Why Is Europe More Equal Than the United States?
aeaweb.org
aeaweb.org
> Inequality grew in nearly all European countries, but much less than in the US. Contrary to a widespread view, we demonstrate that Europe's lower inequality levels cannot be explained by more equalizing tax and transfer systems.
> After accounting for indirect taxes and in-kind transfers, the US redistributes a greater share of national income to low-income groups than any European country. "Predistribution," not "redistribution," explains why Europe is less unequal than the United States.
(Edit: thanks boulos for the direct PDF link and vlovich123 for finding their definition of the term)
ie By "Predistribution" they assert that most European countries pay better at the low end and thus have less need to "redistribute" from the better paid end.
Inequality is related to these things but doesn’t necessarily block them.
There are many top-heavy systems where the top benefits far more than the middle even though the middle is close to as good. Consider sporting events where the second place receives 1/3 of the price of the winner, even if it was a very close finals. Yes, the winner played better, but not to the extent of warranting double the earnings.
It seems to me that this is an unsolvable or at least a very hard problem. Ask 10 people about what they think the correct and fair compensation is and you’ll get 10 opinions. It is difficult to quantify effort and skill. If a very talented person produces better results - with less effort - than someone less talented but very hard working, who gets compensated more? These are tough questions to answer.
> Yes, the winner played better, but not to the extent of warranting double the earnings.
I am curious about these sporting events. Please help me understand them better.
Compare this with the word chess championship, where it is often split 60-40%, or the found is often bound to performance differences. A victory by a sweep incurs a larger percentage for the winner.
The caveat to my caveat is of course the winning a major tournament also significantly increases all those other sources of income.
It's a close finals because of the difference in reward between 1st and 2nd. If they were the same then the finals match would not matter financially as whether you win or lose you earn the same amount.
Do you have a house, a car, and children going to college/university? Then you are successful as far as Europe is concerned, and that’s basically everyone.
Of course, that’s been going down the drain in the past 10-20ish years for reasons I’m not sure about. Nobody can buy a €500k home on a median salary any more.
Not everyone needs a three-to-five-year academic education, but nobody should be blocked because of who their parents were.
I feel that that varies a lot from country to country. Certainly in Sweden, if you just graduate from any program at any high school (or get a not terrible score on the university entrance exam), you will get into a university if you want. Probably not the university you want, and probably not to study you first choice subject, but you will get in somewhere.
Of course as you say, getting in is far from a guarantee that you'll actually get a degree.
>The most robust ecosystems are those where you have the greatest diversity of species which correlates with inequality between them
I would love to know how you came to this conclusion. Different species occupy different niches when there is a robust ecosystem and there is nothing like inequality between them. There is symbiosis and inter-dependence, but I have not seen one species turn on other for "inequality".
Clearly society at large can still function in Europe with reduced inequality compared to America.
https://www.brookings.edu/wp-content/uploads/2016/07/02_econ...
Beyond that, when I was growing up US superior economic mobility was touted as one of the key characteristics of American greatness. Its been interesting to watch the conservatives that were the biggest cheerleaders for this and other greatness indicators now make excuses when empirical data challenges these myths.
https://en.m.wikipedia.org/wiki/Effects_of_economic_inequali...
Inequality is also correlated to children having the same income level as their parents.
[1] https://www.scientificamerican.com/article/is-inequality-ine...
Inequality matters because 90% of it is pointless.
It matters, but only to some extent. I agree that ideally everyone should meet some basic level of subsistence, and that Africa-like Gini values are undesirable in the long term. Neither, however, are Nordic/Eastern European-like levels, either.[1] Some amount of inequality, it seems, is necessary to drive long-term economic dynamism.
Botswana's Gini is among the highest in the world <https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...>, while Iraq and Egypt's are as low as the Netherlands. Botswana is probably a better near- and mid-term bet than Egypt (and perhaps a better long-term bet than the Netherlands), though, while Iraq might be better than both in the long term; such conclusions imply that Gini just doesn't say anything useful for economic potential, and that absolute figures measuring tangible things are the right way to judge a nation's growth.
