Many people believe that the Scandinavian economies have managed to combine high taxes, hugely generous welfare states and prosperity. They therefore wonder why Britain or Greece cannot do the same, and thus instinctively reject any talk of austerity or spending cuts. If Sweden can be rich and spend such a large proportion of its GDP, why cannot Britain or Greece? Why do the Germans insist that Greece must cut back its public sector, and why does Mr Osborne intend to accelerate his welfare cuts next week? Ultimately, these sorts of arguments are all a variation of the same theme: do we want a bigger or smaller state?