"For then the government's heavy demand for military labor, coupled with the high cost of military service to soldiers at significant risk, would drive the market wage rate for such service through the roof."

So? Just because defense is a public good doesn't mean the lives of potential conscripts are too.

"Very heavy taxes would be required to defray the expense of a volunteer army in these circumstances and those taxes would have misallocative effects that might well exceed the misallocative effects of conscription."

Better to conscript and send people to die than to tax them? Easy to say that when you're not the one being conscripted. And what, exactly, is the marginal rate of substitution between death and taxes? How exactly would you propose measuring it, either theoretically or empiracally?

"I don't think that there is a good theoretical or empirical basis for [Friedman's] view."

Pot.Kettle.Black.

Let's be fair to Hayek (and simply honest) -- Britain abandoned many of the things Hayek most worried about, often _because_ of what Hayek wrote. And it is clear that the British left did listen to Hayek, and did adjust their thinking due to his arguments. (This is also true of America, as the historian Alan Brinkley has pointed out.)

Hayek says he wrote his book _The Road to Serfdom_ to change history and Hayek believes his book did change how history came out -- and a number of historians back Hayek up on this.

Hayek wasn't making a prophecy or a prediction -- he was intervening to change history. Hayek, I shouldn't have to tell you, was not a Marxist. Hayek didn't believe in historical inevitability and he believed arguments and ideas could change history.

I'm wondering if you've actually read Hayek -- your many comments over the years on the ideas of Hayek lead me to believe you haven't read his actual writings, only misleading or false accounts of Hayek's actual thoughts and arguments. Am I right?

Let's be fair to Hayek (and simply honest) -- Britain abandoned many of the things Hayek most worried about, often _because_ of what Hayek wrote. And it is clear that the British left did listen to Hayek, and did adjust their thinking due to his arguments. (This is also true of America, as the historian Alan Brinkley has pointed out.)

Hayek says he wrote his book _The Road to Serfdom_ to change history and Hayek believes his book did change how history came out -- and a number of historians back Hayek up on this.

Hayek wasn't making a prophecy or a prediction -- he was intervening to change history. Hayek, I shouldn't have to tell you, was not a Marxist. Hayek didn't believe in historical inevitability and he believed arguments and ideas could change history.

I'm wondering if you've actually read Hayek -- your many comments over the years on the ideas of Hayek lead me to believe you haven't read his actual writings, only misleading or false accounts of Hayek's actual thoughts and arguments. Am I right?

Posner: "Very heavy taxes would be required to defray the expense of a volunteer army in these circumstances and those taxes would have misallocative effects that might well exceed the misallocative effects of conscription."

In short 'I want my wars, but perish the thought of high taxes on *me*. Never should I suffer even one-tenth of what peasant draftees should be made to suffer.' According to: http://en.wikipedia.org/wiki/Richard_Posner, it looks like Posner is another right-winger who never found it necessary to serve his country.

If wars, by law, led immediately to higher taxes on the rich, I bet that the USA might discover diplomacy again. Force would be used by the USA only when necessary, not when desired.

In discussing Friedman, Posner identifies a pervasive problem in the political debate today. Many modern conservatives believe as a matter of faith in the superiority of unregulated markets and private industry. They ignore the reality that some regulation (though certainly not all regulation) provides beneficial results. Indeed, "think tanks" funded by corporate money propogate the faith by singing the praises of deregulation in every industry and by advocating tax breaks for the corporate class. Unfortunately, most citizens are unaware of the conflicts of interest that underlie such advocacy. And, many politicians have their own conflicts of interest, because the same corporate money funds their compaigns.

The greatest argument for a volunteer army lay in the fact that the state, in this context, has no right to man's life and his decision as to what to do with it. The argument is moral, not economic.

Kipesquire says:

And what, exactly, is the marginal rate of substitution between death and taxes? How exactly would you propose measuring it, either theoretically or empiracally?

That's an interesting question. I think, in Milton Friedman fashion, you could start by asking what the individuals faced with death think about it.

When our volunteer Army moves from a period of peace to combat, it doesn't increase base salary much, but in order to meet recruiting and retention manning requirements it must usually offer larger bonuses. The bonus system is painfully complex, but in the extreme case it can increase a soldier's pay by about $2,000 a month - and that doesn't include hazard pay, family separation allowance, and the tax-free status during oversees service. For some soldiers, it's around a doubling of pay.

