Scott Sumner  

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Is British public policy more left wing or right wing, compared to Scandinavian countries like Sweden and Denmark? The Heritage rankings suggest they are about the same, with Denmark coming in at number 10 in the world (at 76.1), Britain number 14 (at 74.9), and Sweden number 20 (at 73.1).

And yet the two models differ in many respects. Most informed observers would probably argue that the Nordics have more "socialist" economies, perhaps much more socialist. On the other hand in many respects the Nordics are much more free market than even the US. Sweden has a 100% voucherized school system. Their Social Security is party privatized. Denmark has for-profit fire fighters. Several Nordic countries have privatized industries that are publicly owned in the US (airports, air traffic control, passenger rail, water companies, mail delivery, etc.)

Consider this recent comparison of Sweden and Britain:

The Swedes are far ahead in two areas. One is their use of hospital registries, showing how well each part of their system treats different ailments. The other is a small fee every hospital charges each time you visit it: A small fee helps stop the buffet welfare state that Lee Kuan Yew identified.

For some purists on the Left, that is a denial of the great promise of institutions like the National Health Service: that they would always be free at the point of delivery. The Swedes are far more practical. Those promises were made when health care was far more basic. It is not in society's interest that hospitals be overused. By changing the benefit slightly, they can keep it more open to all.


In some respects Sweden is more left wing than Britain; for instance it has higher top marginal income tax rates, and more income redistribution. In other respects Sweden is more right wing, it has a freer market in education, and a fee for use of health services. Is there any common theme here?

I believe the common theme is utilitarianism. Policy in the Nordic countries is motivated by utilitarian considerations to a greater extent than anywhere else on Earth. The right wing in Britain feels it isn't "fair" for people to have to pay more than 50% of their earnings to the government. The left wing in Britain believes it isn't "fair" that people have to pay for health care; it's a basic "right" that should be free. Utilitarians tend to avoid concepts like "fair" and "rights", and instead focus on maximizing aggregate happiness.

Does it work? Well there are a number of studies that suggest Denmark is the happiest country in the world.

Now for a curve ball. Although I am a utilitarian, I prefer a small government model like Hong Kong or Singapore to a big government model like Sweden or Denmark. Before explaining why, it's important to note that these 4 countries are not as different as they seem. The conservative Heritage Foundation ranks Hong Kong and Singapore number one and two in the world in "economic freedom." However if you restrict your analysis to the 8 categories out of 10 that exclude size of government (i.e. exclude the tax and spending categories) then Denmark is number one in the world in economic freedom.

The two Asian city-states are also quite utilitarian in their governance, reflecting the accident of history (an idealistic dictator in Singapore, and a non-socialist British administrator for Hong Kong.) But the Nordics are the most democratic of the utilitarian governments. So if I share their values, why don't I share their preference for big government?

I believe that economics is full of "cognitive illusions." Common sense suggests that government ought to be able to fix all sorts of problems like financial turmoil and inequality, through government programs like regulation and redistribution. I don't deny that there are some possibilities for progressive governance, in a few areas. But overall I think intellectuals tend to greatly exaggerate how much good can come from big government. Economics (and especially University of Chicago economics) teaches us about all the unintended consequences of seemingly well-intentioned government programs. Even the Danes seem to have realized that truth in 8 of the 10 categories studied by Heritage. And both Denmark and Sweden have been moving in the direction of more economic freedom in recent decades.

So I am what Krugman calls a "homeless" person. I'm a utilitarian who ended up on the right, due to the fact that I think most people vastly underestimate the importance of incentive effects, and the negative side effects of regulation and redistribution. Most people with similar views get there from a different direction, from a "natural rights" approach. For instance, Greg Mankiw thinks very high taxes on the rich are unjust because people deserve the fruits of their labor.

Although my utilitarian moral system tends to align with intellectuals on the left, people like Paul Krugman and Noah Smith want nothing to do with the likes of me. They shudder with horror at the mere thought of libertarianism. Thus I'm grateful to Econlog for giving me a home.

PS. The quote was taken from a new book by John Micklethwait and Adrian Wooldridge. It's not a heavy academic book like Thomas Piketty's recent magnum opus, rather a breezy journalistic style overview of current best practices in governance. But it's well worth reading. (Of course I'd say that, they also appear to be right-wing utilitarians.)

PPS. Britain is still more utilitarian than most other countries.

PPPS. I'm still planning reply to Caplan on immigration--hopefully soon.


