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21.12.2006

Does econ make people conservative?

Tags: Uncategorized — Author:   @ 4:46 am

Harvard University’s economics Professor Greg Mankiw is known for his popularity, especially as he seems to actually enjoy teaching introductory economics courses (while most of his peers tend to favor spending time with advanced, post-graduate students). He even runs a blogsite so that he can keep in touch with his students, now dispersed worldwide.

One student posed a question on that site recently that’s actually quite central to the kind of ideological divide we see in Finnish politics today: does the study of economics make people more conservative (or more classically liberal, in academic terms)?

I believe the answer is, to some degree, yes. My experience is that many students find that their views become somewhat more conservative after studying economics. There are at least three, related reasons.

First, in some cases, students start off with utopian views of public policy, where a benevolent government can fix all problems. One of the first lessons of economics is that life is full of tradeoffs. That insight, completely absorbed, makes many utopian visions less attractive. Once you recognize, for example, that there is a tradeoff between equality and efficiency, as economist Arthur Okun famously noted, many public policy decisions become harder.

Second, some of the striking insights of economics make one more respectful of the market as a mechanism for coordinating a society. Because market participants are motivated by self-interest, a person might naturally be suspect of market-based societies. But after learning about the gains from trade, the invisible hand, and the efficiency of market equilibrium, one starts to approach the market with a degree of admiration and, indeed, awe.

Third, the study of actual public policy makes students recognize that political reality often deviates from their idealistic hopes. Much income redistribution, for example, is aimed not toward the needy but toward those with political clout.

These are lessons certainly lost on Finland, where entrenched socialist ideology sees any challenge to its moral precepts as a threat. In fact, most of Finnish counter-arguments focus on the demonization of any contending models to the welfare-state, even to the extent of employing state-sponsored bigotry to ensure the status quo.

  • winter

    So education is your answer to fight the welfare state of Finland.

    But. “views become somewhat more conservative after studying economics.”

    is actually tied to someone turning 30 and realizing they have wealth to protect from the welfare state’s redistribution plans.

    then that person will study economics, and your theory come to life.

  • stercus

    This actually explains alot. I consider myself a strongly Social Libertarian and Economic Leftist (For a great definition and “scoring” system, check out http://www.politicalcompass.com. Phil, you would enjoy it.). However, since I’ve started taking a Global Studies course with a teacher who puts strong focus on Economics, I have noticed my Socialist tendencies being moderated (begrudgingly I must admit) by certain things I’m learning. This doesn’t mean that my morals have changed at all. On the contrary, I think that they have been reinforced by all the debates I’ve had with myself over my political views. However, a good study of Economics does have a tendency to soften your idealism because it presents you with facts and situations you might not have considered in your morally and politically based mindset.

  • stercus

    Excuse me, that was http://www.politicalcompass.org. I apologise for that, it redirects to some shitty site.

  • Sparticus

    It would make you slightly consrvative, assuming that one doesn’t know the faults of their own gov’t. As well as the condition of Finland’s Economic stature.

  • Tomi

    Phil, the fact that you don’t have a clue how the economy here works – and works pretty well – doesn’t mean that there is no theory behind it, that is, something even you could understand if you just spend some time studying it, instead of demnonizing it in the best libertarian fashion. You could start by forgetting the ignorant view you’ve been brainwashed with that the welfare state has only to do with morals, that ugly thing.

    Studying economy makes one more conservative if one is taught by conservatives, people who actively misunderstand the meaning of such core concepts like externalities or social capital (you know, the kind of things the evil Nobel commitee has been dealing with lately).

  • Tomi

    Oh, it was the mad guy. That’s it. Phil let Pundy post once again and that means, I’m afraid, that I’m out of here for good …

  • http://finnpundit.blogspot.com Finnpundit

    2. stercus: agreed. The study of economics tends to do that.

    However, as to that political compass site, I’d propose another venue for thought: why is it so necessary for us to identify ourselves in classic left/right-wing panoramic hues? In fact, why is it necessary to identify ourselves as part of a parliamentary, democratic process at all, if our more important, “dollar/euro votes”, – done in the market place – are a more significant part of an essentially democratic process?

    Why concede such great power to governmental politics, when marketplace politics are all the more relevant to the needs of the people? (In this sense, I tend to approach Phil’s kind of libertarianism).

    The state is simply not that important. We can only vote democratically, say, every once in a few years. But by using our dollar/euro votes, we vote everyday. Thus, market based decision-making is all the more important, and should be given primacy over parliamentary politics.

  • http://finnpundit.blogspot.com Finnpundit

    6. Phil let Pundy post once again and that means, I’m afraid, that I’m out of here for good …

    Buh bye Tomi! Don’t let the door hit ya where the Good Lord split ya!

  • http://www.pasi.fi/ Pasi

    Agreed. I used to be rather idealistic leftist before and when my university studies began, although I think the idealism was already slightly loosing its grip. Fortunately one of the first courses I took was Basics of Economics, followed up by Economics of Public Sector and Integration Economics. I think those courses really kicked off the change of political and economic mindset in me, finally resulting in the somewhat libertarian views I hold today.

    Economics 101 should be mandatory course for all university students in this country. I think we’d have quite a bit less of them hippies that “study” at the university for ten years or so and finally graduate to become academically unemployed (as in, professional social bums).

  • http://finnsense.blogspot.com finnsense

    I agree with everything Mankiw says but Finland displays admirable faith in the workings of markets and is much less protectionist than the US. Mankiw talks of trade-offs between effiency and equity which I believe exist. I have never denied that high taxes act as a disincentive. Maybe not much of one but a disincentive nonetheless.

    Interesting though Finnpundit, that a post on economics decrying the Finnish system fails to acknowledge the recent news that Finland is expecting 6% GDP growth based on increases in labour productivity this year. They are also running a very healthy surplus. This just as the US posts a record current account deficit and seems to be heading for either a recession-like slowdown or an outright recession.

  • http://finnpundit.blogspot.com Finnpundit

    10. Ah, but European markets always trail American economic growth (or slowdowns) by a few years. That’s the downside to being dependent as an exporter, and being an economic freerider. The present upswing in Finnish economic growth can be attributed to Bush’s cut in taxation; the effect took a few years, but eventually it arrived in Finland, too.

    Eventually, Europe (and Finland) may develop more export markets in China, and elsewhere, but even these areas will always respond to market conditions in the nations where consumers are allowed the most dollar/euro/yen votes.

    As euros and yens get taxed heavily, dollars continue to be the biggest vote-getters.

    As to the future, there may indeed be a worldwide economic slowdown (though the markets seem not to say so: my portfolio is up by 12% this calendar year. So much for the effects of the dreaded current account deficit). However, there’s nothing Europe could do about it, nor China, nor Japan. Only the tastes, trends, opinions, and spending-patterns of American worker-consumers matter.

  • Keksi

    At least the welfare state offers “free” stuff and offers organisations . It’s not perfect but it’s not that anywhere. Still better than to leave people lying in the gutter if they’re not economically viable :)

  • Kristian (in Espoo)

    At least the welfare state offers “free” stuff and offers organisations . {….} Still better than to leave people lying in the gutter if they’re not economically viable :)

    I don’t even think the dreaded US capitalists favor leaving people lying in the gutter :-)

    Insofar as “free stuff”, I went to the “free library” yesterday, to make some photocopies. It cost 40ct/page. In all the low-tax lands I’ve lived, it costs 10ct/page.

    Small example, but can easily be expanded to other “free” things here in the Nordics. We pay overly-high taxes and then, to boot, we pay overly-high purchase-prices for these “free” things.

    Nice article FinnPundit. Very relevant.

  • http://stockholmslender.blogspot.com/ mjr

    Correlation and causation are difficult matters, especially for libertarians… Does libertarianism “cause” muddled thought? Maybe an anecdote would resolve the question!

  • N. Siinistö

    Well, duh, obviously students in any academic field are trained to adopt the “way of thinking” in that particular field. That’s what paradigms are all about. And modern economics are heavily influenced by the Milton Friedman school, i.e. inherently what you call “conservative” but in reality is a very utopian view of the power of unrestrained markets. It’s radically different from what used to be labeled conservative, but that’s another discussion.

  • http://funkybrownchick.com funkybrownchick

    I studied economics — which, in most US universities, equates to the study of capitalism — and it didn’t make me conservative. :) If anything, it had the opposite effect.

  • a lamb with no guiding light

    Finnpundit wrote: Buh bye Tomi! Don’t let the door hit ya where the Good Lord split ya!

    Seriously, though, Phil, you got to do something about al-Pundy. His posts can be neatly divided into two categories: entirely insane and deadly dull. The former category consists of all posts dealing with foreign policy, the latter of all posts on economic policy. There’s a reason nobody reads his blog, you know. Do you want to drive away your blog’s readers, too?

  • Kristian (in Espoo)

    In fact, most of Finnish counter-arguments focus on the demonization of any contending models to the welfare-state, even to the extent of employing state-sponsored bigotry to ensure the status quo.

    How about this one……. In an effort to promote class envy, Finland and Sweden openly publish the economic and tax information of its citizens and residents. An old law from the Cold War era?

    Think again, apparently, in Finland’s case, the law was recently revised: See 30.12.1999/1346 Laki verotustietojen julkisuudesta ja salassapidosta.

    As a byproduct of their efforts to impose Social Control over the Finnish population, the Socialists made it possible for, not only one’s neighbors, but also for anyone in the world—Russians, Somalians, Ukrainians—to see the private economic and tax information of Finns. How embarrassing!

    …..and potentially dangerous, obviously.

    However, if you are a resident of Finland—no need even to be a citizen—then you can file a complaint with the European Commission. It is possible that Finland’s policy conflicts with EU Directive 95/46/EC. You can start here; read text and scroll down for complaint form:

    http://ec.europa.eu/youreurope/nav/en/citizens/services/eu-guide/data-protection/index_en.html#11464_12

    Anyway, that’s Nordic Socialism. The Devil lives in its details.

