INTRODUCTORY COMMENTS

At the admirable web site, Marginal Revolution, prof bug continued his exchanges with some Scandinavians about the relative performance of the US's relatively free-market economy compared to that of the advanced welfare-state economies of Denmark, Finland, and Sweden, all members of the EU, but with Denmark and Sweden not in the eurozone. (Britain is the other West European country that doesn't use the euro, and Norway is not an EU member.)

It will help if you remember that the three small Scandinavian countries --- Denmark, Norway, and Finland --- have 4 million people each, while Sweden's population is 9 million. Traditionally, these are ethnically homogeneous countries that industrialized in the mid- and late-19th centuries, and all four are wealthy countries: Denmark has a per capita income of around $38,000, making it the second richest country in the EU after tiny Ireland (also four million: about $44,000 per capita income). Sweden and Finland each have about $33,000 per capita income. The US, by comparison, has about 300 million people, is very heterogeneous in its ethnic/racial composition, has no socialist traditions, equally it has no strong statist conservatism as the West Europeans all do rooted in pre-democratic, pre-industrial values, and --- unlike the Continental EU countries --- diffuses state power by means of a strong federalism, divided powers in Washington D.C. between the two houses of Congress, the Executive, and the Judiciary. It also subjects all legislation and much executive behavior to judicial review.

The US, too, was a pioneer in political equality, ahead of all other industrial countries on this score: an early establishment of a mass-voting system --- in the 1840s, about 2/3 of the white population voted for the presidency and Congress, as opposed to Britain that was just entering an era of expanding voting powers . . . about 10-11% of Britons eligible to vote in that decade. It also pioneered the open primary, the popular referendum, and the recall-referendum in the early 20th century. As for the judiciary, the US is unique: Americans vote directly for all judges and district attorneys at local and state levels, and indirectly through Congress for all federal judges, the Supreme Court, and federal prosecutors. One result of these "populist" measures shows up in the differences over the death penalty. When Britain first abolished the death penalty in 1971 --- followed in the next decade or so by all the current members of the EU --- there was not any majority in any country favoring such abolition. In the US, by contrast, legislators, district attorneys, and judges on the state and local level are far more sensitive to majority opinion --- for good or bad. Some states, about a dozen now, have nonetheless either formally abolished the death penalty or suspended its use, with Texas alone accounting for about 2/3 of all executions yearly in the US --- about 45-50 in the current year.

There's a good economics blog called the Marginal Revolution, run by a libertarian economist at George Mason Univeristy, Tyler Cowan --- George Mason itself a citadel of libertarian economists, something the buggy prof is not. He's a lifelong moderate Democrat, recently soured on the party's radical and ultra-liberal left-wings, and now regards himself as an independent. Still, despite some ideological differences, the buggy prof respects Tyler's academic work and his blog . . . not least, please note, because Tyler has uncommon, wide-ranging interests for an economist (or political scientist) in art, music, literature, foreign languages, and the cinema as well, surprisingly, in haute cuisine. Note the stress on uncommon. Most academics in these professions, at any rate these days, seems so preoccupied with their professional research and writing and rushing off to conferences that their tastes, alas, have regrettably narrowed --- a trend that has been at work for 30 or 40 years now, showing little sign of changing.

At the Marginal Revolution the other day, more specifically December 28th, 2007, the buggy prof expounded on a theme that was touched on briefly by Professor Cowan, followed by a lengthy set of comments where this expounding went on. If you go to that comments' section, you'll probably be pleasantly surprised by the high-quality of the posters . . . knowledgeable, polite, and literate (some, of course, are not native-speaking Americans or Englishmen and hence some allowance has to be shown). A few seem to be professional economists themselves or at least grad and undergrad students in the discipline. The theme that started this long thread there?

"Megan McArdle writes:

'It is hard for high levels of taxation to survive a right of exit; Europe has mostly been protected (so far) by its many languages, which make it harder to move. But as the EU increases labor mobility, expect to hear more about harmful tax competition.'