All told, with congress' late but better-late-than-never allocation response, the Armed Forces have finally remedied their manning issues during an extended period of combat at a per-soldier additional compensation expense (vs peacetime) of, I would very roughly guess, about $20K per combat year. That is what it takes on average to compensate a serviceman for a probability of death during a year of combat being roughly 0.65 and serious injury of about 1 percent.

I'll leave it to others to conclude a full analysis of tax efficiency and the draft - but this should be a start, and a decent support of Milton Friedman's idea that capitalism, market forces, and free choice work, and can work better than compulsion even in wartime.

FYI - In a recent update of Free To Choose, Milton Friedman softened his views on the connection between democracy and capitalism and pointed toward China as an example of a country that (so-far) has managed to be an outlier.

I think Posner is guilty of creating a Straw Friedman. He accepted the possibility of needing total mobilization for a WWII type of war for national survival. In Capitalism and Freedom he accepted universal military training for just such a contingency.

At any rate, today we are a nation of 300 million people, with about 50 million in the prime soldiering ages 18-30. There's no way we could have an army that size. And then the Hayek of The Use of Knowledge in Society becomes very important.

Friedman's own contribution to WWII is very instructive too. He was part of Allen Wallis' Statistical Research Group at Columbia.

Friedman actually was used as a consultant during the Battle of the Bulge to explain the math behind the settings on proximity fuses for air bursts against German ground troops. Army officers flew into Washington DC and then went back to the battlefield and put into action what they'd learned.

Jeffrey Sachs misreads Hayek just as Judge Posner misreads Hayek. This letter that I sent last month to Scientific American -- which published Sachs's misinterpretation of Hayek -- applies also to Judge Posner's misinterpretation:

6 October 2006

Editor, Scientific American

To the Editor:

Jeffrey Sachs writes that the late "Friedrich Von Hayek was Wrong" ("Welfare States, beyond Ideology," November 2006). This Nobel laureate's error allegedly was to argue that the welfare state paves - as the title of Hayek's 1944 book expressed it - "the road to serfdom."

Sachs misreads Hayek. Although he was no fan of the welfare state, Hayek never argued that it leads to tyranny. In The Road to Serfdom, Hayek distinguished between government efforts to ensure "limited security" and government efforts to achieve "absolute security." Hayek warned only against efforts to achieve the latter, which he described as "the security of a given standard of life, or of the relative position which one person or group enjoys compared with others." Hayek was correct that such "security" is achievable only by tyranny.

But as for limited security, Hayek wrote that "There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security [that is, limited security] should not be guaranteed to all without endangering general freedom…. Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision" [pages 133-134].

Sincerely,
Donald J. Boudreaux
George Mason University

"A country can be highly productive though it has an authoritarian political system, as in China, or democratic and impoverished, as was true for the first half century or so of India's democracy..."

Neither of these observations contradicts Friedman in any significant way. Considering, first, the China example, remember that Friedman admired Hong Kong for its immense economic accomplishments under a British colonial rule that happend to give great economic freedom with little political freedom.

India's history merely illustrates that one can have democracy with very little economic freedom. Indeed, if the US had intended to retard India's emergence as an economic power, a dozen nuclear bombs would have been less effective than sending them Ambassador John Kenneth Galbraith to teach them how to run a properly socialist economy.

If there's any refutation of Friedman to be found in India, it would be that Friedman's thesis of political freedom depending on economic freedom is inconsistent with India's political freedoms surviving so well and so long in the absence of better economic freedoms. But I don't think you were trying to make that case.

Poser says: I also think that Friedman, again more as a matter of faith than of science, exaggerated the correlation between economic and political freedom.


Something is wrong in what Posner says, I don't know what it is.


As a matter of fact there is a strong relationship between Economic Freedom and Development, Economic Growth. Better the economic growth better the development thereby higher standard of living for the common man.


Plain political freedom achieves nothing. What is the use of political freedom if I have to live below poverty line for my whole life due to lack of economic freedom. But wait, even in India Political freedom had to depend upon Economic freedom. In 1991, India had very very less economic freedom even though is had political freedom, it averted becoming a total collapse and insolvency by liberalising its economy, otherwise all hell would have broken loose.


India would have become like another african state with civil war and warring tribes.


Poser says:protection of property rights, which authoritarian government threatens.
People in India do not have any property right, so does it make it Authoritarian or a Politically free nation??
Even in the US of A there is 'Eminent Domain', does this law protect property right??.
Is America Authoritarian as it threatens property rights??


Poser says:The Road to Serfdom flunks the test of accuracy of prediction!
I wish Posner should have lived in germany under nazi rule or atleast in Soviet Russia or under Mao in China.

