More is better. The post is about this article and I even went through the painful ordeal of reading the lecture.
In his Richard T. Ely lecture to the American Economic Association in 2002, economist Edward Prescott of the University of Minnesota concluded that almost all of the difference in living standards between the U.S. and France is accounted for by the impact of taxes on work. He notes that while the capital/output ratio is about the same in both countries, French workers work 30 percent less, due entirely to the much heavier French tax burden on labor. Prof. Prescott concluded that if France had the U.S. tax system, the French standard of living would immediately rise by 20 percent.
This brillant observation points out that if the French worked 30% more their standard of living would rise to American levels. I hope Mr. Prescott did not receive any special merit for pointing out that the French would make more money if they worked more.
Does anyone see an issue with equating more work and more money with a higher standard of living?
Here is my brillant observation: If the French work 30% more they will have 30% less free time. Is that really an increase in living standards?? I’d be upset if I worked 30% more and only received a 20% increase in “living standards”. Where did the other 10% go?
Mr. Prescott’s research isn’t really about the living standard question. It is about the effect of taxation on one’s willingness to work. He proposes that if you are taxed less, you will work more. In effect you will choose work over leisure time because there is more reward for working.
That sounds right, not that it matters what I think sounds good. I am just always amazed by the assumption that more money equals a better life. In a country where money is plentiful and no one is satisfied with it, it troubles me that the assumption lies unquestioned.
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Mr. Dykes,
I like your blog. Had some comments on the Ely link that I think you might find useful.
I do think that economists tend to overstate the value of goods vs. other things. Mainly because goods can be counted and modeled easily whereas other things like leisure and QOL stuff are very difficult to model.
However, I believe that Mr. Ely is saying that the French would be better off after adjusting for any extra hours that they work. Eash individual could use this to purchase leisure at whatever rate they prefer. Chances are they would work more than they do know but still less than Americans. The key is that the individual would have the freedom to decide rather than the state.
Regards,
Bruce Picard
Boston, MA