Thursday, April 20, 2017

Martin S. Feldstein — Why the U.S. Is Still Richer Than Every Other Large Country

Will America maintain these advantages? In his 1942 book, Socialism, Capitalism, and Democracy, Joseph Schumpeter warned that capitalism would decline and fail because the political and intellectual environment needed for capitalism to flourish would be undermined by the success of capitalism and by the critique of intellectuals. He argued that popularly elected social democratic parties would create a welfare state that would restrict entrepreneurship.
Although Schumpeter’s book was published more than 20 years after he had moved from Europe to the United States, his warning seems more appropriate to Europe today than to the United States. The welfare state has grown in the United States, but much less than it has grown in Europe. And the intellectual climate in the United States is much more supportive of capitalism.
If Schumpeter were with us today, he might point to the growth of the social democratic parties in Europe and the resulting expansion of the welfare state as reasons why the industrial countries of Europe have not enjoyed the same robust economic growth that has prevailed in the United States.
What's wrong with Martin Feldstein's argument?

First, he defines national wealth based on real GDP per capita regardless of distributional effects. Biased and skewed away from distributed prosperity.

Secondly, he proposes no rigorous method for identifying causal factors, determining their relationships and priority of importance, and isolating confounding factors. Methodologically unsound.

Thirdly,  it is blatantly political. A view of economics is used to promote a political viewpoint. Ideology rather than science.

He knows better. Fail. A grade for persuasion based on ideology though. It even appeals to authority (Schumpeter). And Feldstein is also using his own authority to persuade.

Harvard Business Review
Why the U.S. Is Still Richer Than Every Other Large Country
Martin S. Feldstein | George F. Baker Professor of Economics at Harvard University, and the president emeritus of the National Bureau of Economic Research


Matt Franko said...

"He knows better."

Evidence please????

Tom Hickey said...

National Bureau of Economic Research

He knows about statistical reasoning, causal inference, relevant and confounding actors, etc. There is no actual argument in the post. It is all ideological pleading. OK, blogs are not papers. But he is using his authority as an argument basis.

Andrew Anderson said...

What's wrong with Martin Feldstein's argument?

For one thing, the assumption that there is no just alternative between our current system of government privileges for banks and private credit creation and socialism.

Unknown said...

As if the US would be necessarily poorer today even on a flawed per capita GDP basis if LBJ had gotten medicare for all passed in 64 instead of just for old people.

thats an argument someone like him would have to make.

These types of rah rah capitalism articles dont even seem to recognize the basic reality of capitalism, which is just a way for the non-govt to organize activity around markets, wage labor, and private property. Its certainly not the only way to organize private activity and its definitely not the best way for every context. Its so broad as to be largely useless as a descriptive idea.

Is the US less capitalist because it has SS?
Because the Federal Govt funds highways?

Is Germany less capitalist because they regulate their the pharmaceutical industry under a slightly different regime then we do?

These are rather meaningless questions, and they just go to show that drivel from the likes of Feldstein is nothing more than an attempt to advertise policies that materially benefit rich people by way of euphemism. As in countries that direct more of their national wealth to a smaller number of people are what he means by being a "better capitalist".

Its all just so intellectually shallow and morally bankrupt.

Matt Franko said...

Tom do you think a Canada Goose knows which way south is?

djrichard said...

For articles like the one from HBR I always refer to that great line from Van Halen's song, "Hot for Teacher": "I don't feel wealthy". That was the line, wasn't it?