Thursday, June 23, 2005

Polish Guy #1

One of my coworkers is a Polish immigrant with a degree in International Finance. We have become quite useful to each other as I ask him questions about European politics and he asks me questions about American politics. Yesterday he asked me three questions that I felt were worth blogging about. You'll find them, appropriately, in posts "Polish Guy #1, 2, and 3".

The Polish guy asked me why America was rich. After pondering this for a while, I decided that the best way to answer the question was to turn it around, since other nations besides the U.S. are rich, and ask why other nations are poor. My solution was the rich nations have a bias in favor of the individual. When a problem occurs, the first solution is to see if someone can make money by fixing it, and only after individual, private solutions have been tried does the government step in. That's why some nations are rich--and no, I'm not denying the importance of accidents of history, such as geography, but the world has a great many nations whose physical attributes should have made them rich, but they are still poor.

1 Comments:

Blogger Noumenon said...

Public problems, like building railroads across the US or creating a stable monetary system, they're too big for an individual "the individual" to solve. I think "free competition" is the answer. It covers allowing all the many individuals to try their own solutions and allowing the ones that work best to spread. It also covers free trade -- interstate and international -- which is more predictive of getting rich than factors like democracy or resources. And it explains the effectiveness of our government -- more than just getting out of the individual's way, free competition for political power kept the ruling class vibrant enough to provide important necessary structures like full statehood for territories, limited liability corporations, the Federal Reserve, the GI Bill, et cetera.

But really I couldn't say whether this represents 25% or 75% of our outperformance. Historical accident has been huge.

9:41 AM  

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