We’ve recently been reminded of a fascinating article that was published by Harvard’s economic think tank a few years ago – here’s the citation - Alesina, Alberto F., Glaeser, Edward L. and Sacerdote, Bruce, “Why Doesn’t The US Have a European-Style Welfare State?” (October 2001), Harvard Institute of Economic Research Disc. Paper No. 1933.

Glaeser is on faculty at Harvard’s Department of Economics, with appointments at the Brookings Institute and the NBER (National Bureau of Economic Research); Alesina is also a Harvard Dept. of Economics faculty member, and holds NBER and (London) Centre for Economic Policy Research appointments; and Sacerdote is on staff at Dartmouth’s Dept. of Economics as well as NBER.  A well credentialed author group. 

This much debated and discussed paper is a great read (here’s a link). 

The question the research was designed to answer was this – why does the US not have a large welfare state as compared to Europe?  There were a couple of very interesting findings noted. 

One – 60% of Americans thought in 2001 that the poor are lazy; contrast that with only 26% of Europeans.  Secondly - large welfare states emerge in countries where citizens generally believe that luck determines income.  This second point is represented graphically above.  The X or vertically oriented axis of the graph by the way is a nation’s percentage of social spending relative to GDP.  One conclusion to be drawn from the graph is that is laziness is viewed as an unproductive or undesirable behavior, then the welfare state is smaller.  The US has avoided the fate of Europe thus far, in terms of developing large welfare states, because (at least in part) its citizens disproportionately believe that luck is not that important a determinant of one’s results, but hard work is important. 

Why is this thoughtful paper (albeit now 7 year old) research back in the news?  There’s a bit (understatement) of a populist movement afoot in the country today, and some are preaching that many of the wealthy (or those working hard to be wealthy) in America are successful today because of bribes, corruption, or other unethical behaviors.  Are this behaviors present in our society?   Yes, no doubt - but the vast majority of the successful in our country worked hard to get there, and did so honestly and ethically.  The caveat is this - if citizens can be convinced income has not been meritoriously earned - they are more likely to support the development of an income redistributing state (read a welfare state). 

There are some who would turn America into a larger welfare state (some who might even be running for national office this year) – “luck” and income redistribution are not the answer - we agree that hard work is the answer.   

We much prefer Earl Nightingale’s definition of luck – “Luck is what happens when preparedness meets opportunity”. 

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