  • Anonymous

    “the latter of all posts on economic policy.”

    Which he knows nothing about it

  • http://www.axis-of-aevil.net/ hfb

    Finnsense – the article on productivity ( http://www.hs.fi/english/article/Surge+in+productivity+brings+exceptional+growth+to+Finnish+economy/1135223812290 ) actually attributes only 1.5 percentage points to labour, ” Labour input accounts for just 1.5 percentage points of growth.”, not 6 percent. It also notes that the trickle down to the workers in the form of higher income and standard of living wasn’t very optimistic. Somebody is making money, it just isn’t the people working…even the ones who cling to the idea that Finland doesn’t embrace US-style capitalism while keeping the patina of a social welfare state.

  • http://finnsense.blogspot.com finnsense

    hfb,

    I said growth was 6%, which is correct. That’s very healthy. The article also says 4.5% comes down to productivity growth which is the key component of competitiveness and the only way to grow without stoking inflation.

    Your point about higher income is relevant but of course we in Finland, in contrast to those in the US, reap the benefits because a larger share of the wealth is redistributed. It shows up in improved health, services, education and other things important to quality of life.

    finnpundit,

    You really have to get over your obsession with spouting economic nonsense. I know you don’t really mean it and you do it just for fun but there are some impressionable people who might think you know what you’re talking about.

    True, the US was the engine of the global economy but as you well know it was because they were willing to take on frightening levels of debt. If Europe had done the same it would have been the engine of growth. Europe is now growing faster than the US and the Nordics much faster. For Finland this is partly export lead growth but Europe does not depend on exports any more than the US. All small countries that are rich rely on exports just as they also rely on imports. Since when was that a criticism of anything? It certainly has nothing to do with freeloading. Growth is generated by higher productivity and doing things more efficiently and productivity is growing all over Europe.

    By the way, I was amused by your comment about the stock market. Unless you’re about twelve I think you might remember another time stocks were doing very well at the start of a recession. There’s actually an economic term for it. It’s called a sucker’s rally. If you look at the historical data you’ll see that there is almost always a stock boom before a recession or a slowdown. Once the recession becomes clear stocks tend to drop about 16%. That’s free advice. You can put my cheque in the post.

  • Kristian (in Espoo)

    I once had a girlfriend named Patina……..or maybe it was Betina. It’s been so long, I can’t remember.

    Anyway, hbf, how are you adapting to life away from Finland? Any noteworthy comparisons?

  • http://www.finlandforthought.net Phil

    At least the welfare state offers “free” stuff and offers organisations . It’s not perfect but it’s not that anywhere. Still better than to leave people lying in the gutter if they’re not economically viable

    Then why such long lines at Helsinki “soup kitchens”?

  • http://www.finlandforthought.net Phil

    We can only vote democratically, say, every once in a few years. But by using our dollar/euro votes, we vote everyday. Thus, market based decision-making is all the more important, and should be given primacy over parliamentary politics.

    Power to the people!!

  • Kristian (in Espoo)

    Your point about higher income is relevant but of course we in Finland, in contrast to those in the US, reap the benefits because a larger share of the wealth is redistributed. It shows up in improved health, services, education and other things important to quality of life.

    Sure, if you have a sense of humor :lol:

    Ok, to be fair, I’ll agree that quality of life is better, but that is NOT due to economic model of Finland; it is something much more intrinsic to Finland. One can even say qol is better, despite the crappy economic model.

    “finnpundit,

    You really have to get over your obsession with spouting economic nonsense. ”

    Pundy finally manages to write something that is both enlightening AND non-hostile, yet you only have criticisms?

    Phil: “Then why such long lines at Helsinki “soup kitchens”?”

    And what about the long lines to recieve medical treatment. It varies of course, but most private models I’ve experienced do it much better.

  • Keksi

    At least the welfare state offers “free” stuff and offers organisations . It’s not perfect but it’s not that anywhere. Still better than to leave people lying in the gutter if they’re not economically viable

    Then why such long lines at Helsinki “soup kitchens”?

    That’s why I said that not every state is perfect. But there’s still a government that TRIES to take care of stuff going on. Not every country has that, at least trying to make benefit for the common good instead of people in the governemnt who fire the entire government and pay all the taxes as salary to themselves while the rest of the country are suffering from poverty.

  • http://www.finlandforthought.net Phil

    Do you want to drive away your blog’s readers, too?

    While I’m not a fan of Tomi’s “I’m gonna leave again” and Finnpundit’s “Don’t let the door hit you on the way out” comments, I think Finnpundit provides a unique perspective raises some interesting points, even if many disagree. If his comments were really so outrageous, he wouldn’t have dozens of people commenting on each of his posts, they’d instead simply ignore him. Hank and Finnpundit are free to post whenever they want and I quite look forward to each of their articles.

    And I’m quite open to new bloggers to join the three of us, but no one has ever asked! I’d love to have a female writer and/or green/leftie on here. There’s too much testosterone on here, it’s so refreshing to read comments from hfb, funkybrownchick, Mo, Anzi, and other women on here.

  • aet75

    How about making the students pay for their Economics 101 as their first lesson…

  • iJusten

    The economist Finnpundit quoted was absolutely right. I took two courses in Economics (one of them mandatory) and it really opened my eyes how stuff goes. While I still have the same values, now I understand why companies work the way they do, and there are less things I whine about.
    While I understand that keeping some factories in Finland is idiotic and have to be moved, there are some things that should not be justified just by economics – like giving user information to Chinese Government, as MSN and Yahoo did.

    Understanding what is most efficient is not always most moral. Understanding economics takes away some innocence, but it should not take away your morals. The relationship between money and morals is not easy. To make money, you have to make compromises, but you should not throw all your values away and just take the money.

    Companies should have some responsibility of the community where they operate, as do people. When companies start to view countries and places just as a way to make money, that’s when they go bad. (eg. Exxon as very over-the- board examble).

    Maybe the way Finland works is not the best ever (and I’m willing to concede that Phil might have points in some of his previous posts and observations) but going “all the way in” is like selling your soul for money.

    I love it when Finnpundit pastes long quotes from experts I agree with, and then put his own opinion in the end “wait, what?”. But I bet Phil stands Finn just because he can find those quotes. They are really good, you know. We are just supposed to ignore his opinion in the end :)

  • Anonymous

    “So education is your answer to fight the welfare state of Finland.”

    Maybe we should offer people free higher education. Then there would be less ignorant welfare statists.

  • Anonymous

    Maybe Erkki Tuomioja should study some economics?

  • N. Siinistö

    “the latter of all posts on economic policy.”

    Which he knows nothing about it

    Anonymous at #18, it’s Phil who knows nothing about economic policy. Finnpundit seems to have a basic understanding of economics, but of course he has to bend and twist and spin it to make it serve his ideological preferences.

  • Keksi

    Well said iJusten. You hit at right the heart of “how it’s supposed to work”. Everybody stands at an awe when someone is doing business with either end of the spectrum.

  • http://aapocalypsenow.blogspot.com Aapo

    That’s the downside to being dependent as an exporter, and being an economic freerider

    Eh, Mr Pundit, I don’t know how much you have done economics yourself but at least those liberalists I have been reading haven’t condemned small, economically open exporters as ‘freeriders’. Quite the opposite. So your view of the world trade sounds very protectionist to me.

    Only the tastes, trends, opinions, and spending-patterns of American worker-consumers matter.

    Dog’s bollocks. I’m quite grateful for the progress in China and India exactly because of this aspect. When America’s debt driven economy eventually faces a slump or slowdown we in Europe won’t be hit as hard as we had been some 5 years ago. Today you can go east, young man.

    Oh those funny neocons, their own breed completely.

  • a lamb with no guiding light

    Phil wrote: I think Finnpundit provides a unique perspective

    His general perspective is that of a loony US right winger, from his unshakeable, unconsidered belief in voodoo economics to his deep desire to see swarthy heathens tortured and killed. There’s nothing unique about any of that, alas.

    The Finland fixation is an original twist on an old non-classic, I suppose. I have to admit that it’s not every day you see someone calling Finnish UN peace-keepers “morons”, “collaborators with terrorists”, and “legitimate targets for eradication”. Somehow, though, I fail to see how this is a point in al-Pundy’s favor.

    If his comments were really so outrageous, he wouldn’t have dozens of people commenting on each of his posts, they’d instead simply ignore him.

    That’s not how the Internet works.

  • STP

    The reason why people are still willing to buy dollar and have faith in it, is because Americans are very hard working people. If investor has to invest in two countries. He will always invest on the country where people are not allergic to working.

    You see a very strong anti work, anti business sentiments in the middle / lower class of scandinavian people. The less they have to work, the better, and they have no trouble voicing that opinion to their work union representatives who do as they command.

    The problem is, that just like most people from all countries. These middle class people do not understand how things work. They do not understand where their recent good fortunes come from (economics). They do not understand that if you barely keep on working / keep over ten percent of workforce unemployed, you are headed for the ruin.

    It is like modern day Russia. A lot of people are proud and nationalistic! They are speaking up a storm about Russia. How great and strong it is again! While totally forgetting to thank the countries where the money comes from: countries that buy their newly nationalized oil.

    In Finland. You just replace the oil with paper and electronics.

    But I have to say. There are a lot of very smart cookies here in Finland. Not very happy with the situation. Even imported smart cookies, like Phil. I hope these cookies wont crumble under the pressure :D

  • a lamb with no guiding light

    STP wrote: The reason why people are still willing to buy dollar and have faith in it, is because Americans are very hard working people. If investor has to invest in two countries. He will always invest on the country where people are not allergic to working.

    If I get your gist right, you’re saying that the reason the euro is stronger than the dollar is that Europeans just plain work harder than Americans. Sounds fair enough.