Posner,

You don't sound like a Federalist in this post.

Greg: that the left in Britain listened to Hayek suggests that his initial argument wasn't strictly correct. For the mechanism in RTS to work, planners have to prefer authoritarianism to free markets. Planning has to have value over and above anything else, otherwise we get a retreat from planning prior to the rise of the demagogue. If the British left found persuasive Hayek's argument that a planned economy was inconsistent with democratic freedom, and chose the latter rather than the former, they also gave evidence against the RTS mechanism. Planning led to serfdom really only where planning was initiated by those already non-benevolent; where it started with largely benevolent planners, we instead saw a retreat to the welfare state.

Posner says: "Sweden could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States."

Sweden has the same GDP per capita (PPP-adjusted) as Alabama or Oklahoma, surpassing only four of the fifty States. Although it has high taxes it ranks high on economic freedom thanks to, for example, low tariffs, largely free enterprising and a largely unregulated labor market.

Hayek was not opposed to a welfare state, he was opposed to the notion that the government could plan the economy. The original understanding of socialism was that government planning would out-perform the chaos of markets. Britain started to become socialist in this sense, but then became more of a welfare state. Hayek was arguing that the socialist idea, in the sense of a commitment to a planned economy, if followed, would result in tyranny. Something like this happened in India in the 1970s, at which point India began to back down from socialist planning. The case of India, as well as much of the communist world, validates Hayek. If a thorough-going socialist party had actually insisted on socialism, rather than large welfare states, we would have seen more of the pathologies suggested by Hayek (whose rhetoric in TRS was admittedly less nuanced than it should have been, but whose logic still had a certain validity).

I agree ... a misreading of Hayek and a misleading description of Sweden (lets see Sweden maintain its current situation as birth-rates decline and the Ponzi scheme of pay-as-you-go pensions and unemployment insurance unravels -- also - Sweden has no defense budget and is homogeneous.)

The last part of Posner's comment brings to mind (for both Friedman and Hayek) Schumpeter's distinction between "Marx the Economist" (a source of many valuable insights) and "Marx
the Prophet" (wrong, as I think Hayek was in RTS, but in this role bringing the kind of vigor and vision needed to get one's ideas adopted--for good or ill).

In regards to Sweden. There seems to be confusion here regarding the taxation. It is true that taxes on consumers and wage earners is very high. Not so on production however. Business taxes are rather moderate. Sweden’s socialism was not a socialisation of production but of consumption. It is meant to control consumers and force them to spend their funds the way the government wishes. For businesses, especially those in export, the situation is not much different than other well off nations. So when you mention the high taxes it is a bit odd since the high taxes are not on the production which you then mention but on the consumption which you don’t mention.

I noticed that schizophrenic tendency in Friedman as well. I agree that theory based on shaky assumptions should be judged by its predictions, not the shaky assumptions. But then arguing for policy changes based on a theory not specifically tested in the relevent area or case is absurd. You can't have it both ways. Either your assumptions behind the theory you want to apply need to be rock-solid, or you need specific empirical evidence.

You refer to Popper but then violate his principle of falsifiability. You praise Friedman for a great theory but say that it needs to be tested. Do you have an alternate theory that does not need to be tested. I think that the proposition that Sweden's system could work as effectively in any country is more likely to be falsifiable than Friedman's theories. Same with Britain's policies. And both could yet fail. Friedman's theories could also fail but they have stood up better than any other.

But like he implied, in the absence of all other theories being falsified, you have to go with the ones left standing. Since condition A is unattainable, Friedman's prescription is just as good as Sweden's.

Friedman liked to compare the relative performances of the economies of West Germany and East Germany as the closest thing one could come to a controled experiment, proving the superiority of market economies over socialism. But Friedman ignored the fact that West Germany was not an example of the kind of laissez-faire capitalism he advocated, but, rather, a welfare state, similar to, though to a lesser degree, Sweden, with, among other things, universal health insurance.

Also, on the conscription topic. If Germany had been living by Friedman's principles, there never would have been a war, or a holocaust in the first place. You can't fault his prescription by throwing up an example in which they weren't being applied.

Until all countries go with volunteer armies, unnecessary and irrational wars will continue to be waged, but that is more an affirmation than a negation of Friedman's views.

The basic tenet of Friedman's version of monetarism was that the velocity of money was stable, or at least predictable, so that to stabilize the economy one merely had to keep the rate of growth of the money supply constant. This turned out to be totally incorrect. Friedman at one point even advocated passing a constitutional amemdment requiring the Fed to keep the rate of growth of the money supply at a constant rate. Fortunately he did not get his way because the effect of this would have been disasterous on the economy.

