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Quarreling with Cato

Last week Salon printed an excerpt from How Not To Be Wrong, in which I tweak Daniel J. Mitchell of the Cato Institute for asking the rhetorical question “Why is America trying to become more like Sweden when Swedes are Trying to be Less Like Sweden?”  I describe the vision of economics implied by the headline as “linear” (or, more generally, “monotone”)  In particular, the headline seems to take the view that smaller government is either a good thing or  a bad thing, independent of context.  If it’s good for Swedes, it’s good for us too.

 

Mitchell didn’t like what I had to say very much, accusing me of calling him a “buffoon”.  He complains that he doesn’t hold any such simplistic linear view.

 

And that’s right!  He doesn’t.  Nobody does, if they sit down to think consciously about what their views are.  But when you sit down to write a zingy headline, sometimes you just reach for something that expresses your vague rules of thumb instead of your carefully articulated beliefs.  (And yes, as a fellow blogger, I get that sometimes you stretch your point a little bit when you reach for that headline; take it from the guy who just published a piece about Berkson’s fallacy called “Why Are Handsome Men Such Jerks?”)

 

The headline makes it sound like there’s something incongruous about Sweden shrinking its government while we grow ours.  But there’s nothing strange about that at all – unless you have in mind something like the linear model that Mitchell correctly disavows.

So what is Mitchell’s actual view about the relation between Swedishness and prosperity?  He says it’s governed by something called the Rahn curve.  According to that curve, or at least Mitchell’s take on it, prosperity peaks when government spending is about 20 percent of GDP, and declines roughly linear thereafter.  As of 2012, there was only one country in the developed world, sorta-free Singapore, whose government spending was that low.  Which means that in the range occupied by countries from the United States to Sweden, from Australia to Korea, the relation between Swedishness and prosperity is more or less exactly the one I drew in the picture Mitchell objects to.  It may well be that the US government should spend less on its citizens.  But contra Mitchell’s headline, Sweden’s best course gives no guidance concerning ours.

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