  • STP

    Lamb wrote:

    “The Finland fixation is an original twist on an old non-classic, I suppose. I have to admit that it’s not every day you see someone calling Finnish UN peace-keepers “morons”, “collaborators with terrorists”, and “legitimate targets for eradication”. Somehow, though, I fail to see how this is a point in al-Pundy’s favor.”

    Hey, Finns talk about US soldiers as morons all the time, even worse, a lot of us Finns do not seem to have any respect for American soldiers what so ever. So why do you think they would have any respect towards ours? You know what they say? What comes around, goes around.

    I am sure that if Finns started speaking of US soldiers with more respect, I am sure that they would give us the same treatment.

  • http://finnsense.blogspot.com finnsense

    STP,

    Your post reads like FP in disguise. To start a post with “the reason people are still willing to buy dollar and have faith in it” is ridiculous. Look at any five year chart of the dollar vs the euro and you’ll notice that the dollar has lost 30% of its value in that time. People don’t buy into a currency because they think the people working in that zone work hard. They do it because they expect it to rise in value against other currencies or they do it to keep their own currency lower so that their exports will be cheaper and thus more attractive. China buys dollars because it is in its interests to have a weak yuan. That is what is keeping the dollar from crashing. Given the size of the deficit, the dollar needs to depreciate if that is to be reduced.

    Now, it’s true Americans work more than Europeans in general in terms of hours per week. It’s not true, however, that more of them work. The participation rate in the US is similar to that in the Nordics. How many Finnish housewives do you know?

    Oh and by the way, Finland’s unemployment rate has dropped 1.2% in the last year. It is now 6.8%. Given that 15 years ago it was 20% that’s pretty damn good. The other “lazy” Nordic nations like Sweden, Norway and Denmark have unemployment rates similar or lower than the US.

  • http://stockholmslender.blogspot.com/ mjr

    Lovely – this level of mindless generalization is really worthy of Finnpundit, a study in nastiness. He has a narrow area of some expertise where he actually sounds knowledgeable and balanced. Most times as regards his customary hatefulness it simply seems that some bats have escaped from the attic, that the analysis is several cookies short of a picnic, that the lunatics have definitely seized the asylum etc. etc. Perhaps is is just some sort of supertrolling, hopefully, but at times my jokes of him being of medication don’t seem completely funny… Really, really unpleasant, unbalanced stuff.

  • http://stockholmslender.blogspot.com/ mjr

    Meant STP previosly, certainly not Finnsense…

  • STP

    Lamb.. Yes, I am happy when I go to US that my euros are worth more
    and no, it does not mean that we work more. It is very easy to prove it, just drive your car around Finland after 9. It is dead. There is nothing, nada. then go to US. Pick any major city, go to wall mart after midnight. You will see people. Shopping. US just does not stop, unlike Finland.

    Also, as how many hours people put in on a average week.

    You will start to see a difference.

    When it comes to currencies. They fluxuate. Do not get too worked up about it. Things change and egos crash.

  • STP

    Oh yea proud Finns. Gather all your egoes and prepare for crashing. Cause it is coming. How many percentage was Nokia owned by Americans? 3/4? Whose funds own half the world? Who are the people who do not let their people to get rich in the first place, let alone invest in funds?

    I am a Finn too. Do not get me wrong, from a business family, I see how business people are treated in this country. Like shit. So, I really do not like Finnish goverment / the jealous Finnish work union people too much. And nothing can change my mind.

  • http://finnsense.blogspot.com finnsense

    “So, I really do not like Finnish goverment / the jealous Finnish work union people too much. And nothing can change my mind.”

    Who’d have guessed?

  • STP

    Mjr, the feeling is mutual. I get sick to the stomache when I see people waving red flags in this country. People who get their money from the west, people who enjoy internet and Us movies / tv series. Speaking shit about it. People who casually would let Israel burn.

  • winter

    People who casually would let Israel burn?

    Change it to

    People who casually would let Israel get nuked?

    Guess who just went into the nuke club? Your best friend who has you-all in Lebanon as “Human shields”.

  • STP

    Finnsense. That 6.8 should be throughly examined. Knowing the Finnish politics you have to factor in people who are not really working. People who earn slightly above unemployment benefits, whose salary is partly paid by the KELA. You have to take into account the huge numbers of people who are swept out of the statistics into being students of one sort or another. You have to remember that vast amounts of people have retired early.. And then when you realize that before the big recession of early nineties the unemployment percentage was around 3. Then you start to understand that Finland really has not recovered as well as politicians would like us to believe.

    Check this out:

    http://www.statetreasury.fi/Public/default.aspx?nodeid=16847

    It shows you that pre recession. Finland truly was almost debt free, we had REALLY low unemployment. Now, our public debt has hung up around 50 billion since recession. The unemployment figures are “fixed” and the boat is really not doing as well as the politicians would like you to believe.

    I guess all people who are saying I am nuts did not experience the recession, had a “safe job” etc. I did not. It knocked me out. I will never forget what happened. The 50 000 businesses that were wiped out. The heavy handling of business families in the aftermath. The way people wanted blood and nailed some examples on the wall when it really was not the bussiness peoples fault, they were mostly just casualties of the economical tsunami that hit us.

    Example. D Trump. He declared a multi billion bankrupcy in early 90es. Look at him now, he is a millionaire again. Could this happen in Finland? Hell no! He would still be prosecuted and ilta sanomat and iltalehti would keep on ripping him a new arsehole till the day he died.

    Just stating the facts.

    I am out of this blog now for a while.

    Merry Christmas to you all. Even if you hate the way I write.

  • http://koti.phnet.fi/bevertje/index majava

    STP is right about the unemployment. Finland’s unemployment fgures are just a little bit less covered up than the Swedish, who should double their official percentage. In Finland you could add about 1/3. And I do not count students as umemployed.

    But the republic of Uusimaa is doing quite well econmically, I have to admit.

  • http://finnpundit.blogspot.com Finnpundit

    20. Finnsense: True, the US was the engine of the global economy but as you well know it was because they were willing to take on frightening levels of debt.

    Frightening? That’s the key word here. Debt is frightening to countries who are dependent on export markets, as the service of debt limits options should recessions happen in said export markets.

    US debt, however, is not frightening (though it is a subject of concern, but not in this context) as it is simply a function of the US dollar being the reserve currency of the world. Countries dependent on exports to the US get paid in dollars. There are only two places where those dollars can be spent: on oil imports, since the oil industry uses petrodollars, and on investments in the US, both in government securities and in capital markets. The fact that such investments also ensure continued trade makes the debt all the more functional as an engine for growth.

    If Europe had done the same it would have been the engine of growth.

    No, it wouldn’t, because Europeans don’t have a strong enough consumer market (due to high taxation) to make them an export destination.

    Europe is now growing faster than the US and the Nordics much faster.

    And that’s due to Bush’s tax cuts, which energized US consumer markets to import more from Europe, and US capital markets to invest more in growth markets.

    For Finland this is partly export lead growth but Europe does not depend on exports any more than the US.

    Wrong. Those nations that are the main economic engines for the EU are very much dependent on exports. Germany’s auto industry is certainly dependent on the American consumer, as Germans and Europeans are too strapped to provide a reliable marketplace. In fact, most all of European prestige corporations – Volvo, Nokia, L’Oreal, LVMH, BMW, Mercedes-Benz, Bayer, Siemens, etc. – are dependent on American consumers. As these corporations form the backbone for Europe’s economies, Europe itself becomes very much beholden to exports.

    All small countries that are rich rely on exports just as they also rely on imports. Since when was that a criticism of anything? It certainly has nothing to do with freeloading.

    You’ve misconstrued the criticism, perhaps on purpose, but still. It’s not a question of the function of trade in generating wealth. It’s a question of whether or not the welfare-statist model is responsible for that wealth. The freeloading happens when exports are necessary to the functioning of a welfare state that cannot survive on its own without exploiting markets in non-welfare states. The notion that welfare states are creating wealth by themselves is an illusion, promulgated by political interests dependent on keeping that illusion alive.

  • http://stockholmslender.blogspot.com/ mjr

    STP: Red flags??? Why is it that conservative slash libertarians sound so absolutely bonkers these days? And why are they so utterly imprecise and anti-empirical when it comes to terminology – wasn’t Erkki quite seriously classified as a “commie” on some comment thread here. If that term has any meaning at all it more or less means Marxism-Leninism, something that our dearly beloved foreign minister has opposed all his life. As for me, I’m a liberal, as much anti-communist as anti-fascist, and definitely not a socialist. There was a time when conservatives where quite reality based – where are Oakeshott and Burke when you need them?

  • http://finnpundit.blogspot.com Finnpundit

    28. iJusten: there are some things that should not be justified just by economics – like giving user information to Chinese Government, as MSN and Yahoo did.
    Understanding what is most efficient is not always most moral. Understanding economics takes away some innocence, but it should not take away your morals. The relationship between money and morals is not easy. To make money, you have to make compromises, but you should not throw all your values away and just take the money.

    It’s a big mistake to insist that corporations must behave in some moral way, because morality is such a nebulous value that it will always defy consensus. The most important thing corporations need to pay attention to – the most important value – is the bottom line, in terms of profitability.

    There is nothing more comforting than that. It makes it easy to make predictions as to what businesses will do. Lives can be built in peace and comfort around that all-important value.

    Once you bring in extraneous values that have nothing to do with profit, you interfere with equations that can only add uncertainty and fear to people’s lives.

    Having said that, the image of a corporation does matter a lot to the bottom line. Good corporate citizenship matters for that purpose, and that alone. Shareholder value must be preserved, and it doesn’t help if corporations behave in ways that might have an adverse effect on shareholder values.

    While I’m not a fan of MSN and Yahoo toying the confidence of consumers when it comes to privacy, I don’t think it’s their role to act as a political agent in China. It’s up to the Chinese to do what needs to be done, in terms of political change.

