Academic journal article Brookings Papers on Economic Activity

General Discussion

Academic journal article Brookings Papers on Economic Activity

General Discussion

Article excerpt

Luigi Zingales liked the paper very much and thought it dealt with an important area of research. But he was surprised about the choice of values examined by the authors, stating that if there is one thing that Europe does not try to homogenize, it is social laws. Thus, he posited that whether there is more or less homogeneity is not that important. What is important--which he thought the authors should emphasize more--is relative trust. Research Zingales has done with Luigi Guiso and Paola Sapienza attempts to compare trust within the United States versus trust within Europe; they find that, by and large, Americans do not differ very greatly in trust from region to region.

In Europe, however, Zingales saw things as very different. For instance, Jeroen Dijsselbloem, a self-described socialist who is head of the euro-zone's finance ministers, came under fire for saying he believes in EU redistribution, but that eurozone countries had wasted their money on drinks and women--clearly referring to the Southern European countries. Not even U.S. presidential candidate Donald Trump did something as thoroughly insulting as that--he may have offended Mexicans and others, but not an internal group in the United States. But in Europe, these types of insults are standard. For instance, Zingales noted, Germans may think Greeks are lazy, but this opinion is proven false by statistics showing that Greeks spend more time working during a week than Germans. Yet the reality, he continued, is that Europeans do not like to redistribute--they find every possible excuse not to do so. Research by Alberto Alesina and Eliana La Ferrara finds that within the United States, the willingness to redistribute is related to racial diversity. (1) So in states where the population is racially heterogeneous, the willingness to redistribute tends to be very low.

With the European Economic and Monetary Union, one does not necessarily need to feel empathy with another country to trade with it; but if one wants to introduce some form of redistribution, such as what banking unions and fiscal unions can bring about, one cannot do it without a sense of nationhood, Zingales contended. Discussant Markus Brunnermeier pointed out that India was made a country by the British, and before that was not a country. The Indians' fight against the British created a national identity that made them one country, in spite of differences in religion, language, and so on. Europeans, unfortunately, have only fought among themselves, not against a common enemy.

Caroline Hoxby thought that, in discussing nations within Europe, one needs to think about the social welfare function that people are implicitly applying. It may very well be that many Europeans apply a social welfare function that has boundaries at their national border, not European borders. Economists have traditionally had little to say about whether the boundaries of a social welfare function are "correct."

She thought that one of the most telling things is that when one asks Europeans where they are from, they almost never say "Europe" or "I'm a European." They almost always give the name of their nation-state. But if one asks Americans, "Who are you, where do you belong?" people tend to say, "I'm an American." They do not say, "I'm a Virginian." However, back in the 18th century, when Americans were forming a union, people did identify themselves as Virginians, Pennsylvanians, and the like. Thomas Jefferson, John Adams, Benjamin Franklin, and the other founders all identified strongly with their states.

Hoxby suggested that three things may have allowed those state loyalties to transform themselves rather quickly into American loyalties. First, early Americans had a common enemy--Britain--so King George III and the War of 1812 may have helped integration. Second, from the beginning, Americans largely shared a common language, which she thought made a huge difference. And third, Americans had a great deal of territory that appeared fairly "vacant" to those of European descent (non-Native Americans, in other words). …

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