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October 21, 2002

Krugman on Instapundit's Sweden Silliness

Krugman dissected Instaman's distorted stats that Swedes are far poorer than the US if you use GNP per capita as the measure. Good points but a few additional ones in my post here last month. Instapundit has a truly weak response that shows just how clueless he is on basic inequality and economic statistics.

Posted by Nathan at October 21, 2002 05:28 PM

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I want to salute the Swedish Troll. The idea that a serious economist is discussing the relative strength of Sweden and Mississippi in a major publication is a triumph of something or other.

Two thoughts, ladies first; if you are having a serious argument about whether your man is better looking than Tom Cruise... you've already won! And guys, if you are having a serious discussion about whether your lady is not as ugly as RoseAnne Barr... you've lost!

Hello, Sweden is not as poor as Mississippi? Who cares? What kind of an advertisemnt is that for Swedish syle socialism - hey, we're not even as lame as Mississippi! I can't keep a straight face.

OH, second point - instead of looking at 1998 snapshots, run the film from, I don't know, 1970. I haven't even looked this up, but I promise you - Sweden was way ahead of Mississippi then. No serious debate about who was number 1 would have been imaginable.

Put it another way - South Korea and Taiwan are considered two great success stories of the last thirty years - I doubt that they are richer than the US, but they are making great progress. It is the trend, not the current position, that is important. And with Sweden, the trend is not a friend.

Hmm, I may blog this.


Posted by: Tom Maguire at October 21, 2002 10:20 PM

Nice try, but doesn't fly. You get Americans even thinking about comparing themselves internationally and the Left wins, since the only reason rightwing arguments around health care even have a chance to fly is by ignoring the glaring success of health care in Europe-- it's cheaper and more effective.

So we win by getting that discussion going.

As for trends, note my original stats on Sweden in recent years: median wages in Sweden rose 22 percent during the 1990s even as the unemployment rate fell considerably. The 1990s was not as kind to East Asia.

Posted by: Nathan Newman at October 21, 2002 10:44 PM

And US style "extreme capitalism" also creates stresses unknown elsewhere in the civilized world. Worries over the essentials of life (food, shelter, health care) are simply greater here -- which is one of many ways, Tom, that the gravamen of Krugman wasn't to compare Mississippi and the US, but to point out that Sweden, despite nearly zero natural resources as compared to the US, has a higher quality of economic life for all but the two country's wealthy.

Also, as Mickey Kaus (ironically) pointed out in his book, The End of Equality (page 61), Sweden has a huge "grey market" from tax avoidance. Assuming Sweden's off the books econ is bigger, proportionally, than that of the US, than the US is far less well off. . . .

Posted by: Jeff at October 21, 2002 11:08 PM

Sorry, guys, I am still laughing out loud. Maybe if I can pop "The seventh Seal" into the old VCR.

Jane Galt has a long post on health care. My own thought is that since the Euros are a bunch of free riders who have quit developing their own drugs, I am not convinced that we can emulate their system.


Posted by: Tom Maguire at October 21, 2002 11:40 PM

The fact that we are comparing Sweden and Missisippi is now a function of reality, but a function of Instapundit's ignorance. I think it's funny too. Most pollution is caused by trees, you know.

Posted by: zizka at October 22, 2002 01:01 PM

My own thought is that since the Euros are a bunch of free riders who have quit developing their own drugs, I am not convinced that we can emulate their system.

Obviously then, the thousands of pharmaceutical researchers in Britain, for instance -- and I know a fair few with doctoral degrees -- are just fooling us all. As are the thousands working in pharma factories. How could I have been so stupid? At least I can console myself with the thought that I'm not star-struck by Megan McArdle's self-proclaimed puissance.

Posted by: nick sweeney at October 22, 2002 01:31 PM

I had heard about the trees, and have been staying indoors ever since. As to the bold new wave of pharmaceuticals emerging from Britain and Europe, I am just mindlessly parrotting what I read, like, everywhere, when I say that Europe doesn't develop drugs. Maybe Nick has some cool info to rebut that? Or anyone? New drugs, Europe versus US. I would love to know.


Posted by: Tom Maguire at October 22, 2002 03:36 PM

I don't suppose we can trust the WSJ on matters of business reporting, but here is an interesting story from ten months ago.


The crux of the matter is this. European governments demand severe
discounts on pricing. With a base price of 100 in the U.S., the
average French price for a drug, for example, is 42. With research
and development funded by profit, the pharma companies argue that the
Europeans are in effect after a free lunch -- access to innovation
without having to pay for it.