    I do tend to think, though, that as more and more Chinese use the internet, – and see what freedoms Americans take for granted on the web – the fact that they themselves must practice circumspection and self-restraint because portals like Yahoo and MSN cannot be trusted will eventually become unbearable. Everyone, after all, wants to imagine that they are and can be as free as Americans. The resultant contradictions when faced with the reality that they are not will in itself become a factor for change.

  • sepisp

    I hope it’s not a blogistan faux pas, but I’m going to comment on the original topic. No, economics, as a science, doesn’t necessarily lead to supporting any school of economics or political ideology. If you’re taught the Keynesian idea that increasing taxes increases wealth, then you’re going to be more socialistic. You should see what political students are taught, it’s pretty nasty.

  • Thomas

    Pundit:

    “US debt, however, is not frightening (though it is a subject of concern, but not in this context) as it is simply a function of the US dollar being the reserve currency of the world.”

    Who has proven beyond dubt that the current state in which the US dollar is “the reserve currency of the world”? Once the chinese stop buying US Bonds, the shit hits the fan.

    It might be “economically” wise for the chinese for the time being to finance the US Debt. But but. Things change.

  • http://finnsense.blogspot.com finnsense

    majava,

    I’ve not heard the criticism of the Finnish statistics (in contrast to the Swedish statistics). You’ll need to explain why you think they are cooked any more than anyone else. Are you saying that they have always been cooked (i.e. the definitions have always included people who are not actually unemployed) or that they have recently been cooked to show growth that is not there. I wasn’t aware of any change in the definitions recently which would imply that even if the actual figure is wrong, the growth rates in employment are accurate.

    It should be pointed out that US unemployment figures have also come in for significant criticism for not taking into account the very high incarceration rate, including part-time workers in the employmed and for ignoring people that don’t bother applying for benefits because unlike inwelfare states, they are no longer eligible.

    Finnpundit,

    I’m not going to respond to all your points because I don’t have time. Some of the stuff you come up with does make me smile though. A couple of points:

    1) The level of public debt in the US is by any measure extraordinarily high. That you defend it sets it apart not just from those on the left but from true Republicans. As you know, Mankiw believes it to be dangerously high as well. I was referring also to personal debt. Americans are hugely indebted personally due to easy credit and the recent figures on loan defaults are pretty shocking. I know of no serious economist who thinks either is sustainable.

    2) My point about Europe being the engine of growth if they were willing to be as indebted as Americans referred to the consumer. If Europeans maxed their credit cards and took all the equity out of their houses to buy stuff, obviously some of the stuff they would have bought would have been from abroad.

    3) You need to understand that both Europe and the US get the very largest share of their demand from their own markets. As I already said, Finland’s share of exports to the US is very small (something like 6%). A recent report by the ECB said that the Eurozone should weather the US slowdown. That simply would not be possible if US imports were that important. The companies you cite are just a list of European multinationals. You think the US has no multinationals? Microsoft, Oracle, News Corp, GM, Ford, GE, Walmart, Motorola, Dell, practically the entire entertainment industry.

    4) I didn’t misconstrue your point about freeloading, I just don’t understand it because it’s nonsense. If a country creates wealth by exporting some of the goods and services it produces it is not exploiting anyone. How can selling stuff to countries with smaller welfare states be exploitation? Do we force them to buy our stuff? I’ll say it again, Finland has had great productivity growth both per hour and overall. If the growth in GDP was all down to selling more stuff to americans I might be able to see where you’re coming from but Finland has simply become more efficient in the way it produces goods and services. In what way is it then a freeloader?

    There is a further point to make here which is that Americans don’t work longer hours because they feel a duty to support the world economy. They do it because there is a culture of hard work and they want more money. That’s a choice. Now, if the additional wealth that creates helps other countries exports that’s very nice but it says nothing about freeloading. What kind of stupid country would not sell goods and services to people that want them? The idea that our welfare state is dependent on that extra wealth is absurd. It accounts for no more than a few percentage points of GDP and Finland had a functioning welfare state with half the GDP it has now. If the US stopped producing so much there would be a correction and then things would proceed on as normal.

  • Freeridin’ Franklin

    Economics 101 should be mandatory course for all university students in this country.

    Mandatory courses in state-funded universities is certainly a fresh, original way to advance freedom in the neverending battle against the welfare-statist ideological cancer.

    But I agree that Finns tend to be rather clueless about even the most basic economics. Witness the current high real estate prices and the rationale for most of the recent Espoo housing fair houses being left unsold:

    “It takes time for people to accept the new price level.”

    I don’t think that any American realtor would try to suggest that builders and realtors set the prices unilaterally. Good old Joe Average is familiar with the law of supply and demand.

  • Thomas

    Pundit:

    Greg Mankiw is popular among people with views similar to yours. Others (I’ve read his blog from time to time, and I do find him rather boring, and very very politically motivated in what he writes, not scientific at all) might think that he’s more a propagandist.

    Now to some of his points.

    “First, in some cases, students start off with utopian views of public policy, where a benevolent government can fix all problems. One of the first lessons of economics is that life is full of tradeoffs. That insight, completely absorbed, makes many utopian visions less attractive. Once you recognize, for example, that there is a tradeoff between equality and efficiency, as economist Arthur Okun famously noted, many public policy decisions become harder.”

    Since the neo-classical economic theory – which is in practice the only economic theory taught at universities – is basically a theory whose motive is to prove that the conservative (capitalist) view of the world is correct, it’s no wonder that people who are not willing to study any alternating views on economy surrender. Sure, many initially might wonder about the absurd assumptions made in order for the theories presented to work. But at some point they surrender to the view, that the absurdities are rather just “simplifications” that are necessary because the world is so complex. And then they forget about their doubts, and the conclusions drawn from patently absurd assumptions, start living their own life. At some point the assumptions are effectively forgotten, only the conclusions live on, and are concieved as almost physical laws.

    “Second, some of the striking insights of economics make one more respectful of the market as a mechanism for coordinating a society. Because market participants are motivated by self-interest, a person might naturally be suspect of market-based societies.”

    The markets (perfect competition) that (neo-classical) economic theory is focused on, do not exist anywhere. So any theory relating to perfectly competetive markets are irrelevant to reality. In reality, the – according to the (neo-classical) economic theory so ineffective oligopolies – are more or less the norm in mature markets. Yet somehow, theories based on the assumption of perfect competition, are freely applied to the real-world, and conclusion about it are made based on these theories. Even by economists, who should know better.

    And the self-interested homo economicus (or Robinson as HE is often called in books for introductory courses), based on whom many economic theories are founded, is a fictional person. He/she might come quite close to the truth for some people, but but. Also, the utility theory relevant for the study of markets, is a theory so completely de-coupled from reality, that it’s almost sad that it is even taught to students. The utility-maximising consumer, is basically an impossibility, due to “the curse of dimensionality”.

    “But after learning about the gains from trade, the invisible hand, and the efficiency of market equilibrium, one starts to approach the market with a degree of admiration and, indeed, awe.”

    What a laugh.

    “Gains from trade”. Yes you might teach Ricardian trade theory, and it is a nice logical exercise. Somebody who is gullible might be fooled by this logical excercise. But then the assumptions (like production factors don’t move between countries) are not made into a big issue.

    “Invisible hand”. Yeah yeah. But markets are steered by much more visible hands, where pricing policies are chosen even before products are launched. The question is more, how big margins should one put on production costs, in order to maximise profits. The theoretical “no profit” result of firms (yes, this is actually one prediction of neo-classical economic theory which is often forgotten. Under this theory firms do not make any profit at all, but somehow this aspect is always forgotten in popular writing about the delights of market economy), who discusses about them?

    “The efficiency of market equilibrium”. Yes, it’s efficient in terms of the neo-classical theoretical framework, which deals with a world that is not existing anywhere. Furtermore, the fixation with EQUILIBRIUMS, in a world that is changing more rapidly every day, is fascinating. How would yesterdays “equilibrium” apply today? When the economy is so extremely dynamic as it is today, the statist equilibria oriented theories do not really talk about the real world. Instead they are the utopias that Mankiw accused new students of. Sure equilibriums are theoretically nice, but they do not talk about the real world, more than in a snapshot like way. But they offer no help to policy planning, since they principally focus only on momentarial snaphots, of what the situation is RIGHT NOW.

    “one starts to approach the market with a degree of admiration and, indeed, awe”

    The most intellectual students do not.

    “Third, the study of actual public policy makes students recognize that political reality often deviates from their idealistic hopes. Much income redistribution, for example, is aimed not toward the needy but toward those with political clout.”

    Which study of actual public policy might the right-wing professor be talking about here? The one he presents, or?

    I don’t see any scientific base for teaching public policy – in the realm of economic science – along these lines. This is typical Mankiw propagandism.

    So Pundit if “These are lessons certainly lost on Finland”, I see it more as a strength than a weakness. Not surrendering to mindless propaganda, is a sign of strength.

  • Wha?

    #39 mjr

    Did you make that appointment to your hemmroid specialist yey? I think you have a bad case of “sit and rotate” ;)

  • http://koti.phnet.fi/bevertje/index majava

    Finnsense. About the cooked unemployment figures. You already know that there is a difference between the stats of statistics Finland and that of the ministry of labour. The latter always shows a worse situation, but the numbers that Eurostat accepts are those of statistics Finland. You also must know that Finland is doing something that also other countries are doing, but therefore it is not justified. I am talking about the hordes of people that are doing practice jobs and those that are put on a wide variety of training and schooling projects. These unemployed disappear from the stats while they attend these activities. Happens everywhere, I know, but the scale this happens in Finland is remarkable. I do not have the numbers, but indirectly you can see it from the funding that is going to labour training. That’s a massive amount, I recall.

    On the positive side: Whatever you include or exclude in your stats, the trend should still be giving you correct information. This trend shows that unemployment is decreasing and employment is improving. Still one remark: Part of why unemployment went down is because a large group of lower educated women gave up job seeking and became housewives. Not a good development if you ask me. The other reason for the better looking unemployment figure is not because so many new jobs were created, but from new small (one person) businesses. God knows what they’re doing??