(My criticsms should not be misinterpreted, I think Friedman made very important contributions to economics and deserved the Nobel Prize. But there are important areas where he was mislead by his ideological blinders.)

Economic and political rights do go hand in hand. The reason for the inequality and lack of freedom in China and India is not because they have economic rights without political rights, but because they have economic rights only selectively applied. In India, there are only certain industries and regions that are economically free. The same with China, which is why rural China is still so poor.

China's high rate of growth is not evidence of economic freedom decoupled from political freedom. They still have little economic freedom...the only reason the country is growing is because they have MORE freedom (very little) than they did (zero). Without ever more economic freedom, that growth will stop.

Captain Video, why is Friedman's monetary theory incorrect? He never said the velocity of money was perfectly stable, he said that IF it is stable then the government can stabilize the economy by controlling the money supply (either growing it or not growing it). I think most economists would agree that this holds up, certainly the Central Bankers do.

If you are saying that it is merely hard to measure the velocity, that doesn't weaken his theory.

"He never said the velocity of money was perfectly stable,"

He argued that it was actually stable enough, or at least predictable enough, so that having the money supply grow at a low constant rate would stabilize the economy. He very strongly advocated that such a policy be followed, to the point of supporting a constitutional amendment requiring the government to do this.

The fact that velocity turned out to be very unstable and unpredictable did orthodox monetarism in.

Obviously, if velocity were stable, such a policy would work. Few would dispute this point, but this theoretical tecnicality was not what monetarism was all about.

Check his writings on economic policy and you will see that I am right. Unfortunately I do not have the time to dig through the material and come up with quotations at the present time.

Judge Posner's analysis of the economics of the volunteer army is an incomplete application of a general principle of public finance, namely that the full cost of government expenditures includes both the opportunity cost of the resources used and the excess burden of the taxes necessary to fund the purchase of those resources. This principle is as applicable to the salaries of federal judges as it is to the wages of soldiers. Thus, if in wartime the overall level of government spending would be so high as to warrant the forced servitude of soldiers it would also warrant the same policy toward all other public employees be they letter carriers, bureaucrats, or judges.

Captain Video: You are right that Friedman at one time advocated a fixed-rate-of-growth rule for the money supply. At other times he advocated more complex rules, commodity links, and inflation targeting. The fed has never adopted any of these specific policy suggestions.

What you are missing is the context of the debate. Friedman was arguing with people (including economists and fed policy-makers) who didn't understand the seperate roles of monetary and fiscal policy. Some thought that government deficits or union wage demands might cause inflation, and that monetary policy could be used to reduce unemployment. With people like that in charge of the fed, you'd prefer a non-discretionary policy, too!

Thanks to Friedman, central bankers (from Volker on) know what to do to control inflation, and know not to try to use their lever for other purposes. That is a tremendous step, and afterwar making it, it's relatively unimportant which secific protocol central bankers use to apply that knowledge.

Posner is right about Friedman. He was a bit religious in his views on the free market. But as Posner notes, maybe it was necessary for him to be like this given his time.

Pragmatism, of course, is superior to any sort of blind faith in markets. The exceptions to the rule matter a lot.

Posner says that Friedman's view that the government is nearly always inferior to market is more akin to faith than hypothesis.

This "faith" is only secondary and is the logical conclusion of several other primary assumptions made about the performance of government relative to market. For example, its own incentives, the lack of resource/information etc.

Therefore I think a believer in market believes that the market is superior to government when those general assumptions about government and market hold true.

There is no denial that market failures exist & compensations can be made. But it does not help to make general statement that market works better or worse than government.

The Scandinavian countries cited above never exceed in size that of many large American cities. Perhaps this has something to do with their relatively happy outcome. The UK is significantly larger, and socialism didn't work too well there. The US is even larger, and it is quite clear the economic and social situation is deteriorating in concert with the expansion of government here.

China is perhaps a bad counter-example as well. Despite the fact that government manipulation of exchange rates has goosed development and the GDP in that country, there were some 50,000 "mass unrest" events record last year.

I think Friedman and Hayek are sufficiently vindicated. The scale and extent of government matters. Freedom matters, and any attempt by government to force-feed economic success will be self-defeating.

”Sweden, could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States.”

I respect professor Posner but in this he is compleatly uninformed.

