And answering a question as dumb and as broad as "who is better" is futile. But I think we can at least say conclusively that the Europeans are doing fine and scare tactics about how bad off they are (particularly scare tactics that rely on bad use of data... as in the original article) aren't helpful.

"I personally still see a lot of problems with social democracy. I see a lot of problems with the American system too."

Redundant.

I don't really know what all those comparisons and figures prove, so I'd be more careful drawing conclusions, esp. when one has to cook the statistics before one can make a point.

But before endorsing Krugman's view of Europe:
I don't understand how european welfare states manage to continue to exist. I don't know where the money is coming from, with governments meddling, taxing, redistributing, restricting and market distorting in far too many ways. I agree with GMU professors when they say this must brake the economy in a massive way and I don't think the USA should emulate it.

I guess a middle way wouldn't be that stupid, for both regions.

By the way, in a response to my comment on Krugman's blog, Jim Manzi posted a link to a rebuttal against Krugman's argument:

http://corner.nationalreview.com/post/?q=NTZmND...

Don Boudreaux,

I am a Spaniard that has lived both in the United States (where I currently reside) and Spain (Madrid). The first thing worth noting is something that Dan Mitchell alludes to in the post you link to: there is no value in comparing the United States as a whole to the entirety of Europe. Different European countries have different federal economic policies, and have different standards of living. You cannot compare the standards of living, for example, of Portugal and Spain. If you do comparisons within Europe alone, you will notice that freer European countries are generally wealthier per capita than more socialized European countries.

Second, I believe that the minimum amount of money necessary to have a comfortable lifestyle in Spain is less than what it is in the United States. While living in Spain, I made ~600€ per month, and in the United States I probably make about the same amount in dollars (I am a university student, so of course I'm supported by my parents regardless of the money I make, but that is besides the point). But, I can tell you that my "purchasing power" in Madrid was much higher than my purchasing power in San Diego. I include "purchasing power" within quotations, because the terminology is not correct. What I mean when I say that is that I need to buy less prerequisites to "get by". While in San Diego I need a car to get around, in Madrid I can either walk (even walking across the city can be done in a relatively short amount of time) or I can take public transportation. Also, food tends to be cheaper comparatively.

My point is that it seems that in Spain, at least, less material goods are necessary to garner a similar amount of utility. While in Spain a worker can live a pretty good life making 1,500€ per month, the same is not necessarily true in the United States (and yes, the euro is stronger than the dollar, but when it comes to purchasing power within each respective country, I don't think that the disparity in international exchange holds).

But, I admit that one could also make the case that they are from $_African_country and they live well off even less income. Different people become accustomed to different lifestyles. In that sense, I don't think there should be any doubt that the average American is wealthier than the average European. I was just providing some food for thought.

Don't forget that there is a good deal of variation between states in the US. Living in San Diego, CA is much more expensive than living in Dallas, TX, for example.

Couldn’t it be argued that there is pretty diverse economic performance and income levels throughout the 50 states which makes a pan-european vs. US comparison perhaps more reasonable? No such comparison could ever be perfect and the higher the degree of aggregation, the more likely there is to be important details that are masked (the great dilemma in keynesian “economics”).

For critics of statism, though, we Americans need look no further than California, NJ and NY here in the US of A for examples of progressivism’s supreme failure in the real world.

"I probably make about the same amount in dollars"

Does that mean you make $600 per month in San Diego, or at current exchange rates, $860 per month?

Purchasing power parity.

Overall which place do you prefer, San Diego or Madrid?

I haven't been to San Diego. Is it navigable by bicycle?

JCatalan,

First, I hope you realize you live in just about the most expensive place in the United States. It costs about 1.5 times as much to live in San Diego as it does to live in Dallas or Orlando. It's even cheaper to live in places such as Louisville, KY, or Nashville, TN.

There are older pre-automobile cities in America - not as old as Madrid, but older than San Diego - where one can get around using public transportation. The reason most of America has little public transportation is simple: we have enough wealth to easily pay for the freedom we get with personal transport. We also have enough wealth to afford the geographically dispersed style of living we have chosen.