  • winter

    “Once the chinese stop buying US Bonds, the shit hits the fan.”

    You all, must think the Chinese are really stupid. They are not. They are just stashing their money where it makes the most, return on investment.

    Something high Taxes are not doing for you.

  • Freeridin’ Franklin

    Much has already been said, but I’ll say this much:

    But after learning about the gains from trade, the invisible hand, and the efficiency of market equilibrium, one starts to approach the market with a degree of admiration and, indeed, awe.

    Yes, this bears all the hallmarks of a religious conversion, and recent converts tend to be the worst fanatics. Market-worship of this kind is essentially sophomoric, which is why I pegged Pundy as a sophomore when I first stumbled on his blog. Of course, a less intelligent person may appear sophomoric for his entire life.

    Impressionable students with silly utopian ideals such as “the state will fix everything” are of course prone to adopt other kinds of utopian ideals such as “the invisible hand will fix everything”. Intellectually lazy sheep like this are always looking for someone to offer them an easily palatable flat Earth worldview. This does raise the obvious question: what are such people doing in an institute of higher learning, particularly a prestigious one such as Harvard? Certainly their place should be taken by people who exhibit capability for critical thinking. This is an argument for numerus clausus as practiced in Finland if I ever saw one.

  • Kristian (in Espoo)

    STP:

    “It is very easy to prove it, just drive your car around Finland after 9. It is dead.”

    Yes, it bores me to tears. It’s especially stupid during tourist season :-|

    “How many percentage was Nokia owned by Americans? 3/4? [.......] I am a Finn too. Do not get me wrong, from a business family, I see how business people are treated in this country.”

    Nordic governments would rather see dependable proletarian populations, with no messy entrepreneurism. It best fits the concept of centralized social and economic control. However, it requires that large corporations from outside bring jobs—that is, corps owned by shareholders in low-tax lands.

    I don’t think that those who smugly tout socialism and egalitarianism even realize where their jobs originate. For most, it’s just a percentage that’s printed in newspapers—either there are more jobs this year, or less.

    Government needs to be a partner with business, and act in a professional way. Nordic governments are antagonistic toward anything except large business—again, centralized social and economic control. For this reason, half my family has moved away. I have relatives who employ many people in other countries. They would laugh at coming back here, other than to visit their summer cabins.

  • http://www.jasongoodwinonline.com Crosschecking

    I can’t believe that FinnPundit received such a largely negative response. I thought that everything he said made sense. Having said that, the whole issue of taxation to serve political clout (as opposed to helping the needy — my, how lovely politics works!!! >:( ) is so true no matter what country you’re in. Happens in the US as well.

  • Thomas

    Winter:

    “You all, must think the Chinese are really stupid. They are not. They are just stashing their money where it makes the most, return on investment.”

    You shouldn’t comment on things you do not know anything of. I’m not saying the Chinese are stupid (I’ll leave that part for your next posting on some other subject, where it is in your nterest to say that), and I think I clearly stated it – all people with enough reading comprehension should be able to grasp this – when I wrote

    “It might be “economically” wise for the chinese for the time being to finance the US Debt. But but. Things change.”.

    In your case “comprehension” is probably a too long word for you to understand. It has more than 4 letters after all.

  • http://fredfryinternational.blogspot.com fred fry

    “It should be pointed out that US unemployment figures have also come in for significant criticism for not taking into account the very high incarceration rate, including part-time workers in the employmed and for ignoring people that don’t bother applying for benefits because unlike inwelfare states, they are no longer eligible.”

    The thought that the US has low unemployment because of the high rate of prison inmates is a myth. If that is so, why is unemployment in Europe high in countries that have mandatory military service as they too are removed from the job market just as if their country put them in jail?

    This myth also ignores a basic fact that many in US prisons have jobs and even earn a salary. It is a token amount, but they are doing work. Just check “prison industries” in google. Al the furniture in my room at school was prison-made.

    Anyway, each person placed in prison is replaced with 10 illegal immigrants who must find work as unemployment is not an option for them. Could Europe meet that kind of demand for jobs. Immigrant slums like those in France say no.

    One other factor going against the US is a standard four-year college education instead of 6 in Europe. So six years for college and 1-2 years for military service. Europe is by far tinking more with their unemployment numbers than the US is.

    It is nice to see the rate going down in Finland. Although the demand is for selective skills. I have one friend whose wife is looking for work and she always seems to be 1 of 200 applicants.

  • Thomas

    Franklin:

    “This does raise the obvious question: what are such people doing in an institute of higher learning, particularly a prestigious one such as Harvard?”

    Unfortunately the un-intellectual disease that has infected the economic science has spread also INTO the departments themselves. Somehow I believe that the “prestigious” Harvard university is full of these “the invisible hand will fix everything”-people. Those “heretics” (or let’s say RATIONAL people – if we want to talk about reality), that don’t surrender to the “religion of economics” will not have a future. At least not a simple one.

    This is the sad state the economic science is in – and the “nobel” price choices, year after year, makes things worse. This years winner’s theory about “natural unemployment rate” is just about crumbling the same year he’s awarded.

    This kind of “science” should be called something else.

  • winter

    “It might be “economically” wise for the chinese for the time being to finance the US Debt. But but. Things change.”.

    Thats not what the chinese are doing. That your stupid part. They are just putting their cash where it makes the MOST money. If your country offered higher rates of return than the USA, the chinese would put their money in your banks.

    Its that simple.

  • http://www.rautainen.com Jyväskyläinen

    Yes, i think it makes you somewhat conservative. Thats a huge problem in this society.

  • http://finnsense.blogspot.com finnsense

    winter,

    Your comment about the chinese is precisely wrong. Yields from dollar investments are extremely low compared to almost any other OECD country. If they weren’t economists would not be puzzled at why the dollar has not fallen as much as expected. The Chinese are doing it, like I said, to keep the dollar high relative to the yuan. Japan and Germany did the same thing after WW2.

    Franklin,

    Your point about US prison workers is moot. Were they not in jail they would almost certainly be either unemployed or illegally employed. Moreover, prison workers are not allowed to displace proper workers so the jobs are created. It’s probably not hard to find work when you can get prisoners deboning chickens for 4c per hour!

    Secondly, the fact that people in the US are counted as employed if they are working part-time (when compared to Finland where part-time workers claim benefit) seems far more significant than the fact that the basic degree take one year more in much of Europe. As you well know, the majority of US graduates go on to grad school anyway. Also, the BA is now the basic degree across Europe too as of a couple of years ago.

    You are right about the need for selective skills though but that it true everywhere. Try getting a job in the manufacturing or homebuilding industries in the US at the moment.

    Everyone,

    I noticed some people have criticised Mankiw. Mankiw is very smart and is one of the most highly regarded economists of his generation so he shouldn’t be dismissed on economic matters. Where he tends to go wrong is his values. He argues that many on the “left” fail to appreciate that there are trade-offs between equality and efficiency, which I think is true. However, that there are trade-offs does not automatically mean we should choose efficiency as he does.

    In his post he is arguing (among other things) that if you study economics you come to appreciate that it is not possible to have both high taxes and a maximally efficient system, so you are more right-wing. But, and this is crucial, being more right-wing doesn’t make you right-wing. I’m quite happy to sacrifice a little bit of growth for more equity because I think that increased equity not only suits human psychology better but that it provides for a better quality of life. Americans must agree because they also redistribute 25% of their GDP. The question is one of degree.

  • Freeridin’ Franklin

    The thought that the US has low unemployment because of the high rate of prison inmates is a myth.

    It is not a myth, it is a factor, albeit not the only one. The high prevalence of housewives in the US is a considerably more important factor. As has been stated, Finland has a higher workforce participation than the US, despite nearly 1,5 million soldiers (the US has a military, remember?) being part of it.

    One other factor going against the US is a standard four-year college education instead of 6 in Europe. So six years for college and 1-2 years for military service.

    Sigh. This has already been explained to you, but I’ll do it again, this time slower. There is no “six-year college education” in Finland, save medical school. The standard curriculum for a master’s degree in a real university akes four or five years (the latter for an MSc in a technical university, i.e. DI). The standard curricula for bachelor’s degrees in real universities take 3 years. Bachelor’s degrees in polytechnic “universities” (like the one you went to) usually take 4 years, but I understand there is some variation.

    Of course, some people take longer to graduate. It happens in the US as well. AFAIK, Bill Gates hasn’t got his Master’s yet.

    By the way, military service in Finland typically lasts 6 or 12 months. (NC)O training takes 12 months.

  • Kristian (in Espoo)

    Yeah, I really can’t see much validity to discussing unemployment percentages. If you’ve trained yourself in a relevant skillset, then you can get a job either here in Europe or in America, without too much difficulty. Of course, one might argue that if you didn’t bother to learn marketable skills, then life in America isn’t so great. And, without a doubt, there are some other factors too.

    For example, America’s car-centric urban planning largely necessitates that you need to spend 5K/year, just to own a car. It’s a heavy expense if you don’t have a job……….and getting a job is difficult if you don’t own a car. That’s a typical American-style quandary, and I imagine it can really make a person *feel* poor. And it can lead to financial problems if car expenses cause credit card balances to skyrocket.

    Conversely, here in Europe, you can commute with a 200e bicycle. There’s no transportation obstacle to getting a job. In fact, there are even roads specially designed for you and your bike! Everywhere! So, getting a job only depends on your motivation and aforementioned skillset—not on transportation.

    Another weakness of America’s shaky urban planning, is that it promotes drunk driving. When I worked in the states, it was common for people to hit the bar on Fridays, after work. I used to look around and think to myself: Every single person here is wasted and will drive home later during the evening.