1. Between 1870 and roughly 1970 Sweden had the highest GDP growth rate of any country on all, tied with Japan. In the late 1960s taxes as a share of GDP were slightly LOWER than the US.

Since than Sweden has had slower growth than most other industrialized countries, including the US. Per capita GDP is 30% higher in the US than Sweden, and 62% higher with the best comparison, if comparing Sweden with Americans of Swedish decent (US census).

http://oberon.sourceoecd.org.proxy.uchicago.edu/vl=7052475/cl=19/nw=1/rpsv/fact2006/data/02-01-02-t01.xls

In 1970 the US had a per capita national income that was 10.6% higher than Sweden, compared to 30% higher today. So Sweden did NOT manage to “maintain” it’s high (comparative) level of economic output.

As any knowledgeable economist would tell you economic theory does not predict that growth stops if you have high taxes for a small open nation. Why? Because technology flows over borders. We should expect the long run growth in Sweden to be the same as the US, which changes in LEVEL (this is conditional convergence).

This is exactly what Friedman would predict, higher income for the US, that has lower taxes/government spending. Government spending is 36% of GDP in the US and 54% in Sweden, so we are talking about degree differences, which is why we should expect to see degree differences in output.

2. It is largely, but not completely, a myth to write that “redistribution resulting in much greater economic equality than the US”.

Already before the expansion of the welfare state Sweden had a much much more even distribution of income than other countries, due to it’s homogenous population. Posner is confusing correlation with causality.

Wealth inequality today is essentially what it was in 1950.

http://www.naringslivsforskning.se/BinaryLoader.aspx?OwnerID=5fec1677-0475-4586-8c5b-0931179a61db&OwnerType=2&ModuleID=a8429cd5-a9d9-4e2b-a1d8-4a7cf26cd7a3&PropertyCollectionName=Content&PropertyName=File1&ValueIndex=0

Maybe it would be higher now without the welfare state, but the underlying distribution has always been more equal than the US, not because of the system, but because of population history.

For example the 4-5 million or so Americans of Swedish decent have a poverty rate of 5.2%.

If anyone is “dogmatic” here it is professor Posner, which dogmatically believes and spreads the leftwing myth about Scandinavia as the socialist paradise.

Milton Friedman was not dogmatic, he was once again right.

"Thanks to Friedman, central bankers (from Volker on) know what to do to control inflation, and know not to try to use their lever for other purposes."

During times that the economy was significantly potential output Alan Greenspan had the good sense to use expansionary monetary policy to help bring the economy back to potential output.

Economic policy making calls for pragmatism, not adherence to dogma.

"You are right that Friedman at one time advocated a fixed-rate-of-growth rule for the money supply. At other times he advocated more complex rules, commodity links, and inflation targeting."

Friedman obviously developed his monetarist approach gradually, and before he had developed it did not support the constant money growth rule. But monetarism was a central part of his career and did hold to the position that velocity was stable enough so that a policy of a constant rate of money supply growth would stabilize the eoonomy. Not only prevent inflation, but most of the ups and downs of the business cycles. Late in his career, faced with the evidence of a very unstable velocity he obviously had the good sense to back off. His support for inflation targeting was the last nail in the coffin of orthodox monetarism.

What is the cost of recruiting? How does the recruiter (salesman) convince a individual that volunteering is a good choice for them, without a false illusion of the benefits and conditions?


How clearly are those that volunteer, understand the contract, obligations, they sign up for, and the rights of freedom they give up once they are sworn in? Many have learned that their four year obligation has small print obligations that could extend that to five years, or more.


How do I explain a third way? Such as voluntary service with a different form of current registration of males at 18 for the Selective Service system.


Based on House bill from 1979, more info at my website www.myspace.com/peterview.


This is the policy of universal registration (male and female) at 17, encouraging debate over the future of being a voting age citizen, and at 18 provide the feedback towards volunteering for active military, reserve duty, community service (Americorps, Peace Corps, Teacher Corps etc), non-profit service (with voucher), maybe later up to age 23?, no or HELL NO!


Today with the Internet technology this form of educational wake up call to the role of participatory citizenship could be the framework for a more enhanced form of participatory democracy. A sort of EBAY citizen contribution and commitment market.



One benfit could be a greater number of individuals that have achieved meaningful contributions, that move on to the private sector with this degree of knowledge and confidence.