1,500€ per month is the equivalent of $25,700 annually. I'm not sure what you mean by "pretty good living", but $25,700 annually will provide an adequate living for a single person in about 40 of our 50 states.

I could provide much anecdotal evidence about living in America. You could do the same for Spain. I do not believe any single person - even an economic professor - can make an adequate assessment based on his own personal experiences. On the other hand, the data provided by Dan Mitchell and by Bruce Bawer are not limited to one person's experiences. And that data is clear: America on average is much wealthier than either weatern Europe as a whole or than any western European nation.

John Dewey,

Although I generally agree, you must remember that large city sprawls were also a product of zoning laws.

In any case, my first point was no so much as to say whether or not the United States was wealthier than Western Europe as a hole. It was much more along the lines of by clumping Europe together the statistics are smeared. You can't clump Europe together and say, "Look, socialist Europe is not that bad!" By clumping all of Europe together you are artificially raising the average income per capita of individual nations which are already relatively poorer than other, freer European States.

JCatalan: "you must remember that large city sprawls were also a product of zoning laws."

Sorry, but my study of U.S. urban development tells me otherwise. While zoning laws have made a difference in a few cities, sprawl predates most such laws. Americans started moving away from city centers as soon as streetcars and trains made that possible. Once inexpensive personal transport became available, there was no turning back the tide.

JCatalan, despite what you may have read from the liberal media and despite what some Europeans believe, sprawl is exactly what Americans desire. Most of us do not want to live near the industrial centers of American cities. Most of us desire the large yards our suburban dispersal allows us.

We do not like long commutes, of course. So our employers have begun to accommodate that desire. Workplace locations have become much more more dispersed, just as housing has become dispersed. I could provide you hundreds of examples of corporations that moved their headquarters to suburbs in order to accomodate Americans desire for short commutes and suburban living.

John Dewey,

Unfortunately, I feel that you are trying to hard to disprove what I said, and focusing on something which is largely tangential to what I was originally saying. I concede whatever point in relevance to sprawl you are arguing to, but that wasn't really what I was getting at or what I wanted to focus on. In any case, I don't know what liberal media you are referring to.

For whatever reason Madrid is clustered and San Diego has a large urban sprawl, it nevertheless stands that transportation in Madrid is cheaper. There was no negative or positive connotation, and no conclusion I drew from that empirical fact (as that would be fallacious), other than that from that perspective my lifestyle in Madrid was cheaper.

But, I also ended my comment with a reference to subjective valuation. Like I said, an African might say that their lifestyle is cheaper and acceptable to them, while an American would disagree. My only real point was to demonstrate how difficult it is to make sweeping comparisons between the United States and Europe, although I generally agree that Europe is poorer per capita than the United States (as I made clear in my first comment).

JCatalan: "I feel that you are trying to hard to disprove what I said, and focusing on something which is largely tangential to what I was originally saying."

I don't really care whether a point made by a commentor is "largely tangential". When I feel a point is so incorrect that it bothers me, I'm likely to reply. These three points did bother me:

1. When you argued about the minimum amount of money required to live a comfortable lifestyle in the two countries, you used as support your experience in San Diego. I don't disagree with your overall point, but it bothers me greatly that anyone would use San Diego as an example of U.S. living costs.

2. I assumed your argument that one cannot live an adequate life in the U.S. for 1,500€ per month ($25,700 annually) was also based on your southern California experiences, which I consider to be out of touch with life in the real United States.

3. Your statement that opened one reply to me was "you must remember that large city sprawls were also a product of zoning laws". This actually irked me. I believe you know less than I do about the causes for large city sprawl in the U.S., but I could be mistaken. The causes and impacts of sprawl are the subject of heated arguments throughout our nation, in particular when government officials interact with voters, and I have been involved in such interaction. I do not let statements such as yours aboiut sprawl go unchallenged.

I apologize if my objections to some of your arguments have offended you. No one likes to feel they are being lectured to, and I suspect we may have both caused that feeling in each other.