    Aside from taking the fun away from an otherwise great evening, a drunk driving arrest can further hamper your chances of getting a job or even _staying_ employed! Here in Europe, we stumble toward the nearest bus/tram/train/taxi stop.

    Urban planning is great here in Europe, and it nullifies lots of the arguments and counter-arguments concerning unemployment percentages because you can live here on less money and with less hassle.

    On the other hand—whereas America is slowly realizing it needs to explore European-style urban planning—the fact that Americans can live according to the housewife paradigm, speaks to the successful part of America’s economic system. Of course, that mode exist here in Europe too, so it’s not a uniquely American concept. But, the Nordics are perhaps a little bit slower in that regard. I think we’ll catch-up though.

    Anyway, my opinion is that the strengths of all countries should be evaluated. To say Europe is better than America, or visa versa, probably isn’t the answer. The optimal solution probably lies somewhere in-between. I like America’s ‘conservative’ economics, but I would like to see it combined with smart European urban planning.

  • http://www.axis-of-aevil.net/ hfb

    STP = “How many Finnish housewives do you know?”

    Not many, but all of the working moms I know want to either stay at home or work part-time but cannot afford to in Finland. Staying at home is a luxury in either country.

  • a lamb with no guiding light

    Finnpundit wrote: Everyone, after all, wants to imagine that they are and can be as free as Americans.

    Piffle. Not even all Americans want that. See, for example, the Christian right in the US.

  • Unit

    “For example, America’s car-centric urban planning largely necessitates that you need to spend 5K/year, just to own a car.”

    Heh, I purchased my first car for 100$, my second for 500$, and my third for 1$.

  • Kristian (in Espoo)

    Heh, I purchased my first car for 100$, my second for 500$, and my third for 1$.

    Yeah, I’ve had those kinds of cars. Spent more time under them than inside. When they break-down, then it’s good to have alternate forms of transportation…..other than one’s neighbor.

    Then there’re those expensive parts (800 for auto-transmission, the only kind available in US ;) ), insurance (probably 1800/yr for a young/new driver) and you can’t even save on gas by buying a small car in America; because someone else’s big car will crush you!

    But, I know what you’re saying: The overall cost of car ownership is much lower. A normal working person can easily afford even a nice car in America.

    Well, whereas you have priceworthy cars, we in Finland have really smart politicians. They’ve convinced us that we shouldn’t pay competitive market prices like everyone else in Europe; instead, we Finns should pay roughly double.

    We don’t question our leaders.

  • http://fredfryinternational.blogspot.com Fred Fry

    Sigh. This has already been explained to you, but I’ll do it again, this time slower. There is no “six-year college education” in Finland, save medical school. The standard curriculum for a master’s degree in a real university akes four or five years (the latter for an MSc in a technical university, i.e. DI). The standard curricula for bachelor’s degrees in real universities take 3 years. Bachelor’s degrees in polytechnic “universities” (like the one you went to) usually take 4 years, but I understand there is some variation.

    Franklin,
    They take the five years for the classes and then they take the 6th year doing their ‘Gradu.’ Lets say that your right. From what I saw, students in Finland pacing finishing their school, namely their gradu (thesis) right before they run out of student subsidy/opintotukki. Why not tell students that they will get all their opintotukki regardless of how early they complete their studies. They you will have an incentive for them to finish and join the workforce. That student subsidy is also keeping kids out of the workforce because they will have to pay it back if they work too many hours. There is no such restrictions in the US. It is somewhat shocking that there are people in their late 20′s joining the workforce in Finland with no job experience.

    As for Finnish housewives, they exist. Although they they have to do something like go back to school for a second free degree after gatting their first. (I have a friend and she is not taking courses for a third free degree.) I have another friend who wants to stay home with her kid but feels pressure to keep working. She gets questions about what is wrong with the daycare and so on. Nobody understands that she just wants to raise her kid herself.

    Maybe the discussion about unemployed would be better if centered on those with less training and experience. It was stated above that if you have a skill you can find a job in both countries. This is somewhat true, although less true in Finland. (Even if you know Finnish) It is completely another story for the unskilled.

  • Thomas

    finnsense:

    “I noticed some people have criticised Mankiw. Mankiw is very smart and is one of the most highly regarded economists of his generation so he shouldn’t be dismissed on economic matters.”

    Mankiw might be smart (as an economist), but he does still preach the neo-classical gospel without that much of a problem. He does (afaik) often make use of theories as if they would apply to reality. Which they don’t. That shows that he is either naive (in the sense that he really doesn’t have the “tools” to understand the facts about the limititations of applicability to the real world most neo-classical economic theories are containing) or simply dishonest. I think it’s the first alternative. I’ve studied economics, and met and discussed with people in the profession. And I’m surprised of the fact that these people truly seem to believe in the idiocies they present.

    I mean, I took part in a seminar, where I presented some findings from the 70′s, that had an fundamental impact on the so called “general equibilirium theory” that – afaik – is still taught in the traditional way at most universities over the world. These findings I presented, basically screwed up all the “general equilibrium theory” foundations. Yet general equilibrium theory is still taught as if it was a fact (a natural law). And the amazing thing was that the guy holding the seminar, wasn’t even aware of these findings dating 30 years back. And he has a PhD in economics.

    So the “economists” are quite good (through an enourmous self-censorship that seems to be in place) at hiding any “bad news” even from people in their own field. And even if it has been published in well-known – actually more or less “corner-stone” – publications. Now this would perhaps get someone thinking, that they might be able to downplay problems also in the eye of the general public. So either Mankiv is an idealist, and just unaware of the problems like this certain PhD, or then he is one of the one’s manipulating the profession/public.

    And the fact that his blog – as F***pundit put it – is/was originally directed towards (his) students, and he pours out his political views disguised as “scientific” facts, just makes me want to puke.

    Brainwashing can be done in many ways.

  • http://finnpundit.blogspot.com Finnpundit

    He does (afaik) often make use of theories as if they would apply to reality. Which they don’t.

    In Finland, however, theories are supplanted by welfare-statist ideologies, as if they would apply to reality. In a contest of economic theory and socialist ideology, guess which will ultimately win? Historically we have seen that economic theory does.

    The critiques of socialists (like Thomas) get weaker over time. Yet because of the entrenchment of socialist interpretations in welfare-statist societies, we are bound to see (as on this thread) even more outlandish denunciations of economic theory, simply because of a refusal to concede defeat.

    It’s a sort of bunker mentality, which Finns are known for. Suffice it to say that the kinds of attacks socialists face have never been experienced before by the left. Eventually, attrition will wear down their resistance, yet most likely they will come up with another ajopuu teoria to describe their own acquiescence in the face of historical inevitability.

  • Unit

    “These findings I presented, basically screwed up all the “general equilibrium theory” foundation”

    So now you are bitter that you didn’t revolutionise the world of economics as you anticipated. Worry not, you might still get that Nobel. Heh Heh.

  • Thomas

    Unit:

    “So now you are bitter that you didn’t revolutionise the world of economics as you anticipated. Worry not, you might still get that Nobel. Heh Heh.”

    I’m definately not BITTER, since this was not MY finding, I merely presented something somebody else had found, and in a fairly low-importance context.

    But, if I would sum up my feelings about the incident, I would use another adjective: SCARED. That’s how I feel concerning the economists, and their profession. If PhD:s do not even KNOW of 30 year old findings, that basically crush teories that are still being taught as if they were the truth, then something is BADLY wrong.

    Talking about Nobel prices. Both the gentlemen who developed the destroyed “general equilibrium theory” (Arrow & Debreau) have received the price. One of them actually took part in destroying that theory himself. The latest Nobel price winners theories are crumbling RIGHT NOW. So: No I’m not especially interested in the – so called – Nobel price of economics.

  • Thomas

    Kristian:

    “Well, whereas you have priceworthy cars, we in Finland have really smart politicians. They’ve convinced us that we shouldn’t pay competitive market prices like everyone else in Europe; instead, we Finns should pay roughly double.”

    Yes, they are really smart. If you consider the overall cost of car-ownership (the second biggest investment households make), and the fact that this money (if not taxed) goes directly out of the country, then it’s really wise to tax this business. Especially since the taxes seem to force the car manufacturers to lower their profit-margins, when dealing with finnish distributors. If I can choose, I’ll rather see that those profit margins are in the hands of the finnish public economy, than in stock options for GM managers. I’m selfish in that sense.

  • Kristian (in Espoo)

    Thomas: “I’ll rather see that those profit margins are in the hands of the finnish public economy, than in stock options for GM managers. I’m selfish in that sense.”

    So, if you buy a 10K used auto, then you don’t mind paying an extra 8K of Finn-tax on top ( AKE autovero )?

    That is, the rest of Europe pays 10K, but you pay the Finn-price of 18K for the same car. You’re not only “selfish”, but also religiously fanatical! :lol:

    If you’re worried about money flowing out of the country for luxury cars, then why not make the tax progressive? Why do Finns need to pay double for their economy automobiles?

  • Freeridin’ Franklin

    That is, the rest of Europe pays 10K, but you pay the Finn-price of 18K for the same car.

    Why do Finns need to pay double for their economy automobiles?

    Yeah yeah. Take, for instance, the cheapest Fiat Grande Punto:

    Germany: 11.200,- EUR (http://www.fiat.de)
    Finland: 13 990,- EUR (http://www.fiat.fi)

    Cry me a bloody river.

    Happy holy-trails, everyone!

  • Thomas

    Kristian:

    I think I said it clearly enough. I don’t mind that the profit margins are diminshed, via taxation. Do you?

  • Kristian (in Espoo)

    #81 Franklin, the overprice—almost 3000e—is the cost of a full-time transit ticket for four-years!

    After overpaying for your Finn-car, you can forget the transit transit. You’ll have to drive that car all the time to justify the 3K premium.