Got to go, feedback would be helpful. Peter Jesella

Re: Political Freedom and Economic Freedom

Deepak Lal: Indian travails
Deepak Lal / New Delhi November 21, 2006

....... , both countries face political problems, which could derail their ongoing economic miracles. For China, as discussed in my last column, the problem is ending China’s continuing financial repression, without loosening the Communist party’s political control of the economy. For India the political problem lies in finding new avenues for “rent-seeking” for the political classes without too much damage to the economy, as liberalisation has closed many old ones..........

http://www.business-standard.com/opinionanalysis/storypage.php?tab=r&autono=265396&subLeft=2&leftnm=4

The death of monetary aggregate targeting is greatly exaggerated.

There is more to be learned about Judge Posner in reading this post than there is about Friedman or Hayek.

Judge P,

If the economy is booming and civilian wages are high, would an extensive, low-grade war such as the one we are in, necessarily provide the government with the quality of soldiers that it desires by way of a volunteer army?

Prof. Becker:

As one whose education in economics was greatly influenced by his writings, in particlar his microtheory notes that many of us were assigned, I nonetheless always had the vague sense when hearing his facilely expressed points in discussion that he was at times making up facts to support his point. And indeed Pierre Rinfret, an advisor to the Nixon administration, has asserted exactly that, to the point of dragging along large tomes to meetings with Friedman to contradict his assertations.

What is your view on this? Did he love a good argument so much that he never wanted to lose, and do you know of any cases where he conceded an argument to his opponent?

Haynes Goddard

This is a great excerpt from Becker:

"I mention this example because I find slightly off-putting what I sensed to be a dogmatic streak in Milton Friedman. I think his belief in the superior efficiency of free markets to government as a means of resource allocation, though fruitful and largely correct, was embraced by him as an article of faith and not merely as a hypothesis. I think he considered it almost a personal affront that the Scandinavian nations, particularly Sweden, could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States. I don't think his analytic apparatus could explain such an anomaly."

Its great to see you raise this example. When reading through 'Capitalism and Freedom' I was appalled at the absurdity of his claim that economic freedom necessarily implies political freedom. Much of that book condenses to faith-based opinion, rather than empirically supported analysis with the requisite amount of theoretical counterweight. A million examples for example contradict the political and economic freedom link. Perhaps foremost among them - Pinochet's Chile (an authoritarian regime with enormous latitude for free-market policies). China, rightfully belongs in this camp as well.

Notably though, Becker raises the point that economic freedom creates an increasingly powerful middle class. This middle class might be self-concerned and happy in its own position (and thus unlikely to challenge the established government), but, along a free-trading supporting commercial class, it does tend to promote free trade. The culmination of these policies and power redistributions moderates the level of authoritarianism the central government - making for example, stalinist totalitarianism less conceivable (e.g. Kim Il Jong).

Tino wrote the following:

"”Sweden, could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States.”

I respect professor Posner but in this he is compleatly uninformed.

1. Between 1870 and roughly 1970 Sweden had the highest GDP growth rate of any country on all, tied with Japan. In the late 1960s taxes as a share of GDP were slightly LOWER than the US.

Since than Sweden has had slower growth than most other industrialized countries, including the US. Per capita GDP is 30% higher in the US than Sweden, and 62% higher with the best comparison, if comparing Sweden with Americans of Swedish decent (US census)."

Be careful about using GDP alone to compare the economic value produced of two nations, especially ones as economically disparate as the US and Sweden.

A recent Economist article waged into the age-old question of whether Americans, with their high number of hours worked relative to Europeans, shorter vacations, higher incidence of heart attack, etc, should think themselves economically superior to welfare states such Sweden. When factoring for the value of vacation time consumed, decreased personal cost of security and crime-fighting due to greater levels of social support systems, decreased policing and law enforcement costs due to the same reasons etc, etc, it found the two countries more or less on equal ground. Americans earn more money than Europeans and have higher GDP but they have much higher personal costs to enjoy valued goods (leisure time, a sense of social safety, e.g. by blockading themselves in expensive, secure neighborhoods, etc).

One can think of leisure time as 'goods' which have higher marginal value for Europeans than Americans. Hence, they collectively pay for and consume more of these types of goods. That Europeans are able to consume vastly more of these kinds of goods while enjoying very high standards of living must be factored into productivity/GDP analyses. In additional, I suggest total factor productivity measures as opposed to often-misleading measures such as GDP, or labour hours worked (e.g. productivity leads to greater wealth in nations which are more productive and is a good indice of relative national wealth).

European nations such as Sweden invest enormously in high-tech industries, contributing to a high productivity level despite lower levels of labour hours worked (e.g. they have more capital inputs per worker than perhaps American firms do).