The US's Gini is high among OECD countries but closer to the middle when measured worldwide. If that's the "price" we Americans pay for having Microsoft, Apple, Google, Facebook, Netflix (and Hollywood), Intel, Nvidia, Exxon, Boeing, Tesla, Citigroup, Goldman Sachs, eBay, Amazon, Wal-Mart, Levi's, SpaceX, Disney, Pixar, General Electric, Gap, McDonald's, Coca-Cola, and Starbucks, I'm glad to pay it.
[1] Norway's per capita income adjusted by cost of living <https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(PPP)...> is much higher than the US's because of its oil—it's basically a Persian Gulf petrostate relocated to northern Europe—but the US's is ~18% higher than Denmark's and Sweden's, and ~30% higher than Finland's. (And, before you ask, when measured by median net income, the gap between America and other developed nations shrinks but the US still does quite well, at #6 worldwide.) At $41,071 the US has the highest household net disposable income per capita in the OECD <http://www.oecdbetterlifeindex.org/countries/united-states/>, where "disposable income" <http://stats.oecd.org/glossary/detail.asp?ID=46> accounts for healthcare and government benefits.
People are just focusing on the equality of wrong things.
But that's good, right?... Economists tend to say that if you want to solve a social problem, the least disruptive way of doing it is just giving them money. It usually has better outcomes and much less side effects than trying to contort the society into a complicated shape that fixes the same problem, and breaks a dozen invisible things in the process.
Which one is better for gas prices? Which one encourages people to consume less gas? Which one is better for society? Which one is less of a pain to administrate? Which one was already written in the coalition contract?
There is this co2 dividend that the greens and FDP and SPD promised but they delayed it to 2024. I suspect that it is too close to a UBI and they don't want to open that can of worms.
But they are happy to spend more and more money on fossil fuel subsidies to enrich fossil fuel companies. That's where those 200€ per month go. Anyone who doesn't want to spend his money on burning gas gets screwed.
It's an ever going band-aid, so no.
I turns out that having next to no social security, no accessible education for the poor and the bizarre legality of “legacy scholarships” has a certain effect.
How is it possible, I ask, that U.S.A. universities openly and notoriously give favorable treatment to the children of past alumni without this being shut down by the lawmaker or the courts?
Yale cannot do "basically whatever they want". For example, they accept students who receive federal financial assistance so must follow Title IX requirements. The government could use the same power of the purse to reduce legacy admissions.
Since you mentioned Bush and Yale. He graduated in 1968. Yale didn't accept women until 1969. Title IX was enacted in 1972. In 1980, Alexander v. Yale was the first use of Title IX in charges of sexual harassment against an educational institution, and established that sexual harassment of a student could be considered illegal sex discrimination.
In any case, some public schools use legacy admissions - it's not a private-college-only thing.
You misinterpret my statement "whatever they want" as some sort of collegiate equivalent of a "license to kill". Presently, Yale chooses to engage with federal funding in a variety of ways. They can stop doing that if they want to, thus dropping their obligations.
But furthermore, realize that a student would need to prove that legacy admissions somehow violates Title IX if they wanted to end the process. The members of the various courts that would ultimately decide that case are the same families that benefit from legacy admissions.
Also it's really weird to bring up Alexander v. Yale. If you actually read into the decision most of the plaintiffs allegations were simply dismissed.
Do a search for "legacy admissions", like https://hn.algolia.com/?q=legacy+admissions and see how rarely people mention Bush.
I've heard much more about minorities at prestigious colleges are viewed as being there as the result of affirmative action, while legacy students ... aren't.
Or how those schools offer scholarships for athletes in water polo, tennis, sailing, rowing, and other sports which more accessible to affluent white kids.