    By the way, 3000e invested at 10%/yr, compounded monthly, equals 8000e in 10 years. It’s no wonder that Finns have the least net worth ( varallisuus ) in western Europe :-(

  • Kristian (in Espoo)

    “…the taxes ( AKE autovero ) seem to force the car manufacturers to lower their profit-margins, when dealing with finnish distributors.”

    Thomas,

    you better hope other countries don’t use the same strategy against Nokia products. Protectionism works both ways.

  • Kristian (in Espoo)

    “3000e invested at 10%/yr, compounded monthly, equals……”

    In 20 years, it’s 22000

  • Kristian (in Espoo)

    “3000e invested at 10%/yr, compounded monthly, equals……”

    In 30 years, it’s 60000e

    All that money you lost because of overpaying 3000e due to AKE autovero — that is, you payed 3K more overall than the German buyer.

    And that 3K is a relatively conservative estimate. I think my estimate of 8K is more realistic. At least that’s what Finland would have charged me for bringing a used car into the country. I didn’t take the offer……..I’ll move away before I buy a car and pay Finland’s autovero .

  • Kristian (in Espoo)

    Just to make the example even more complete, let’s say you buy the car when you’re 25-years-old…….

    When you retire in 40-years, that 3000e invested at 10%/yr, compounded monthly, equals 160000e !!!!!!!

    It’s all about varallisuus !

  • Thomas

    Kristian:

    “you better hope other countries don’t use the same strategy against Nokia products. Protectionism works both ways.”

    Fortunately, the WTO handles this part. So don’t worry.

  • Thomas

    Kristian:

    “When you retire in 40-years, that 3000e invested at 10%/yr, compounded monthly, equals 160000e !!!!!!!.”

    Say a new car costs 20000. Say it is worth 14000 after 3 years (incredible for such an expensive investment). Now calculate the cost of this over a lifetime (assuming people change cars every three years). THEN, ask yourself, should this kind of money be thrown abroad at no cost? Nevermind Nokia.

  • Freeridin’ Franklin

    By the way, 3000e invested at 10%/yr, compounded monthly, equals 8000e in 10 years.

    But of course, every penny is the beginning of a million. I see that your grandmother has taught you well. I must say that I am very interested in your guaranteed 10% yield investments, though.

    Even if things look bleak for the proud new Finnish Punto owner, after roughly three years they might be somewhat better since by that time the Finn will have gained back the 3000€, as cars depreciate slower in Finland.

  • Kristian (in Espoo)

    Franklin: “I must say that I am very interested in your guaranteed 10% yield investments, though.”

    I guarantee that you WON’T get 10% yield—or any other yield—if you pay the enormous autovero to the Finnish government.

    Not really sure why you guys like spending many thousands of euros more for a car, than people in other European lands.

    I have to concede that Thomas does have a point about the tax being used to reduce auto company profit margins. Seems to make sense for new cars. But, I still think paying that huge tax on used cars, is a big ripoff against Finnish consumers.

    Maybe it wouldn’t be so bad if they drastically reduced income taxes instead. In principle, I’d rather see higher taxes on products, than on income. It’d be more straight-forward and make social engineering difficult.

    I think that’s Germany’s approach with raising VAT to 19%. Let’s just hope they follow-through and lower income taxes, as planned. Then we should do the same in Finland.

  • Freeridin’ Franklin

    I guarantee that you WON’T get 10% yield—or any other yield—if you pay the enormous autovero to the Finnish government.

    What does that have to do with anything? I paid it and still have plenty of money for investing. I’m a little wary of the market right now, so please inform me of your guaranteed 10% yield investment targets. I’ve considered real estate in new and aspiring members of the EU, but it’s difficult to manage over a distance. Estonia would be close, but I’m 10 years too late. Riga has some pretty nice art nouveau buildings in awful condition (an investor sees this as a possibility), but prices seem to be pretty inflated there as well.

    Not really sure why you guys like spending many thousands of euros more for a car, than people in other European lands.

    I would like to pay zero taxes on everything, actually I’d like to get my car for free, but I guess I’m able to look at the big picture. Mind you, the car tax should be modified: for instance, more economical technology such as hybrids and electric cars should be favoured. Making the tax progressive as you suggested wouldn’t be such a bad idea.

    By the way, you didn’t address the point about depreciation. Have you bothered to compare used car prices in Finland and Germany, car tax notwithstanding?

  • Freeridin’ Franklin

    Funny, I looked at the price of my car in Germany. It cost about 22k here in Finland and would be about 3k cheaper in Germany. It seems that the car tax is eati

  • Freeridin’ Franklin

    ng away the profit margins quite nicely. No wonder the EU (read: France and Germany) is so pissed off about it. Did I mention that my car was French?

  • Kristian (in Espoo)

    Franklin: “What does that have to do with anything? I paid it and still have plenty of money for investing.”

    But, you’ll have 160000e less at the end.

    Franklin: “I’m a little wary of the market right now, so please inform me of your guaranteed 10% yield investment targets….”

    Again, the only guarantee is that you won’t earn less than with the finnish government’s tax scheme.

    Check-out Oppenheimer Global Fund’s averages—around 12%. Difficult to say what the future holds, but if you’re young, then growth funds might make the best sense. Depends on your own risk tolerance, of course.

    By the way, it’d be nice to invest pre-tax income, like in the United States.

  • Kristian (in Espoo)

    Franklin: “By the way, you didn’t address the point about depreciation. Have you bothered to compare used car prices in Finland and Germany, car tax notwithstanding?”

    Yes, I have compared. I tried to bring an 8K car to Finland, and they wanted to charge me over 7K tax. Buying in Finland would have been even more expensive overall. I’ve done other comparisons in the past; it’s always about the same.

    Depreciation….. The overcharge (due to Finland’s autovero) precludes me from selling the car outside of Finland. Obviously, nobody will pay finnish prices outside of Finland.

    That means when I move away, I’ll have to arrange selling the car in Finland and buying a new one abroad. It’s a big hassle and the series of transactions will cost me more than I might have saved via Finland’s alleged favorable depreciation.

    I tend to keep cars forever; perform all mechanical work myself and invest in good parts. That investment is lost due to the transaction process.

    And none of that considers the time-value of the overcharge (due to finnish autovero). At 10%, that 7K would earn me 2500 over 3-years.

    Finland’s system causes a needless and expensive hassle. It’s always been that way. I really wish we’d do business like in other countries.

    That way people could invest the money they’d otherwise spend on the autovero, into business that sell products abroad. The current system just keeps everyone cash-poor and makes investment and growth more difficult.

    But hey, if they would drastically reduce income taxes to help us recoup the loss due to autovero, then it would almost be worthwhile…….sort of. However, it would still keep us on an awkward footing compared to other countries.

    I really hope the EU successfully addresses this issue.

  • Kristian (in Espoo)

    “I’ve considered real estate in new and aspiring members of the EU, but it’s difficult to manage over a distance. Estonia would be close, but I’m 10 years too late.”

    No you’re not. Just go outward one-or-two km, from the city’s center. You’ll see that luxury flats are being built in various places. So, apparently, demand for a nice lifestyle exists.

    Old buildings in the city’s center are a hassle to renovate. Aside from historic protection regulations, they probably need new plumbing, electric, heating, etc.—all based on primitive base construction. I’ve renovated a few of them, though not in the Baltics. It’s expensive. On the bright side, building materials and labor are cheap in the Baltics.

    Again, if you go outward, you might find something more simple. You might also find better parking and attached storage buildings for your stuff. Think long-term if you’re young. Plus, at some point, you might want to change your tax-home to the Baltics, so you’ll have a comfortable place to go—at least officially.

  • Freeridin’ Franklin

    No you’re not. Just go outward one-or-two km, from the city’s center. You’ll see that luxury flats are being built in various places. So, apparently, demand for a nice lifestyle exists.

    Sure they are. It’s only that the prices have 15 or so trailing zeroes.

    Again, if you go outward, you might find something more simple.

    I suppose Narva could be an option, if one dared to go there. Buy an apartment, get 10000 little-used syringes as a bonus. But I’d sat there is potential for longterm appreciation.

  • Kristian (in Espoo)

    Narva….near the Russia border???? I’ve never been there, but I assume it’s populated mostly by Russians. I guess you’re looking for something really inexpensive then?

    I’ve seen some older buildings on the outskirts of Tallinn. I’m pretty sure you can get something there that needs work. If you’re looking for an investment rental property, then make sure you can get at least middle income people in there. If you go too cheap, you’ll just attract problems.

    You can probably contract with a rental agency for little money.

    One thing I noticed, is that most older buildings don’t have balconies. If I were to ever move there, then a balcony would be important. I assume it would be important to most middle- and high-income renters, too.

  • Kristian (in Espoo)

    By the way, Franklin, if you use Google Earth, then scroll to the outer edges of the city. You’ll see areas with single houses and a few tenements mixed-in. I’ve walked through those areas. Lots of houses are dilapidated. But, the neighborhoods are slowly shaping-up.

    Might be some opportunities there. I wonder how much those singles would cost. Or flats in the tenements, for that matter.

  • Freeridin’ Franklin

    Narva….near the Russia border???? I’ve never been there, but I assume it’s populated mostly by Russians. I guess you’re looking for something really inexpensive then?

    This is all very theoretical, but yes, I am interested in profit more than spending my money.

    You see, Russia=oil=money. This equation is already beginning to lift real estate prices near the border in Finland. I can’t imagine why it wouldn’t have a similar effect in Estonia.

    But based on http://www.narvakinnisvara.ee/services.php, this premium is already being discounted in the prices. Houses and flats are cheaper in eastern Finland, and shall we say, in slightly better condition. It seems that Narva is approaching Helsinki prices whereas Tallinn has probably already surpassed them.

    Might be some opportunities there. I wonder how much those singles would cost.

    My guess is appx. a gazilliard €. Per square meter.

  • Freeridin’ Franklin

    I did a quick comparison and it does indeed seem that Narva and Lappeenranta are roughly at the same absolute price level.