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COMMENTS (19 to date)
RPLong writes:

Your utilitarianism seems incomplete to me. I think fairness produces utility.

If you disagree, then I challenge you to a series of tennis matches. We'll group each match into "Category-A Matches," in which I am given a 4-game-per-set advantage throughout the match and you are never allowed to approach the net, and "Category-B Matches," in which we play according to traditional rules and scoring. We will toss a fair coin at the outset of each match we play to determine whether the match will be Category A or Category B, until we have played 100 of each.

After each match, you can rate the level of subjective utility you derived from the match on a scale of 1-to-10. If the Category-A matches are consistently as fun for you as the Category B matches or more so, then I will stand corrected.

Jody writes:

RPLong - would it be perverse of me to think A would be more fun than B? (partially for the novelty) FWIW, I'm a 4.5.

On a more serious point, fair is a poorly defined term beyond "I find the resulting allocation of resources acceptable"

TravisV writes:

"Although my utilitarian moral system tends to align with intellectuals on the left, people like Paul Krugman and Noah Smith want nothing to do with the likes of me. They shudder with horror at the mere thought of libertarianism."

That's an overstatement but it did make me laugh!

I'm a fan of Smith and Krugman but Sumner is definitely my favorite!

RPLong writes:

Jody - Funnily enough, I typed out my example as "a tennis match," and then the prospect of the novelty occurred to me. Then I thought I had better make it 200 tennis matches - enough for the novelty to wear off. ;)

And I guess we still need to account for my utility. I mean, not only do I have a good chance of winning more than 100 high-profile tennis matches against a famous economist, I'm also deriving utility from being able to prove a point in the process.

In fact, this whole thought-experiment I've come up with is basically a utility machine...

TravisV writes:

Also, just to be clear, Krugman and Noah Smith's views aren't exactly extreme left-wing. Here are examples of Krugman's market-friendly views:

http://www.newyorker.com/magazine/2010/03/01/the-deflationist?currentPage=all

"He thought that people who wanted to boycott Nike and other companies that ran sweatshops abroad were sentimental and stupid. Yes, of course, those foreign workers weren’t earning American wages and didn’t have American protections, but working in a sweatshop was still much better than their alternatives—that’s why they chose to work there. Moreover, sweatshops really weren’t the threat to American workers that the left claimed they were. “A back-of-the-envelope calculation . . . suggests that capital flows to the Third World since 1990 . . . have reduced real wages in the advanced world by about 0.15%,” he wrote in 1994. That was not nothing, but it certainly wasn’t anything to get paranoid about. The world needed more sweatshops, not fewer. Free trade was good for everyone. He felt that there was a market hatred on the left that was as dogmatic and irrational as government hatred on the right."

...........

“What does it mean to do economics?” Krugman asked on the stage in Montreal. “Economics is really about two stories. One is the story of the old economist and younger economist walking down the street, and the younger economist says, ‘Look, there’s a hundred-dollar bill,’ and the older one says, ‘Nonsense, if it was there somebody would have picked it up already.’ So sometimes you do find hundred-dollar bills lying on the street, but not often—generally people respond to opportunities. The other is the Yogi Berra line ‘Nobody goes to Coney Island anymore; it’s too crowded.’ That’s the idea that things tend to settle into some kind of equilibrium where what people expect is in line with what they actually encounter.”

ThomasH writes:

I think the Nordics have more economic freedom because they are willing to be more explicitly re-distributive. You don't need crazy ways to transfer income to low wage workers with a minimum wage if you could do it with a higher earned income tax credit. You would not need to mandate employers "provide" health insurance if the subsidy were given to people as a tax credit. Historically distortion atrocities like rent control were efforts to prevent large income redistribution from renters to landlords in response to unexpected changes in housing demand (as during WW2) No doubt underestimating the problems caused by perverse incentives plays a role and better teaching of economics would help, but ultimately inefficient ways of redistributing income need to be combated with more efficient ways.

Daniel Klein writes:

An area in which Sweden is much freer than the US is occupational licensing, which is much lighter in Sweden. UK falls somewhere in between, no doubt, but closer to Sweden or to the US?

Scott Sumner writes:

RPLong, I certainly agree that fairness provides utility. So does liberty. That's one reason these philosophical issues are so tricky.

Travis, Krugman in the good old days.

Thomas, That's part of the story.

Daniel, Good point.

