Beyond left and right By Scott Sumner

Is British public policy more left wing or right wing, compared to Scandinavian countries like Sweden and Denmark? The Heritage rankings suggest they are about the same, with Denmark coming in at number 10 in the world (at 76.1), Britain number 14 (at 74.9), and Sweden number 20 (at 73.1).

And yet the two models differ in many respects. Most informed observers would probably argue that the Nordics have more “socialist” economies, perhaps much more socialist. On the other hand in many respects the Nordics are much more free market than even the US. Sweden has a 100% voucherized school system. Their Social Security is party privatized. Denmark has for-profit fire fighters. Several Nordic countries have privatized industries that are publicly owned in the US (airports, air traffic control, passenger rail, water companies, mail delivery, etc.)

Consider this recent comparison of Sweden and Britain:

The Swedes are far ahead in two areas. One is their use of hospital registries, showing how well each part of their system treats different ailments. The other is a small fee every hospital charges each time you visit it: A small fee helps stop the buffet welfare state that Lee Kuan Yew identified. For some purists on the Left, that is a denial of the great promise of institutions like the National Health Service: that they would always be free at the point of delivery. The Swedes are far more practical. Those promises were made when health care was far more basic. It is not in society’s interest that hospitals be overused. By changing the benefit slightly, they can keep it more open to all.

In some respects Sweden is more left wing than Britain; for instance it has higher top marginal income tax rates, and more income redistribution. In other respects Sweden is more right wing, it has a freer market in education, and a fee for use of health services. Is there any common theme here?

I believe the common theme is utilitarianism. Policy in the Nordic countries is motivated by utilitarian considerations to a greater extent than anywhere else on Earth. The right wing in Britain feels it isn’t “fair” for people to have to pay more than 50% of their earnings to the government. The left wing in Britain believes it isn’t “fair” that people have to pay for health care; it’s a basic “right” that should be free. Utilitarians tend to avoid concepts like “fair” and “rights”, and instead focus on maximizing aggregate happiness.

Does it work? Well there are a number of studies that suggest Denmark is the happiest country in the world.

Now for a curve ball. Although I am a utilitarian, I prefer a small government model like Hong Kong or Singapore to a big government model like Sweden or Denmark. Before explaining why, it’s important to note that these 4 countries are not as different as they seem. The conservative Heritage Foundation ranks Hong Kong and Singapore number one and two in the world in “economic freedom.” However if you restrict your analysis to the 8 categories out of 10 that exclude size of government (i.e. exclude the tax and spending categories) then Denmark is number one in the world in economic freedom.

The two Asian city-states are also quite utilitarian in their governance, reflecting the accident of history (an idealistic dictator in Singapore, and a non-socialist British administrator for Hong Kong.) But the Nordics are the most democratic of the utilitarian governments. So if I share their values, why don’t I share their preference for big government?

I believe that economics is full of “cognitive illusions.” Common sense suggests that government ought to be able to fix all sorts of problems like financial turmoil and inequality, through government programs like regulation and redistribution. I don’t deny that there are some possibilities for progressive governance, in a few areas. But overall I think intellectuals tend to greatly exaggerate how much good can come from big government. Economics (and especially University of Chicago economics) teaches us about all the unintended consequences of seemingly well-intentioned government programs. Even the Danes seem to have realized that truth in 8 of the 10 categories studied by Heritage. And both Denmark and Sweden have been moving in the direction of more economic freedom in recent decades.

So I am what Krugman calls a “homeless” person. I’m a utilitarian who ended up on the right, due to the fact that I think most people vastly underestimate the importance of incentive effects, and the negative side effects of regulation and redistribution. Most people with similar views get there from a different direction, from a “natural rights” approach. For instance, Greg Mankiw thinks very high taxes on the rich are unjust because people deserve the fruits of their labor.

Although my utilitarian moral system tends to align with intellectuals on the left, people like Paul Krugman and Noah Smith want nothing to do with the likes of me. They shudder with horror at the mere thought of libertarianism. Thus I’m grateful to Econlog for giving me a home.

PS. The quote was taken from a new book by John Micklethwait and Adrian Wooldridge. It’s not a heavy academic book like Thomas Piketty’s recent magnum opus, rather a breezy journalistic style overview of current best practices in governance. But it’s well worth reading. (Of course I’d say that, they also appear to be right-wing utilitarians.)

PPS. Britain is still more utilitarian than most other countries.

PPPS. I’m still planning reply to Caplan on immigration–hopefully soon.