"The story is about skilled Danes leaving the country so as to avoid higher taxes."The last time I was in Denmark I was struck how many service workers could not speak Danish (will a Spaniard or Hungarian really learn that language?) and in the workplace communicated in English. Greater policy competition is one of the most important results of so many Europeans speaking good English. High taxes and differential incomes, in turn, increase the incentive for people to learn good English, thereby creating a self-reinforcing dynamic. I've long thought that Europe will become more like the United States than vice versa, most of all through mobility and diversity, but I don't think that is a very popular view."

Click on the continue button here to find bug's views, expressed in a couple of lengthy posts at Tyler's blog --- along with some rejoinders by others.

Prof Bug has been busy the last two months posting a lot of queries and commentaries at Consumer Reports, more specifically in their car forums. One of the most recent posts has to do with the falling dollar's exchange rate vis-a-vis the Euro, the Canadian dollar, and to an extent the Japanese Yen, with the Chinese Yuan unchanged in its fixed currency rate in dollar terms. The post you're reading, please note, is in a fairly long thread that the buggy prof himself started. (The main reason that brought prof bug to CR's forums, which requires an online subscription, is that I wanted a new, safer SUV to replace a 2005 Jeep Cherokee that was still under factory warranty, ran well, but had major problems with its visibility through the windshield and front seat windows. In the end, I opted for a certified 2006 Acura MDX with only 20,000 miles on, with 2.5 years left on its factory warranty, plus a "free" third year that Acura's certification carries . . . all bumper to bumper. Prof bug will expand on this theme some time soon.)

Here are some links to articles in today's Financial Times that touch on the topics treated in this thread on the outlook for various car companies. To read the articles in total, you have to register (free) at this impressive daily newspaper, whose economic and financial coverage, along with commentaries and blogs, are matchless.

1) BMW --- whose profits (surprisingly) as a percentage of sales are far behind Mercedes' --- is going to cut its workforce by over 12,000. Another article shows that BMW is being hurt in competing in the US market and abroad by the high value of the Euro.

2) Chrysler's new ownership group is robustly optimistic about the company's restructuring program, despite current financial losses.

3) By contrast, Honda's top management is looking forward to record sales and profits in the coming year.

A little clarification about the high value of the euro in dollar terms, and to an extent, a similar if much smaller rise of the Yen, follows.

First the Already Visible and Rapidly Growing Benefits for the US Economy

For the last few months, while prof bug's mood changes surged one way or another or just up and down, he kept intending to return to his bugged-out commentaries any day then. By late summer, it was clear the buggy prof was over-optimistic, and so he decided to extend his web site's unwilled leave of absence with a voluntary one . . . a kind of self-awarded sabbatical for the rest of the year. The year, of course, is drawing to an end, with 2008's start just ahead; and prof bug has already started gathering some materials for some new articles, and on a variety of subjects: the US economy, viewed in comparative perspective; the global status of American power and influence; the Middle East, and especially the problems of events in Iraq and in Iran; the status of the NATO alliance at a time when increasingly pro-American governments have come to power and replaced openly anti-American ones the last two or three years in Germany, France, Canada, and for that matter elsewhere as in South Korea this last week; some books worth reading or avoiding; and . . . well, the list is long and fairly ambitious.

As for the current political primary campaigns, prof bug hopes that on the Democratic side the winner will be Obama --- a fresh and hopeful presence on the American political landscape --- and John McCain on the Republican side, a man who early on (in 2003) urged far more US troops in Iraq as with the current surge that began last summer, condemend Guantanomo and water-boarding, and has been notable for his stand on campaign financial reform. In short, if these candidates came through the primaries as winners, we'd have a promising choice between a young energetic Senator on one side and an experienced middle-of-the-road Republican Senator of impressive integrity on the other side.

In the meantime, prof bug wishes everyone a very pleasant holiday season.