On Thursday, New York Times columnist Nicholas Kristof alerted his readers to a new international ranking system of social progress:

The United States is the most powerful colossus in the history of the world: Our nuclear warheads could wipe out the globe, our enemies tweet on iPhones, and kids worldwide bop to Beyoncé.
Yet let’s get real. All this hasn’t benefited all Americans….
A newly released global index finds that America falls short, along with other powerful countries, on what matters most: assuring a high quality of life for ordinary citizens.
The Social Progress Index for 2015 ranks the United States 16th in the world. We may thump our chests and boast that we’re No. 1, and in some ways we are. But, in important ways, we lag….
The top countries in the 2015 Social Progress Index are—

Now I’m just going to stop Kristof right there and hazard some guesses: the top countries are some combination of Scandinavian countries, Switzerland, and New Zealand:

–Norway, Sweden, Switzerland, Iceland, New Zealand and Canada.

Totally nailed it!!! Except for Canada. Well done, neighbors to the north.

The Social Progress Index is merely the latest drop in a river of data that points to the same conclusion. Pick your global index — no, seriously, pick one! The Legatum Prosperity Index. The Global Peace Index. The Corruptions Perception Index. The Rule of Law Index.  The U.N. Human Development Indicators. They will all show the same rough set of rankings. Small countries in Europe and New Zealand do remarkably well. The United States usually ranks somewhere in the teens.

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Every year these rankings come out, and the same cycle repeats. American columnists rend their garments about how life is better in Scandinavia, and the United States needs to do better. Chinese commentators say nothing and silently fume at Norwegian thriving. Expatriates carp that things aren’t that great in Scandinavia.

[Actual Scandinavians are way too polite to brag about any of this, but you know that, in the comfort of their own homes, they nibble on their lutefisk and chuckle at how the Scandinavian film version of “The Girl with the Dragon Tattoo" is so superior to the Hollywood version.]

Enough. Here’s a crazy thought: What if life is better in these small countries because of the United States?

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That sounds jingoistic of me, I know. But I’m not the one making this argument. Daron Acemoglu, James Robinson, and Thierry Verdier are the ones making this argument. You can read the full paper (pdf), or read their precis in VoxEU.

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In essence, they argue that everyone benefits from technological innovation, and that technological innovation is more likely to thrive in an economy where “incentives for workers and entrepreneurs results in greater inequality and greater poverty.” This is the cut-throat capitalist model. The other option is to create an economy with generous social protections and safety nets. They dub this the “cuddly capitalist” model.

Their conclusion:

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[T]he main implication of our theoretical framework is that we cannot all be like the Nordics! Indeed it is not an equilibrium choice for the cut-throat leader, the US, to become cuddly. As a matter of fact, given the institutional choices of other countries, if the cut-throat leader were to switch to such cuddly capitalism, this would reduce the growth rate of the entire world economy, discouraging the adoption of the more egalitarian reward structure. In contrast, followers are still happy to choose an institutional system associated to a more egalitarian reward structure. Indeed, this choice, though making them poorer, does not permanently reduce their growth rates, thanks to the positive technological externalities created by the cut-throat technology leader. This line of reasoning suggests therefore that in an interconnected world, it may be precisely the more cut-throat American society, with its extant inequalities, that makes possible the existence of more cuddly Nordic societies.

If Acemoglu, Robinson and Verdier are right — and let me stress that this is just a theoretical framework — then there would be real costs to the United States moving up the lifestyle rankings.

Of course, Kristof is still right: the current system does not necessarily benefit all Americans. There should be a public debate about these kind of trade-offs. But I do wonder if that debate would play out the way that Kristof and others would like.

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It’s not a coincidence that the countries that top out these rankings are not great powers. National pride in large countries might cause their populations to support economic sacrifices to bolster their power and standing in the world.  [See: Russia, effects of Ukrainian adventure] For example, if you poll Americans about having the strongest military in the world, you see that a healthy fraction of Americas are favorable to the idea — even though having the strongest military is expensive and doesn’t pay out the way its advocates claim. I suspect this would also likely be true if the debate was switched to the costs necessary to bolster technological innovation.

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I don’t mean to suggest that the United States is stuck with the current system. There are dimensions to the indices listed above — corruption, infrastructure rule of law, etc. — where the United States could do better, and it would improve rather than retard innovation.

But mostly, I just want to say: enough with the Scandinavians already. Yes, life is pretty good there, but it’s possible that this is not entirely due to the Scandinavians.

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