Ricardo writes:

Scott,

I always enjoy your posts.

When you have time, would you write a post describing how utilitarianism works in practice (at least from your perspective)? I can't observe your utility functions, nor you mine, so how can I apply the doctrine? Specifically, how can I apply the doctrine to decide when coercion is acceptable?

Adam J. writes:

Mr. Sumner,

Good article. I consider myself a utilitarian and occasionally liberal as well. However, you say that inequality is a problem. I disagree. Inequality itself is a problem only to the extent that it came about from crony capitalism or other market intervention. To the other extent it results from voluntary exchange, it is not a problem at all.

Adam

Sale writes:

Krugman goes full libertarian (1998):

"The biggest lesson from Asia's troubles isn't about economics; it's about governments. When Asian economies delivered nothing but good news, it was possible to convince yourself that the alleged planners of those economies knew what they were doing. Now the truth is revealed: They don't have a clue. Even during the glory days, a visit to one of those planning agencies--say, Japan's all-powerful Ministry of Finance--was enough to inspire a few doubts. I visited the MOF in 1985 and saw what looked less like the Pentagon's War Room than like the Department of Motor Vehicles: dusty hallways, broken furniture, guys padding around in their socks, centerfolds taped to the dirty glass partitions. But maybe, I thought, appearances were deceiving. Then things started to go wrong, and the MOF proved itself as hapless in action as it was in appearance. It's easy to look competent in a prosperous economy (ask Bill Clinton), but the true test is whether you can cope with adversity. So much for the legendary managers of Japan Inc."
http://web.mit.edu/krugman/www/perspire.htm

RPLong writes:

...so, no tennis? Aw, rats! ;)

Old Whig writes:

Sweden's tax system is OECDs most regressive as is Germany's (source: LIS Project paper)

US has OECD's most progressive tax system.

In Sweden the FICA tax is roughly 35% and it's county tax ~30%. Has a VAT of 25%. All of these are several regressive.

In the US top 10% of tax payers pay 70% of taxes, in Sweden 30%.

The Swedish welfare state is basically a forced savings scheme. 80% of what an average citizen pays in tax and fees he gets back over his life span.

Redistribution is very low in Sweden and poor, especially single mothers, and unemployed have relatively low benefits and are shunned by the average citizens

Miguel Madeira writes:

"In the US top 10% of tax payers pay 70% of taxes, in Sweden 30%."

That metric does not make much sense - if in country A the 10% taxpayers receive (pre-tax) a bigger share of GDP than in country B, they could pay a bigger share of taxes even if the taxes in country B are more progressive.

Then,"In the US top 10% of tax payers pay 70% of taxes, in Sweden 30%." could mean that taxes in US are more progressive, but also could mean that pre-tax income is more equal in Sweden (by this information alone, we cannot know)

Zeke writes:

re: utilitarianism and political idealogy.

I'm a graduating law student from a well known law school. Professors more interested in consequentialism tended to skew libertarian (at least for the academy). While it is true that behavioral L&E types tended to be a bit paternlistic (i.e. Cass Sunstien), even they often ended up with more market based solutions. Those concerned with "rights" or "fairness" tended to be more progressive.

So, my guess is that utilitarianism need not go hand-in-hand with progressivism at the academic area. My guess is that it has more to do with whether you are macro or micro focused.

Jim Rose writes:

Scott, do you happen to have the reference for the quote comparing Sweden with Britain. I'd like to use it in a paper

Scott Sumner writes:

Ricardo, The default assumption for most public policy purposes is that people have roughly equal ability to enjoy life. That's obviously not true, but any other assumption seems even less defensible.

There are tougher issues when you get to end of life scenarios where people are in pain. One reason I am a libertarian is that I don't have much faith in the government's ability to make useful distinctions in this area.

Adam, It is a "problem" if there are government or private redistribution schemes that boost aggregate utility. If not, then it's not a problem.

Sale, Good quote.

Old Whig. Sweden has a relatively efficient and utilitarian tax regime, for the amount of revenue collected. But I don't agree about the redistribution. They do quite a bit with benefits.

Zeke, Interesting point.

Jim, It's in the book "The 4th Revolution" that I cite in the PS, I believe it's around page 180-85 somewhere, but am not certain.

Jim Rose writes:

Thanks Scott.

Lorenzo from Oz writes:

Australia has been famously described as a Benthamite country. (The place where the Chartists won.) There is a lot in that.

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