David Williams,

It's actually amazing that Spain became less free economically after the death of Francisco Franco, and Franco's dictatorship was far short of laissez-faire. Under Aznar Spain improved, on this scale, to some degree, but even during the Aznar administration, and especially thereafter, Spain's freedom is hardly worth mentioning. Spain's big advantage was its low tax on foreign entrepreneurs, which will probably be eliminated soon enough (I believe the PSOE administration was already discussing raising taxes on foreign entrepreneurs to rates which would come in second only behind Italy).

In any case, your response illustrates my posts perfectly. It's much more worthwhile to compare European states as separate entities, because there are European countries which are relatively more free and are relatively wealthier. There is no sense lumping Europe as one country, because it's not, and by doing so you are falsely connecting an average income per capita to some stereotypical vision of Europe (as socialists). The connection, as your point shows, is fallacious.

Everything is definitions and until we all define things the same way then the debate means not a whole lot.

"Comfortable lifestyle" for instance, what does that mean to JC here, and what does it mean to say, muirduck? Think the descriptions would match up? I doubt it.

I grew up poor country and lived in places that lacked many of the basic amenities one would think necessary. I lived on the economy (off base in private quarters I secured on my own) in Japan in a teeny little apartment with my pregnant wife. As far as the space and utility was concerned we were "comfortable" in that 300 sq ft apartment. In Spain I lived on the economy for 2 plus years in a villa that once was a stable. We had about 1200 to 1300 sq ft for my wife, and three children and there we had a decent sized yard.....no grass but yard at least. Inside it was just like I said.....zero closet or cupboard space. We were very comfortable and happy there, because we did what the Spanish did, bought armoires and stand up cupboards.

In short I can be comfortable at a lower level of amenities than your general American, my background makes me flexible.

That being said, sir, I generally agree with you that, for an American who is paid in dollars, goods and services on the "economy" in Spain can be found at a lower cost than they would be here in the USA. For instance in 1999, on a visit to Spain, my party visited a decent little steak house called the "Coasta Del Sol", a few blocks away from the Plaza at the center of the city. My wife had a 1/2 roasted chicken with veggies, salad, and bread for approximately $6.50. My neice and I had a decent 14oz steak, french fries, salad, and bread for the princely sum of $8.00. A 1/2 bottle of a decent Tinto cost me a whole $3.00 (and I got ripped at that :-D).

That is just an example of the difference between eating out in Madrid in 1999 and the approximately 33% increase you'd have to add in if we had had the same meal in Houston, Tex. Certainly the wine alone would have more than doubled, but we Americans can't be bothered with having the 1/2 bottle of wine offered to us.

At a supermarket I bought many packets of the spice saffron to bring home with me because it was shockingly inexpensive compared to what I was being gouged for here in the USA.

However, in general across Europe, socialist state or more capitalist state, what does "comfortable" mean to difference in such things as housing. Typically in Europe, people tend to live in villages, cities, or large metropolises, the parameters of which are sharply delineated. Exceptionally few actually Europeans live in what we in America call rural homes.

For instance in your country of Spain, so many of the villages are built on land that was/is land that could not be planted, but also land or sites that could be better defended from marauding bands of enemy or bandits. Historically Europeans were really safer bunched together in clumps, and went out to their land to actually work it, coming home to the village at night.

This results in housing that is small, clumped together wall-to-wall literally, with maybe a patch in front and/or back that can actually be called a yard. Inside most home there are no closets, people own chests or armoire to keep their clothes in. In other words the living spaces are typically much smaller than the average home of an equivalent wage earner in the USA. If an American wants to get a feel for what I am talking about, simply go to New York city and look at Manhattan and imagine living there and longing for a yard.

In short, sir, my personal opinion as one who has been in Europe for extended periods, 4 1/2 years in Rota, Spain, who traveled a lot just seeing, visiting, as well as playing basketball against Spanish teams, and having lived on the economy for extended periods....yes you can buy many things cheaper in Spain, but the definition of middle class in Europe doesn't meet the same standards as it does here in the USA, it falls a tad short in many ways. Myself, I could live middle class Europe and be "comfortable", but I certainly know a lot of people that could not, that would bitch and moan endlessly at what they lacked.