Hence the question "How is it possible, I ask, that U.S.A. universities openly and notoriously give favorable treatment to the children of past alumni without this being shut down by the lawmaker or the courts?"
> thus dropping their obligations
Except the question was, why isn't that practice illegal? Responding with something like "because it's legal" isn't that insightful.
> somehow violates Title IX
I wasn't making that argument. If it were that easy, it would be done long ago.
I was pointing out that the fed can also use the power of the purse to change things, even if the courts say separation of powers prevents a direct law.
> it's really weird to bring up Alexander v. Yale
What benefited Bush more, legacy admission or rampant sexism that prevented half the population from being able to apply?
In any case, "Although the women did not win their case, they achieved their objectives: Yale instituted a grievance procedure and a court held that sexual harassment constituted sex discrimination. ... As a result of Alexander v. Yale most U.S. universities instituted grievance procedures for sexual harassment."
Lost the battle and won the war.
Private institutions can do as they see fit. Public universities not so much. So yes, Harvard alumni will have favorable treatment for their kids. SUNY Buffalo, not so much.
Most colleges - public included - have legacy admissions.
Why are you so certain SUNY Buffalo does not have legacy admissions?
https://www.collegetransitions.com/dataverse/colleges-that-c... says SUNY at Albany, SUNY College at Geneseo, SUNY College at Oswego, SUNY College of Environmental Science and Forestry, and SUNY Cortland consider legacy status.
It says SUNY at Purchase College, SUNY College at Potsdam, and SUNY Oneonta do not.
It doesn't mention SUNY Buffalo.
As far as I know, there is no such thing as a “private university” where I live. All educational facilities receive funding from the government, and are beholden to it's standards and rules.
Even apart from that, a private company cannot legally here hire people because their parents worked there first. – That is illegal employment discrimination.
It very often seems legal to do in the U.S.A. what is illegal discrimination almost everywhere else. Except of course when it concerns their almighty “protected classes”, because then it suddenly matters, though it's of course woefully ineffective, a system where one can be fired for any reason including no reason, but not for, say, skin color. It makes it very easy to find another reason, or just no reason.
If I were to be terminated, they have to give me the reason and be transparent with the books so that I can easily show in court that though they claimed I was fired for performance, others who performed worse, were strangely not. — Such is how matters are done in normal, civilized, industrialized countries.
Yes I understand, Europe is perfect.
Are these public colleges, paid for by tax money?
I suppose that private institutions have more leeway.
To my mind, the problem of the US higher education is that it was made "too" accessible by offering tuition loans, which result in young people taking on a large debt which they cannot even shake off by a personal bankruptcy. These "easy" money made tuition prices grow, while also producing some degrees that don't help to pay them off.
This is not the most helpful kind of higher education.
https://en.wikipedia.org/wiki/Legacy_preferences
"almost three-quarters of research universities and nearly all liberal arts colleges grant legacy preferences in admissions"
> by offering tuition loans
I think you missed a qualifier. Tuition loans have always existed in the US.
What happened a few decades ago was they became much harder to discharge through bankruptcy, thus shifting risk to the student.
Note that I'm not saying that public institutions don't do it; I was just curious about your answer and link.
Quoting it: "Public universities that do consider alumni relations in their admissions process include Auburn University in Alabama, University of Michigan at Ann Arbor and University of Virginia"
Only recently has it been made illegal in some states. Colorado was the first: https://www.forbes.com/sites/susanadams/2021/06/01/legacy-ad... . The article mentions how Colorado School of Mines (a public school) had legacy admissions, and "found the legacy preference useful because the children of alums are the most likely to decide to attend once they are accepted."
My understanding appears to be out-of-date. That is, I could have sworn that my alma mater had legacy admissions, but that does not appear to be the case. It may have changed since I went to college.
