Scott Sumner  

Americans are richer and happier* than Europeans

Caplan versus Hanushek... That great classical liberal n...

The asterisk refers to my skepticism about happiness surveys. But other people cite and believe this data, so I'll play along and show the implications of the actual survey data.

Megan McArdle has a very nice article discussing the Danish model, cited by progressives like Bernie Sanders as something we should emulate. I agree with virtually everything in the article. Nonetheless, I'd like to add a few points that McArdle does not make in order to put this all into perspective.

One reason that progressives love Denmark is that it has a lot of social welfare spending, and its workers are highly productive. Even so, GDP/person in America is about 20% higher than in Denmark (adjusted for PPP.) The gap between America and Europe as a whole is much larger, as Denmark is one of Europe's richest countries.

Is there any evidence that this gap is due to Europe's welfare state? I'd say yes. AFAIK, Switzerland is the only western European country with less government spending than America (as a share of GDP.) It's also the only Western European country that is richer, apart from oil-rich Norway and a few tiny countries. High welfare spending leads to fewer hours worked, and this factor largely explains why Denmark is poorer than the US, and Europe as a whole is much poorer.

In my view it's a mistake for progressives to cite Denmark's high levels of happiness. If you compare the US to Europe as a whole, America is happier than more than 90% of Europe, weighted by population. Indeed the Netherlands is the largest European country that rates happier than America. And yet Europe as a whole has a much more extensive welfare state than America. And Europe as a whole is a far better comparison than Denmark---much more similar to America in terms of size and diversity of population. Unfortunately for progressives, Europe is much poorer and less happy than Denmark. Indeed the US is roughly 40% to 50% richer than the EU on a PPP basis. That's partly due to fewer hours worked and partly due to lower productivity.

Putting this all together there's really no evidence that social welfare spending makes Denmark a happy country. If they are happier (I'm agnostic on that point) it's more likely due to their culture---a high trust society. Big government probably makes countries poorer than otherwise, and does not seem to make them happier. That's the lesson I draw from looking at both Denmark and Europe as a whole.

PS. Ten years ago I wrote a long article on this topic, entitled "The Great Danes".

A Danish flag made out of Danish Legos:

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COMMENTS (17 to date)
Quite Likely writes:

Haha "Danes are happier than Americans despite their lower GDP per capita? Wait, wait, I've got something for this that will really muddy the waters..."

Brandon Fishback writes:

When you say Europe, are you including the entire continent? Because when progressives say “Europe” it’s usually a short hand for Western Europe. I don’t think they want us to emulate Serbia.

Pajser writes:

Explanation of USA advantage is maybe simple - Americans work more. Average working hours per laborer in USA is 1783/year while in Denmark it is 1410, i.e. Americans work 26% longer. In the same time, American GDP (PPP)/cap is $57470, while in Danish is $49500, i.e. USA is 16% wealthier. If Danish worker wants (and law allows him) to work as much as American worker, he would produce ~10% greater value. Furthermore, in 1950, USA had 38% advantage in GDP(PPP) per capita, it appears that Denmark develops marginally faster in long terms.

Denmark has marginally longer life expectancy, 5x lower homicide rate, 30% lower suicide rate, 3x less traffic accident deaths per person, almost twice lower child mortality, 30% lower obesity, better HDI, lower human rights violation risk. All that can be cultural difference, unrelated to economic decisions, but data as we have it on side of Denmark. (World Bank, OECD, Maddison project ...)

maynardGkeynes writes:

I worked several summers when I was in college for Scandinavian Airlines at JFK. It was a great job, and particularly fun because the Scandinavians are really quite fine people (both the thousands I helped load onto DC-8s, and my dozens of coworkers.) However, my 4 summers at SAS left no doubt in my mind that Shakespeare really had it right with "melancholy Dane." A survey that puts the Danes at the top of the happiness list surely has "something rotten" about it. Happiness is not a Dane.

François Godard writes:

Pajser above is to the point. Some high productivity countries like many in Western Europe show a preference for working less than Americans, thus producing less. Collective provision of some goods like health care, public transport and public leisure facilities may help to sustain this model. In his post Scott does not clearly say why it would be intrinsically superior to use marginal available hours to work and consumer more rather than do non-productive activities.