...The two issues of European cost-cutting and increasing research
budgets are, of course, deeply entwined. As Steve Slovick, senior
vice president with the Cambridge Pharma Consultancy in New York, put
it in The Wall Street Journal Europe on Dec. 12, "The U.S. ends up
funding all the research and development," European countries aren't
"paying their fair share."

or, here

A year ago, the European Commission
itself published a report by Professor Fabio Pammoli on "Global
Competitiveness in Pharmaceuticals: a European perspective." The
study was commissioned to look out how far and why the European
pharmaceutical industry was losing ground to the U.S. Even the most
superficial glimpse at the industry can see that previously
EU-headquartered companies have moved to the U.S. As one key player
said: "The environment is becoming steadily more inhospitable." Put
simply, the 80 pages of the Pammoli report concluded that the EU
pharma industry was uncompetitive and that governments needed as a
priority to rekindle investment in R&D. Yet far from doing that,
their price-control policies are undermining research.


Posted by: Tom Maguire at October 22, 2002 03:43 PM

Uh huh... and this makes the US health care system look better and less like a lapdog for industry interests, how? Anything created by US drug companies can be used by Europe, so they lose nothing other than a few pharma jobs, which their savings on drug costs no doubt counterbalance.

In the long run, I'm all for US and Europe eliminating patented drugs altogether and publicly funding the whole shebang. Even the Economist has run articles saying that for-profit patented medicine is not necessarily the best model. Either government funding or government prizes-- buying it all into the public domain-- is probably the future of medical research.

Posted by: Nathan Newman at October 22, 2002 06:33 PM

"Anything created by US drug companies can be used by Europe, so they lose nothing other than a few pharma jobs, which their savings on drug costs no doubt counterbalance."

Well, yes, if they can buy everything at marginal cost while the US pays the full cost of production, including R&D, I suppose no obvious harm is done in the short run. However, comparisons of the effectiveness of the two health care systems should reflect what is arguably an artificially low cost of drugs in Europe. Or, if the US went away, what would they do? And when does the US benefit from drugs they produce?

More Euro free-riding, just as with national defense. We pay, they benefit.

As to full government funding of R&D, the story of the sequencing of the human genome seems topical. Private enterprise versus government sponsored research - let's go!

A Race to the Starting Line

Cracking the Genome: Inside the Race to Unlock Human DNA

I think your confidence in the universal efficacy of government solutions is touching (as is my confidence in the private sector, no doubt), but not supported by a lot of evidence. Frankly, I would rather trust the private sector to rip me off by developing a treatment for Alzheimers, rather than waiting eternally for the Euro-approved Low Cost solution.

Posted by: Tom Maguire at October 23, 2002 12:18 AM

From both cites, my conclusion is that the government (NIH, academia) did the 'brush-clearing', which enabled private companies to do anything.

Posted by: Barry at October 25, 2002 09:24 AM

Yes, it seems like the Government is best able to "add value" in basic science: lots of different experiments, no clear objective, just gathering info - classic "scientific pursuit of truth", rather than delivering a product.

If you are a football fan, perhaps you will like a reference to a team's "red zone" offense - it's all very well to move the ball downfield, but can they score?

I am also intrigued by the "prize" notion Nathan mentioned. A famous prize was offered way back for determining a ship's longitude (east-west coordinate). An accurate clock was the answer. One might think that testing a clock for accuracy was pretty easy - put it on a ship, sail around, come home, compare to land-based clock. However, due to politics and scientific jealousy, it took years to award the prize to the eventual winner.

So, move into the present era - what sort of prizes are we talking about for drug development? Does a near miss which advances science get recognition? Do we hold up entrant A while the French rush their entrant past hurdles in order to win - remember, the French didn't test donated blood for HIV because it was not a French company that developed the test.

Or, do the Euros simply refuse to donate prize dollars. Why should they, they are already free-riding, and the US consumer still wants an Alzheimer's treatment.

So, it could work. But we have a system in the US for drug development that does seem to work and a system in Europe that has stalled. I would not be inclined to bet the health of a generation on an unproved, risky prize scheme, if I may mimic Al Gore.

Posted by: Tom Maguire at October 25, 2002 12:39 PM

In general, I would agree that there is bound to be a range where some Swedification of an economy should bring "desirable" results (i.e. reduced inequality) without too high a cost.

But the following comment needs looking at:

"Sweden has a huge "grey market" from tax avoidance. Assuming Sweden's off the books econ is bigger, proportionally, than that of the US, than the US is far less well off"

Would this not, logically, also lower the "true" figure for Sweden's tax receipts as % of GDP? That would make the economy look "less Swedish" would it not?

Posted by: BRH at March 4, 2003 10:22 PM

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