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If Sweden and Germany became US states, they would be among the poorest states

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Lets take a closer look at a puzzle
Lets take a closer look at a puzzle

There seems to be a lot of talk among Democrats and native young people to the effect that European countries have less “income inequality” thanks to bigger government, higher taxes, and more social spending. Is there a downside to this?

The Mises Institute takes a look at it:

The battle over the assumed success of European socialism continues. Many European countries like Sweden have gained a reputation as being very wealthy in spite of their highly regulated and taxed economies. From there, many assume that the rest of Europe is more or less similar, even if slightly poorer. But if we look more closely at the data, a very different picture emerges, and we find that the median household in the US is better off (income-wise) than the median household in all but three European countries.

[…]Using the BEA’s regional price parity index, we can take now account for the different cost of living in different states…
[…]We now see that there’s less variation in the median income levels among the US states. That makes sense because many states with low median incomes also have a very low cost of living. At the same time, many states with high median incomes have a very high cost of living.

Now that we’ve accounted for the low cost of living in Mississippi, we find that Mississippi ($26,517) is no longer the state with the lowest median income in real terms. New York ($26,152) is now the state with the lowest median income due to its very high cost of living.

This has had the effect of giving us a more realistic view of the purchasing power of the median household in US states. It is also more helpful in comparing individual states to OECD members, many of which have much higher costs of living than places like the American south and midwest.  Now that we recognize how inexpensive it is to live in places like Tennessee, Florida, and Kentucky, we find that residents in those states now have higher median incomes than Sweden (a place that’s 30% more expensive than the US) and most other OECD countries measured.

Once purchasing power among the US states is taken into account, we find that Sweden’s median income ($27,167) is higher than only six states: Arkansas ($26,804), Louisiana ($25,643), Mississippi ($26,517), New Mexico ($26,762), New York ($26,152) and North Carolina ($26,819).

We find something similar when we look at Germany, but in Germany’s case, every single US state shows a higher median income than Germany. Germany’s median income is $25,528. Things look even worse for the United Kingdom which has a median income of $21,033, compared to $26,517 in Mississippi.

Meanwhile, Colorado ($35,059) has a median income nearly identical to Switzerland ($35,083), and ten states (Connecticut, Iowa, Maryland, Minnesota, New Hampshire, North Dakota, South Dakota, Utah, Virginia, and Washington State) show higher median incomes than Switzerland. Luxembourg ($38,502), on the other hand, shows a median income higher than every state except New Hampshire ($39,034).

None of this analysis should really surprise us. According to the OECD’s own numbers (which take into account taxes and social benefits, the US has higher median disposable income than all but three OECD countries. Sweden ranks below the US in this regard, as does Finland and Denmark.

The fact that the median level in the US is above most OECD countries thus makes it no surprise that most of these countries then rank below most US states. The US states that have income level above the median US level will, not surprisingly, outpace many OECD countries by a considerable margin.

What’s going on here? Well, it turns out that when you have fewer regulations on business, lower business taxes, and an emphasis on working rather collecting welfare, that people have more money in their pockets and a better standard of living. The trouble with Europe is that too many able-bodied people can get by without working. In the United States, we put more emphasis on making your own way, earning your own pay, and spending or saving your money as you please.

In America, the system is geared towards equipping each person to serve their fellows in the private sector workplace. More people working means more wealth is produced, and more wealth produced means that people have a higher standard of living. You wouldn’t have a higher standard of living in a country where most people didn’t work, and just relied on the few who did work. There isn’t enough to go around in society where most people don’t work.

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Donald Trump’s plan to introduce tariffs is just a tax on consumer goods

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I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

What are the consequences of adopting tariffs for all of the people who are affected? What happens next, after stage one?

Here’s a lesson in basic economics from Joe Carter, writing for the Acton Institute.

He writes:

Both Sanders and Trump propose increasing tariffs on goods imported from other countries — and increase them significantly.* This isn’t that surprising for Sanders, a socialist who, on the issue of economics, is one of the most ill-informed candidates in modern history. But Trump should (and probably does) understand the detrimental impact tariffs have on the poor. And yet he has proposed an economy-crippling, poverty-increasing tariff.

In 2012, Trump proposed a tariff on China of 25 percent. In 2016 he bumped it up to 45 percent. (He later tried to lie and say he never proposed the 45 percent increase, but there is audio of him making the proposal.) A tariff is simply a tax on imports or exports, so Trump is proposing to raise taxes on imported goods by 25 to 45 percent. (To keep this point in mind, I’ll hereafter refer to tariffs as “taxes.”)