BTW, my definition of contentment is a fresh baked chunk of Spanish bread, a good chunk of Manchego cheese, a glass of good Tinto, a good book, and privacy. And, you can have that in a 300 sq ft apartment as well as in any rico's villa.

Oh and one more BTW, I'd love to see you walk your butt across Madrid in one day, you might make it but you'd have to be moving at one hell of a pace. :-D

We need objective measures of quality of life. Let me propose a few:

* average commute time
* air quality
* water quality(is the tap water drinkable)
* social freedoms(abortion rights, euthanasia, gay rights, gun rights)
* economic freedom(how easy is it to open a business free of govt interference, how much licensing required for professions, etc...)
* safety from violent crime

everything else is subjective.

:-D, I would add

* privacy - the ability to enjoy, without noise intrusion, one's domicile.

Little tale: I took my wife and niece to Spain in 99 on a 17 day tour. We had a flight time of about 14 hours total, including a two hour layover in Atlanta. Jet lag and lack of sleep put us in Madrid at about 0900AM. We got our rental car, drove into the center of the city to our Hostel, spent almost an hour finding a place to park. Got situated, walked around totally wired with "channel fever" and exhaustion. Had dinner around 0700PM and went back to our rooms to rest up for a day trip to Segovia the next day. Laid down to sleep about 0900PM, and though I had lived 4 1/2 years in Spain I had never lived in a huge city. The noise coming up to the 6th floor was incredible, with the huge numbers of people doing business, going and coming from dinners, partying, cars and trucks going down the narrow street. No way it was possible to sleep. Around 0100AM, things began to settle down and with a sigh of relief we went to sleep only to be awakened at 0200AM by the streets cleaners and garbage trucks doing their job. Have someone drop a 500 Lb metal garbage bin from a height of two feet in the quiet of the night in a canyon of tenement buildings and I can tell that if it isn't part of your life you are coming out of bed! LOL

Definitely privacy to enjoy your home is high on the list of objective comparisons.

vidyohs,

I completely agree with you! Wealth, utility, standards of living, et cetera, are completely subjective. My real point, although perhaps not clearly stated, was that these Europe versus United States comparisons, although perhaps generally correct, are very difficult to make due to different factors.

Usually, during rush hour the metro and bus are packed line cans of sardines, so I would walk home from the center of the city. It took me about 40 minutes, although I admit that that distance was not very long (not even half the distance of walking from nothern Madrid to southern Madrid). This is a better point on what a poor job city-regulated transportation services do distributing services to clients!

No no, I understood your point and was attempting in my own way to agree. We can not really accurately compare because of the differences in subjective comparisons.

I was just saying that yes things can be cheaper in dollars in some of Europe, but at the same time in other aspects one can not get the same level of creature comforts in Europe that one can in America for the same dollar.

We can see population pressures pushing Europeans out of their enclaves and into their version of suburbs, but the suburbs I have seen in Europe are still predominantly outside the walls versions of inside the walls housing. Wall-to-wall housing with little space. Space, freedom, privacy can't be had in Europe by the middle class like it can in the USA. But, there is no way to attach a dollar figure to that, so we still can't really compare.

I live in a definite middle class level home in a rural subdivision where all homes have a minimum of an acre, we have three. At the space, freedom, and privacy level in Europe I'd would have to be considered very rich to have this, especially on land that I did not inherit.

There are some difference that aren't subjective in measurement, but are in personal expectations and acceptance.

I would agree that Europe does not have a universal economic policies. But there is a general trend here the states that have greater economic liberalism such Denmark ranked 8 overall Ireland 4 and Finland 17 are doing better than France ranked 64 or Italy 76. Spain is doing better because of greater economic liberalism such as intergration into one of the worlds largest free trading zone the EU and increased liberalization of labor and capital.

Economic liberalism creates job growth and wage growth the European states that have the most economic liberalism have the best economic statistics. http://online.wsj.com/article/SB123180425194675...