Alan Goldhammer writes:

Scott - one of the flaws in analyses such as this is the comparison of a small country (both in terms of land area and population) with a much larger one. In addition, there is a vast difference between the natural resources of Denmark v. the US. Would not a much better comparison be between Denmark and a state of the same size and population? Population of Denmark is roughly 5.8M. If we look at states within say 5% of the population one gets four states that are worth comparing: MO, MD, WI, and MN. Of those, MD is the closest in terms of geographic size.

I'm a resident of MD but don't know whether I'm happier than the typical Dane. :-)

robc writes:

Did everyone miss Scott's point?

The idea is to NOT compare Denmark to the US, but Europe to the US.

Floccina writes:

Greenland is part of Denmark, does that make it Denmark without Danes?

IVV writes:

My wife's from Germany, and we live in America. We do quite well, and although we've had opportunities to move to Europe in the past, we always figured out that we are better off here.

But the one area that the difference remains is financial security. My wife always fears that we will lose the advantages we have, and unless we have saved tons, then we will find ourselves starving and hopeless. The truth is, we could be earning millions but it still wouldn't be enough because there's nothing in place that would say "Now you're a millionaire, so a millionaire you must stay."

Compared to Europe, you go back to the welfare state. You're not going to starve there. You could be living in some tiny hovel but you'll always have a roof over your head and food in your belly. But as we've noted personally, you're also not going to be able to have earnings as high, either.

So the fantasy solution is some form of stratification. I always feel like much of Europe still believes in the nobility in their hearts. Don't start your own firm, do well under a large existing firm (the noble house). There's an odd, unsavory feel to entrepreneurship, as if you're a thief, if you aren't starting out independently wealthy.

Bah, I'm rambling at this point. But if your happiness depends strongly on security at whatever level, then floor-setting becomes far more important than ambition and competition.

Nick Ronalds writes:

There's one other point that was barely touched on in McArdle's article, where she quotes the speech writer. It's that Denmark is in no way a socialist country. It's a welfare state, yes, and taxes may be high, but its economy is one of the freest in the world, ranking 6 places above the U.S. in the Heritage 2018 rankings of countries by economic freedom.

IronSig writes:

So if we're comparing the US and Europe, can we compare Denmark and Switzerland to different states?

Denmark as a goods exporter, Switzerland as a service exporter = Wyoming, NY? Iowa, Texas?

Or have I fumbled at the premise?

Scott Sumner writes:

Brandon, I was thinking in terms of the EU, which includes some poorer countries like Portugal and Poland, but not Serbia. It makes no sense to compare a large diverse country like the US to a small homogeneous European country. Looking at the overall EU adds some ethnic diversity. Imagine someone looking at the US and saying ("I'm excluding blacks and Hispanics from my average income data.") Excluding Portugal, Greece and Poland would be much the same. Different ethnic groups have different productivity levels.

Pajser, None of those claims apply to Europe, which entirely misses the point of my post. Obviously it makes no sense to compare America to Denmark. It would make more sense to compare New Hampshire or Utah to Denmark, and those states would come out ahead. Compare big to big, or small to small. That's not to say there aren't things to be learned form Denmark, I like their system.

Francois, The reason we assume European hours worked is suboptimal is because the labor market is full of distortions that discourage work. There's a huge tax and subsidy "wedge". It's the same reason we assume there is too much carbon emitted in most countries.

robc, Exactly!

Mr. Econotarian writes:

If the US tried to become like Denmark, it would end up like France or Italy...

Thaomas writes:

There seems like a lot of truth in your argument, but it misses the point. No one that I know of wants to try to replicate Denmark in the New World. But I do think there are things tat we can learn from the experiences of other countries: infrastructure can be built more cheaply, it is possible to provide health insurance for almost everyone, subsidized child care can improve labor force participation.

MARTIN writes:


"An economist cannot make interpersonal comparisons of utility".

PLW writes:

For those not interested in clicking through. Here's the list of countries that are "happier" than the U.S., in order.

New Zealand
Costa Rica
United States

Louis Woodhill writes:

I guess it depends upon what makes you happy.

On October 11, 2011, a Danish man, Poul Hagen Thisted, and an American woman, Jessica Buchanan, were kidnapped by Somali pirates. Somalia is 4,100 miles from Denmark, and 7,800 miles from the U.S.

On January 25, 2012, U.S. Navy SEALs parachuted into Somalia, killed the 9 pirates holding the hostages, and brought Thisted and Buchanan out safely. If both people been Danes, they would still be there.


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