There's an idea out there that the U.S. is some sort 'red in tooth and claw' Nation that's one step off anarchy. That may or may not be the case but it's not for lack of spending; whether that spending is being done wisely is another question but it's hard to say it's not being done at all.
I don't care about income inequality too much. I care about the two extremes:
* How bad is the situation of the poorest, can they still live with any decency if they honestly choose to. A society should care about that, if not due to its member being kind and humane, then just due to reasons of self-preservation.
* How powerful the richest become. It's hard to talk about anything like democracy or preserving liberties if extremely well-moneyed interests can seriously affect government and especially law.
If these two extremes are kept within reason, I don't mind if anyone makes 1000x than I do.
I cannot imagine any worthwhile society where someone would be entitled to earn 1000 times the average. 10 times is certainly a common-sense maximum. If his only motivation for contributing to the society is to be in the 10-1000 range, I'm pretty sure the society will not miss much his contribution.
If somebody makes enough to allow founding a new SpaceX, or a new Intel, or a new network of public libraries [1], or a new medical research center [2], I don't see why that would be bad.
[1]: https://en.wikipedia.org/wiki/Carnegie_library
[2]: https://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institut...
I would prefer not to live in a society where control of our natural resources (which nobody 'created') is concentrated in proportionally fewer and fewer hands. That to me is what economic inequality means.
However if you don't invest enough in these thing, then you stand the chance of running into real problem. However it is hard to tell what the right balance is...
But money never really trickle down if you don't produce necessary goods. Maybe it was a valid theory when half the economy was agricultural and 80% of the industrial output was useful for everyone (aka directed towards food, medicine and construction), but nowadays nobody really believe it works.
Another factor is a somewhat greater level of homogeneity (i.e 'no Denmark without the Danes') although this seems overplayed usually for political reasons from the more extreme factions given that Europe's social model also seems to hold in recent times despite changing demographics.
Another factor, a little bit contradictory to the last one maybe, is I think also the diversity between individual European nations. There's lots of natural and linguistic borders that have prevented the sort of concentration you see in say, the US or China both politically as well as economically. A lot of the drivers of inequality in the US are incredibly concentrated corporate giants, which domestically in the EU wouldn't have much success.
A fourth factor I think is also the focus on white collar academic work in the US as well as Britain. In particular here in the German-speaking/adjacent sphere (Germany, Swiss, Northern Italy, also Benelux and parts of the East) there's a focus on grey-collar work and industry which provides what Daron Acemoglu labeled 'good jobs'. Middle class vocational professions that support a broad base of workers. The European South has traditionally lacked this and is markedly more unequal.
Counterpoint, France. Laïcité, separation of church and state, is one of the principles of the republic. None of the parties today are religious-inspired, and i don't think any major ones have been since the beginning of the 20th century.
Also, I'm not an expert but I don't think the SPD in Germany or the PSOE in Spain have any religious foundations.
> Another factor is a somewhat greater level of homogeneity (i.e 'no Denmark without the Danes') although this seems overplayed usually for political reasons from the more extreme factions given that Europe's social model also seems to hold in recent times despite changing demographics.
Few counterpoints: Belgium (Flemish and Walloons, former colonies), France, Spain, Portugal (former colonies). "Homogeneous" is little more than a racist dog whistle with little substance.
As for the homogeneity, I don't think it's a dogwhistle. You don't need to interpret it normatively, but it is worth accepting the reality that very diverse populations often have issues with social trust. And high social trust is a requirement for equality, because it is necessary if people are supposed to share resources and make sacrifices for strangers. Some very high trust and egalitarian countries like Israel or Finland are tight knit because they share an identity, or sometimes which is ugly to admit, an enemy. You don't need to turn this into a guideline for some racist political program, but it's important to not ignore it. That's a huge problem of Laïcité, it's intentionally blind.
It's dying sadly, but it existed.
> Contrary to a widespread view, we demonstrate that Europe's lower inequality levels cannot be explained by more equalizing tax and transfer systems.