Scandinavian Simplicity

My favorite piece of furniture is an elegant rosewood desk that was custom made in Denmark.  Like most of my possessions, I bought it out of someone’s house.  This was back before Craigslist (I basically stopped buying stuff at age 45; thank God they don’t depend on me for sales tax revenue.)  Of course Scandinavian furniture is known for its “less is more” aesthetic, although I’d say Ikea overdoes the “less” part.  There’s a difference between timeless elegance and dorm room utilitarian.

I believe that there are some artistic theories that mix ethics and aesthetics.  I suppose simplicity is seen as being more honest.  Keat’s truth is beauty.  The Bauhaus aesthetic was linked to socialist ideals, whereas the Italian Baroque was associated with the Counter-Reformation.

I’m not a big fan of attempts to mix ethics and aesthetics, but when it comes to politics and economics, I definitely think less is more.  I was reminded of this when frequent commenter Malavel sent me a new Swedish regulation requiring at least 15% down-payments on all mortgages.  That’s it, no bells and whistles, just 15%.  Check out the simplicity of this press release.

Sweden also has an income tax that is much simpler than ours (yes, I know that’s faint praise), where many (most?) taxpayers simply receive a bill in the mail.  Their vouchers for education don’t require you to live in Milwaukee, or enter a lottery.  Everyone in the country is eligible, and their kids are free to go to any approved school; public, not-for-profit, or for-profit.

In America, the left told us that the banking fiasco was caused by ”de-regulation,” which allowed banks to run amok making sub-prime loans.  The right insisted it was the government’s fault; Fannie Mae and Freddie Mac and FDIC creating moral hazard.  Both are partly right.  In response our legislators produced a 1000 page bill that failed to address any of the alleged causes of the crisis. Not only are sub-prime loans not banned, but FHA is actually encouraging more sub-prime lending.  The GSEs got off scot-free, and FDIC has not been reformed at all.  It’s still insuring wildcat banks in the South, who take taxpayer-insured deposits and lend the money out to highly risky construction projects.

If only we could have an economic policy regime that reflected the simplicity and elegance of Scandinavian furniture.  When I saw the Fed’s alphabet soup of special vehicles created to address the financial crisis, I pretty much knew we were in trouble.  The Fed forgot that its duty was very simple—just provide enough money to keep the price level rising at 2%.

The left was ecstatic about the appointment of Elizabeth Warren.  I have nothing against her, although I was a bit puzzled to learn that the main lesson of this crisis was that we needed to do a better job of protecting the financial industry’s consumers.  (Scratches head.)  But let’s say I’m wrong, and she’s the superwoman her supporters believe her to be.  How does that really help us?  Before too long the Republicans will be back in power, and she’ll be out of a job.

If you are visiting a dysfunctional tropical country, it’s common to have people talk wistfully of the need for a “strong man” to be put in charge.  But with the possible exception of Singapore, that almost never works.  Unless you put into place a democratic, transparent and non-corrupt system of governance, there is a real danger of back-sliding as the strong man becomes corrupted by power, or is replaced by someone less honest.

It’s sad that we’ve reached the point where Congress writes a 1000 page bill that completely fails to address the problems that caused the worst economic disaster since the 1930s, and then we instead pin all our hopes on Elizabeth Warren.  The elation that greeted her appointment was the sort of thing you’d expect from a mob of supporters when a Putin or Chavez announces he’ll run again, as there is “no one else capable of doing the job.”

In art and architecture it is not always true that simplicity is best.  I’ll take Borromini’s Quattro Fontane over Le Corbusier’s Radiant City.  But in politics and economics the simplest and most transparent regulatory regime is generally best.  K.I.S.S.

PS.  Of course the Swedish program has problems just like any other system. But progressive skeptics might be surprised by the nature of those problems:

One of the first independent schools, Botkyrka Friskola, was started by an ex-communist in a low-income, immigrant suburb of Stockholm. With an emphasis on individual student responsibility, familial involvement, and efficient use of technology, it now has over 2000 students waiting for one of its 240 places and a continuous stream of educators interested in imitating its success (Svangren 1998).

Public Vouchers and Public Controls

Though public vouchers are invigorating the Swedish education system and broadening the educational choices available to families, they have come with some strings attached. The first of these is the government’s demand that independent schools select their pupils on a first-come, first-served basis. Special exceptions are granted only for siblings of current students, students with special needs, and those who live in the immediate vicinity of the school (Gustafsson 1998). Most independent schools are happy to accept students on this basis and would have done so even without this regulation.

The condition makes it difficult, however, for a school to establish a particular learning environment and does nothing to guarantee the equal access it was set up to ensure. Per Svangren, the principal of Botkyrka Friskola, hoped his school would become a challenging, multicultural environment for immigrant families poorly served by the local municipal school but, as its reputation grew, Swedish families in neighbourhoods with better schools began applying early. The school had to take the students who applied first, so it was forced to reject those whom its leaders believed would not only benefit most but also contribute most to the school’s unique environment. As a result, a fundamental aspect of the school’s mandate was compromised (Svangren 1998). Though they would be rare exceptions, (as experience in Denmark demonstrates) schools established for the academically gifted or those for a particular learning disability are impossible in this environment. It is a loss to Sweden that its politicians prohibit families from choosing a specialized education for their children and prohibit schools from making such educational alternatives available for them.

About Scott Sumner 490 Articles

Affiliation: Bentley University

Scott Sumner has taught economics at Bentley University for the past 27 years.

He earned a BA in economics at Wisconsin and a PhD at University of Chicago.

Professor Sumner's current research topics include monetary policy targets and the Great Depression. His areas of interest are macroeconomics, monetary theory and policy, and history of economic thought.

Professor Sumner has published articles in the Journal of Political Economy, the Journal of Money, Credit and Banking, and the Bulletin of Economic Research.

Visit: TheMoneyIllusion

Be the first to comment

Leave a Reply

Your email address will not be published.