    Not to mention that after you’ve spent your gazilliard euros, in Estonia suprise heirs tend to pop up to claim the property you just bought…

  • Thomas

    Kristian:

    “But, I still think paying that huge tax on used cars, is a big ripoff against Finnish consumers.”

    Not necessarily so, if that “maintains” used car market prices in Finland. There is no point really to allow any more depreceation in prices of 20000e investments.

    I mean. If I invest 20000e (todays money – something like a bit more than a normal 1 year salary in Finland), for something, this should have a market value for 50 years onwards. Especially, if it’s an artefact, that is calculated into the planning of societies, more or less. Otherwise, you can yourself calculate, how sound the market is. If we now have a situation that is – not likeable – but perhaps liveable, why should we import the insane markets abroad? The markets abroad – in this case – feed themselves, but they do not feed us. It’s not a commodity market, when you start with prices like 20000e, that are then something like (in Finlands case, with the aid of boarder control) 14000e 3 years later. That’s a rip-off. Nothing else.

  • Kristian (in Espoo)

    Thomas: Not necessarily so, if [autovero] “maintains” used car market prices in Finland. There is no point really to allow any more depreceation in prices of 20000e investments.

    A car has a finite useful life. At some point, a car will die. A car’s useful life is probably shorter here in Finland, due to the climate.

    Despite any depreciation advantages, due to autovero, during the early years of a car’s life, eventually someone within the chain-of-ownership gets screwed. Most likely it will be another Finn, since cars can’t be sold abroad at overinflated Finnish prices.

    In your case, Thomas, thanks to the Finnish autovero, you bought an overpriced car. And to avoid losing even more money, you rely on the Finnish government to keep prices artificially high via autovero.

    But, some future owner of your car—another Finn—will get screwed when the value sharply drops. That’s just another reason for why the Finnish autovero system is a big ripoff.

  • Kristian (in Espoo)

    reposted, hopefully with better italics….

    Thomas: Not necessarily so, if [autovero] “maintains” used car market prices in Finland. There is no point really to allow any more depreceation in prices of 20000e investments.

    A car has a finite useful life. At some point, a car will die. A car’s useful life is probably shorter here in Finland, due to the climate.

    Autovero might ensure depreciation advantages during the early years of a car’s life, but eventually someone within the car’s chain-of-ownership gets screwed. Most likely it will be another Finn, since cars can’t be sold abroad at overinflated Finnish prices.

    In your case, Thomas, thanks to the Finnish autovero, you bought an overpriced car. And to avoid losing even more money, you rely on the Finnish government to keep prices artificially high via autovero.

    But, some future owner of your car—probably another Finn—will get screwed when the value sharply drops. That’s just another reason for why the Finnish autovero system is a big ripoff.

  • Kristian (in Espoo)

    Oh, and that Finn who eventually gets ripped-off by purchasing your car…..

    We can probably assume that he is less fortunate than you. In other words, he is poorer.

    So Thomas, your gain is his loss. Due to autovero.

  • Anonymous

    sepisp #52:”No, economics, as a science, doesn’t necessarily lead to supporting any school of economics or political ideology. If you’re taught the Keynesian idea that increasing taxes increases wealth, then you’re going to be more socialistic. You should see what political students are taught, it’s pretty nasty.”

    Economics students and political students are both fraquently taught grand theories with highly suspect connections with the real world. The difference, to me, seems to be that political students also get a healthy dose of political history with their courses. Comparing different political systems (past and present) critically is a built in part of the field.

    In economics, on the other hand, history is for the most part presented in an anecdotal fashion. “Economic history” is considered to be a realm of political or historical studies, not economics as such. The field of economics seems consider the world mainly “as it is” or “as it will be”. This is not surprising: neo-classical economic theory does not need to compare different systems and their comparative merits: it itself presents a teleological model instructing how the economic world operates and how things shall be done.

    In political science similar follies (such as Marxist “historical materialism”) are easier to discard: despite the field’s high dependance on theories it remains also well grounded in historical studies and that valuable groundwork it provides. This is something economics seems to lack, and frightfully so.

  • Drakon

    sepisp #52:”No, economics, as a science, doesn’t necessarily lead to supporting any school of economics or political ideology. If you’re taught the Keynesian idea that increasing taxes increases wealth, then you’re going to be more socialistic. You should see what political students are taught, it’s pretty nasty.”

    Economics students and political students are both fraquently taught grand theories with highly suspect connections with the real world. The difference, to me, seems to be that political students also get a healthy dose of political history with their courses. Comparing different political systems (past and present) critically is a built in part of the field.

    In economics, on the other hand, history is for the most part presented in an anecdotal fashion. “Economic history” is considered to be a realm of political or historical studies, not economics as such. The field of economics seems consider the world mainly “as it is” or “as it will be”. This is not surprising: neo-classical economic theory does not need to compare different systems and their comparative merits: it itself presents a teleological model instructing how the economic world operates and how things shall be done.

    In political science similar follies (such as Marxist “historical materialism”) are easier to discard: despite the field’s high dependance on theories it remains also well grounded in historical studies and that valuable groundwork it provides. This is something economics seems to lack, and frightfully so.

  • Freeridin’ Franklin

    So Thomas, your gain is his loss. Due to autovero.

    Actually, the problem is mostly that people make the stupidest kind of car purchases: they strain their finances to buy a big used car just before it faces its most radical depreciation. They bring it upon themselves. But I agree that the system benefits some people and harms others. You can choose which group you belong in.

    That being said, a system where the car tax was moved into fuel could be feasible and would have superior environmental benefits to the current one.

    I wonder if there are studies about car depreciation in Finland vis-à-vis other countries. It would be interesting to compare the curves. Sounds like a job for the ATCF.

  • Kristian (in Espoo)

    “….they strain their finances to buy a big used car just before it faces its most radical depreciation.”

    That’s the problem! Some Finn needs to buy these used cars with skewed prices at some point. Overpriced cars (due to autovero) can’t be sold anywhere else except Finland.

    Incentivizing econo-cars is fine. But, the pricing needs to be on the same basis as the rest of Europe. Right now, we’re trying to outsmart the French by reducing their profit margin, but we only screw ourselves in the process.

    Or more precisely, those of us with lower incomes—who can only afford used cars—get screwed the most. It sucks!

    Instead, we should get our revenge on the French by taking the money we’d otherwise overpay for autovero and invest in businesses that sell them stuff. It’s the way everyone else does it, and they seem to be doing pretty well…….at least, compared to our low-net-worth asses here in Finland.

  • aet75

    Well, the good news is that with the amount of greenhouse gases released with from melting permafrost in Siberia we don’t have to dwell on these things much longer ;)

  • Thomas

    Kristian:

    “A car has a finite useful life. At some point, a car will die. A car’s useful life is probably shorter here in Finland, due to the climate.”

    Maybe, but given the starting price (which due to autovero is slightly higher for new cars, than for similar cars abroad. Like I’ve said timie and time again – the autovero actually lowers the benefit of car factories) they shpould bloody well last forever more or less.

    “Autovero might ensure depreciation advantages during the early years of a car’s life, but eventually someone within the car’s chain-of-ownership gets screwed.”

    I don’t believe this. The car market in e.g. Germany is based upon the idea that one (i.e. the “normal” German middle-class consumer) changes cars every three to five years. That’s why car dealers (e.g. in Finland – in order to CREATE conditions similar to e.g. Germany) offer very cheap insurances, for cars financed via auto-loans. The whole idea is to keep the business going, artificially. This is economically understandable in a country like Germany, with a big car industry, and where a quick turnaraound of cars creates jobs. But does it create jobs in Finland? Nope.

    I think it would be interesting to check the depreciation rate between countries, but I think that the Finnish one is closer to the “true” one (or are you saying that a 20000e car is ready to be scrapped after 6 years, since that is the depreciaton rate after 3 years for e.g. German cars – I might overblow a bit, but this is at least close to the truth).

    It’s in the car industries interest to keep the mileage of cars as low as possible. Why should we in Finland – where this kind of waste has no advantages whatsoever – simply surrender to this “market logic” (actually car “markets” are really a bad example of anything even resembling markets, since there are so few players, and there are patents, trade marks, … etc. that stop free entry)?

    And as for someone getting screwed – thanks to the autovero – I don’t think so. Whether we have the change every 3 years, or a somewhat slower pace, someone will be the “screwed up” one. Unless we accept that a cars life-time is something like 10 years max (and 6 years normally). But that imho is really a HUGE screw up, given the starting prices for cars. How the hell can you sell something that costs half the years earnings, of a normal citisen, that is supposed to be – righteously – crap, after merely 10 years? I think there is somebody else (except finnish authorities) to point a finger against in that case.

    I remember that the movie “Turner” (?) based on “a true story” about a car manufacturer named Turner (who was then effectively put out of bussiness, thanks to the “market”) who sold something like 1000 cars. This was in the 50s, I think. According to the movie, more or less all of the cars he manufactured, were still drivable when the movie appeared. That’s what I expect from car manufacturers. But thanks to the “eminent” market economy, car manufacturers can’t operate their business unless people change cars every 3 years or so. Sick.

    Nowadays, when cars are so complex, that even car service (indirectly I agree, but nevertheless) is under the control of manufacturers (thus controlling service costs as well), the whole “market” has become so sick that it makes one want to puke. The autovero is simply not something I would fire myself up on that much. The “sickness” is somewhere else.

    Funny though, that it is possible to manufacture (expensive) sailing boats that keep their value fairly well. But also there the countries with big production (Germany, France) show a more sick “market logic” when it comes to used boats. If you want to make money buying used things abroad, and importing to Finland for re-sale, learn to sail, go to Germany, and buy a used sailing boat. Then bring it to Finland, and sell it. No autovero there. You can then use your profit (after taxes ;-) ) to buy your dream car FOR FREE (and keep some extra money as well).

  • Anonymous

    [i]Humbug[i]

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