You might be thinking, “ So what? That’s a tax the Chinese have to pay.” But that’s not the way tariffs works. China doesn’t pay the tax — you do. If a tariff on Chinese goods is increased by 25 to 45 percent then you pay 25 to 45 percent more for those goods.

Here’s a way to think about it. Imagine there are two hamburger stands in town. One is owned by the mayor’s wife, Veronica, and one is owned by a woman who lives in the next town over, Betty.

Of the two, Betty makes the tastier burger. She is also able to charge $1 a burger since she is able to buy her supplies in her own hometown for much cheaper. Veronica’s burgers aren’t quite as good and cost more to make. She has to charge $1.30 per burger.

The mayor decides to implement a new tax of 45 percent on producers (like Betty) who don’t live in the city limits. Since Betty’s profit margin is already low, she has to pass the bulk of the 45-cent tax on to her customers. Instead of $1 she now has to charge $1.35.

So who is better off in this scenario? The only winner is Veronica. Since her burgers are now cheaper, she is likely to sell more. And who is worse off? The customers who now have to pay 30 to 35 cents more for every burger. That is money they could have used to buy other products or services. Now they have to spend additional money on this new tax.

The same principle applies to taxes on goods and services imported from other countries. Customers simply have to pay more for goods and services they used to get much cheaper.

To understand how Trump’s tax increase would affect consumers, take a trip to Target or Wal-Mart and add 45 percent to almost all the prices. That’s money that comes directly out of your pocket into the hands of the federal government — all to punish you for buying goods that are cheaper to make in China.

Harvard University economist Greg Mankiw explains what most professional economists agree on. The economic benefit of free trade tied for first place, with 93% agreement:

The recent debate over the stimulus bill has lead some observers to think that economists are hopelessly divided on issues of public policy. That is true regarding business cycle theory and, specifically, the virtues or defects of Keynesian economics. But it is not true more broadly.

My favorite textbook covers business cycle theory toward the end of the book (the last four chapters) precisely because that theory is controversial. I believe it is better to introduce students to economics with topics about which there is more of a professional consensus. In chapter two of the book, I include a table of propositions to which most economists subscribe, based on various polls of the profession. Here is the list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)

  2. Tariffs and import quotas usually reduce general economic welfare. (93%)

He is the author of his “favorite textbook”, which is published by Harvard University Press.

This is not controversial among professional and academic economists. Economists across the ideological spectrum understand that free trade lowers the prices of consumer goods, and allows individuals, families and businesses to get more quality for their dollars. We can do better than Donald Trump and his naive, populist economic pablum.

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Podcasts

Andy Bannister and Michael Ruse discuss how atheists find meaning in life

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Two horses fight it out, may the best horse win!
Two horses fight it out, and may the best horse win!

I’m summarizing the most recent episode of the Unbelievable show.

Details:

Atheist philosopher Michael Ruse joins Justin as we spend a second week looking at Andy Bannister’s new book ‘The atheist who didn’t exist’.

Its amusingly titled chapters include ‘The Peculiar Case of the Postmodern Penguin (or: Why Life without God is Meaningless). Michael and Andy debate whether it’s a problem that atheists can’t have meaning with a ‘capital M’.

Here is a summary of the discussion between Ruse and Bannister, and my comments below the summary.

The MP3 file is here.

Summary:

  • Ruse: ultimate questions are serious questions, and some religions are attempting to provide serious answers to those questions
  • Ruse: there is a psychological element to belief in God but it’s not a complete explanation, but it can apply to non-belief as well
  • Bannister: there are psychological reasons why people would prefer unbelief (quotes Thomas Nagel and Aldous Huxley)
  • Bannister: (to Ruse) what do you think would follow next if you got new information that caused you to believe in God?
  • Ruse: I’d feel scared, I’d think of all the reasons that God would dislike me, rather than any reasons why God would save me
  • Bannister: according to the Bible, God is not so much interested in mere belief, but in active trust in him
  • Ruse: without being smug, I just completed 50 years as a college professor of philosophy, and I have a sense of worth from that
  • Ruse: if God turns up, and says that 50 years of being a professor is not good enough, well, I don’t know God, I’m sorry, I did my best
  • Brierley: Andy, explain to us this story of how a penguin explained to you how he invented a subjective meaning in life for himself?
  • Brierley: (reads the story)
  • Bannister: when it comes to reading a book, the real meaning is the meaning the author intended the book to have
  • Bannister: readers can inject their own meaning into the book that has nothing to do with it, but the author gives the real meaning
  • Bannister: meaning in life is like reading a book – you can make up your own meaning, but the author’s meaning is the real meaning
  • Brierley: (to Ruse) on atheism, is there any objective meaning?
  • Ruse: “obviously, someone like myself cannot have meaning with a capital M in that sense”
  • Ruse: the real question is and atheist can find a sense of self-worth, “I find that I’m happier within myself, I can find meaning”
  • Bannister: what would you say to someone who drinks away the family inheritance and gets the same sense of happiness you have?
  • Bannister: what would you say to all the people who are unable to get “a sense of self-worth” from their career, because of where they are born, sickness, etc.
  • Ruse: I have nothing to offer them, some people are born into such awful situations that they are bound to be bad people
  • Ruse: these unfair accidents of birth, etc.,  fits with atheism better
  • Ruse: what we should do is change society so that more people can build a sense of self-worth through achievements
  • Ruse: that way, they can say to God “I used my talents” so they can create feelings of self-worth and happiness (apart from God)
  • Bannister: meaning in life cannot be answered without answering questions related to identity, value, which are rooted in the overall worldview
  • Bannister: on the Christian worldview, you have an infinite worth, your value isn’t determined by circumstances, earnings, friends, etc.
  • Bannister: your value comes from what Jesus was willing to pay to save you, namely, giving his own life for you
  • Bannister: when I travel to meet other Christians in other parts of the world, they have a happiness that should not be there if they are getting happiness from wealth, fame, achievements, etc.
  • Bannister: but when you come to the West, many people who have wealth, fame, achievement, etc. are unhappy
  • Ruse: well maybe who look after a flock of sheep every day may get a sense of self-worth from that, or from other jobs
  • Ruse: I do take Christianity very seriously, it is a grown-up proposal to answer grown-up questions – it works if it is true
  • Ruse: we don’t have to follow Nietzche’s statement that if there is no God, there is no meaning in life – we can find a middle way, we can achieve meaning in life by using our talents to achieve things
  • Bannister: I disagree with Michael, I don’t think that the meaning you invent for yourself is authentic meaning
  • Bannister: distracting yourself with amusing things and happiness is not an answer to the problem
  • Brierley: (to Ruse) are you saying that you have searched for ultimate meaning, and you are settling for subjective meaning?
  • Ruse: my subjective meaning is not second class to objective meaning, “I feel a real deep sense of achievement, of meaning, of self-worth, of having used my talents properly, and I don’t feel in any sense a sense of regret” (what matters to him is how he feels)
  • Bannister: notice how Michael keeps bringing in value judgments. e.g. – “use my talents well”, that implies that there is a right way and a wrong to use your talents, which assumes an objective scale of right and wrong, which makes no sense in atheism
  • Bannister: an atheist can sit in a sun room and enjoy the feelings of happiness generated by the light and heat of the Sun, without asking whether there is a Sun out there
  • Bannister: ultimately, at the end of the day, my concern is not whether something makes me happy or makes me feel fulfilled
  • Bannister: ultimately, at the end of the day, I think there is only one real reason to wrestle with these questions of meaning, and that is to find truth
  • Ruse: sometimes we reach a point where we cannot get to true answers to some questions, sometimes we look for truth, but then give up and confess “I cannot find it” and then move on from there

Is it possible to dispense with God’s advice on your decision-making and achieve something that affects a lot of people, or makes people like you, or makes you famous, etc., and then have that please God? “Look, God, I did something I liked that affected a lot of people, and made them feel happy as they were on their way to Hell because they rejected you”. Will rap musicians answer God by pointing to 50 years of leading people away from chastity with godless music? A lot of people went to see the “NWA” movie that celebrated musicians who have an anti-Christian view of women and violence. Can NWA present their “artistic work” to God and claim that God should be pleased with their successful efforts to get rich and famous? Having feelings of achievement doesn’t mean anything to God.

So what is the standard? How you imitate Jesus – self-control, self-denial and self-sacrifice to honor God – that is the standard. If I had to choose between giving up two hours of my life to summarize this discussion for my readers, and all the fame and fortune that people who make godless TV shows, movies and music have, I would choose to make this debate summary. My goal in life is not to have fun, thrills, travel and feel happy in this world. I have a Boss. Doing without fun, thrills, travel and happy feelings in order to put points on the board for my Boss is objectively meaningful. It’s may not seem like much compared to what James Bond does in million-dollar movies, but at least I am wearing the right uniform, and playing for the right team.

I was telling Dina recently, isn’t it remarkable how rarely in our culture that people actually talk about the big questions? If you look out at the culture, everything seems to be about feeling good, having fun, being liked by others. Not much about ultimate questions, and certainly not a truth-based assessment of the alternatives. .