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BY SOREN LARSON

In print | Published December 3, 2009

Swarthmore finals period is stressful. But don’t worry, because I’m here to help you get through it.

My best guide is, not surprisingly, economics.

Consider how societies achieve success. The surest way for any society to raise the living standards for all is with capitalism and an appropriately limited government.

Then, within an equal capitalist society, success comes to those who are diligent, honorable and rational. Individuals find their buying power in their own ability to produce; their supplying power. So the value of the money workers earn is then deeply rooted within their experience of earning it.

Studying at Swarthmore isn’t so different. We succeed by working hard with integrity and maintaining some sense of rationality. Most of the time, good grades don’t wander onto our transcripts unless we work hard. And within the good grades we receive lives our experience of earning them. But this finals period, like any other, will be tough. It seems that until we’ve spent hours in the basement of McCabe reflecting on Narcissus, get sick to our stomachs studying Green’s Theorem, or we’ve been so electrified by studying for PHYS 008 that we do the wave, we’re probably not yet prepared. While this all could sound deadly, painful, and slightly embarrassing, remember that after learning lots, professors should commend our achievements. In the words of Luke 6:38, “Give and it shall be given unto you.”
But curiously, despite the remarkable success of capitalism and students at Swarthmore, some countries, especially those in Europe, seem to resist capitalism. Why?

Lucky for us, there’s a bunch of economics literature on this topic. (Don’t worry, this time, I promise not to “misuse the discipline of economics.”) Consider the characteristics of European economies. In Europe, taxes are higher, governments are bigger, and labor unions are much more active. In essence, Europeans want a government that serves as a sort of insurance policy against risks that invariably arise in a dynamic global economy.

But after Europeans had their little laugh about the perils of an “unregulated” American economy, they observed the even greater risks of maintaining a mostly static economy in an ever-changing world. Economists at UBS recently reported in the Wall Street Journal that productivity is expected to fall 1.4 percent in Europe while it should expand by 2.3 percent in the U.S. The European Central Bank is also worried. It seems Europaeans didn’t read the fine print on their insurance policy.

On the other hand, labor regulations and government unemployment benefits keep workers optimistic. For example, German mechanic Alfred Butt lost his job in the recession, but unemployment benefits left him and his wife feeling financially confident enough to vacation in Cyprus, according the Wall Street Journal.

Beyond anecdotes, however, Germany’s efforts to maintain labor supply will prove effective only if the industries that drive the world recovery are those that existed before the recession began. If it is new industry that thrives in the recovery, America’s allowance of a reallocation of resources will pay off.

But seriously. I want a vacation! Where’s my stimulus?!

I think we all want a vacation. Nevertheless, despite the billion-dollars-a-page stimulus, I’m not sure many unemployed Americans are heading off to the Florida Keys this year.

So the question is, why did countries in Europe become large welfare states when the U.S. became a mostly free-market economy?

In a 2001 Brookings Paper, Alesina, Glaeser & Sacerdote offer an answer. The economists contend that it is social perceptions of luck that make all the difference.

Does luck determine success? Fifty-four percent of Europeans think so, while only 30 percent of Americans do. Ask 100 Americans if they think the poor are lazy, and 60 will say yes. Only 23 out of 100 Europeans say yes.
The economists suggest that these results could imply real underlying trends. For example, in the United States there is a strong positive correlation between earnings and the number of hours worked. People who work more, make more. This is true for full-time workers as well. These trends don’t hold in Europe, though. In fact, in Switzerland and Italy, rich people actually work less than poor people!

Alesina et al. then summarize their findings showing the relationship between social attitudes about luck and social spending (welfare, unemployment benefits, etc.) as a percent of GDP. Indeed, countries whose citizens believe luck determines income spend lots on social programs. But in countries whose citizens believe laziness causes poverty, the welfare state is small. It turns out that America doesn’t have Europe’s welfare state because Americans believe that industriousness, not luck, brings success.

So while our friends at Oxford may “bop” at the bars and our amigos in Spain drink wine in the afternoons, at Swarthmore College, it’s a bit more serious. Working hard just works. Although it may be tense, Calculus students, serious study of series until Saturday will bring success so great it cannot be spanned by a finite basis of vectors.

Help each other out. Remember that what’s good for our classmates is generally us. As David Hume puts it in “Of Jealousy and Trade,” “I shall therefore venture to acknowledge, that, not only as a man, but as a British subject, I pray for the flourishing commerce of Germany, Spain, Italy and even France itself. I am at least certain that all nations would flourish more [with] such enlarged and benevolent sympathies toward each other.” Indeed, there exist a mutuality of gains. When our classmates learn more, we generally learn more too.

And with the power of the Bible, I end my last column of the year. Luke 11:9. “And I say unto you, Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you.”

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