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Understanding this idea, and advocating it to the world, was part of what it meant to be an economist—especially an American economist.

ately things have changed. Some of America’s most eminent economists, including Samuelson himself, have edged away from that earlier consensus.

The shift is both momentous and disturbing. Just why it happened is a mystery.

what the principle of comparative advantage does not say.

trade between two countries will make both better off so long as each is especially good at making something different from the other

absolute advantage

there are mutual gains from trade even when one country is better at producing everything. All that matters is that its margin of superior efficiency is greater for some products than for others.

comparative advantage

Once again we see no indication that public insurance generosity has had a damaging effect

Note also that the employment rate increased in nearly all of the countries during this period. On average, it rose by nine percentage points between 1979 and 2013. That’s not what we would expect to see if generous public insurance programs were inducing large numbers of able adults to withdraw from the labor market

What we see in the chart is that countries with more generous public insurance programs tend to have less material deprivation.

With globalization, the advance of computers and robots, increased pressure from shareholders for short-run profit maximization, union weakening, and other shifts, wages have been under pressure. Couple this with the fact that many people at the low end of the income ladder have labor market disadvantages — disability, family constraint, geographic vulnerability to structural unemployment — and we have a recipe for stagnation in the market incomes of the poor.

here’s a good reason for these shifts: government provision offers economies of scale and scope, which reduces the cost of a good or service and thereby makes it available to many people who couldn’t or wouldn’t get it on their own.

Government provides more insurance now than it used to. All of us, not just some, are dependent on it. And life for almost everyone is better because of it

hese expenditures are encouraged by government tax advantages.22 But they do little to help people on the bottom of the ladder, who often work for employers that don’t provide retirement or health benefits.

To make them more affordable, the government claws back some of the benefit by taxing it as though it were regular income. All countries do this, including the United States, but the Nordic countries do it more extensively. Does that hurt their poor? Not much. The tax rates increase with household income, so much of the tax clawback hits middle- and upper-income households.

Another difference is that public services such as schooling, childcare, medical care, housing, and transportation are more plentiful and of better quality for the poor in the Nordic countries. Public services reduce deprivation and free up income to be spent on other needs. It’s difficult to measure the impact of services on living standards, but one indirect way is to look at indicators of material deprivation,

Targeted transfers are directed (sometimes disproportionately, sometimes exclusively) to those with low incomes and assets, whereas universal transfers are provided to most or all citizens.

Targeted programs are more efficient at reducing poverty; each dollar or euro or kroner transferred is more likely to go to the least well-off. Increased targeting therefore could be an effective way to maintain or enhance public insurance in the face of diminished resources.

“the more we target benefits to the poor … the less likely we are to reduce poverty and inequality.”

Korpi and Palme found that the pattern across eleven affluent nations supported the hypothesis that greater use of targeting in transfers yields less redistribution

The hypothesis that targeting in social policy reduces political support and thereby lessens redistributive effort is a sensible one. Yet the experience of the rich countries in recent decades suggests reason to question it. Targeting has drawbacks relative to universalism: more stigma for recipients, lower take-up rates, and possibly less social trust.44 But targeting is less expensive. As pressures to contain government expenditures mount, policy makers may therefore turn to greater use of targeting. That may not be a bad thing.

Public insurance programs boost the incomes of the least well-off and improve their material well-being. If such programs are too generous, this benefit could be offset by reduced employment or economic growth, but the comparative evidence suggests that the world’s rich nations haven’t reached or exceeded the tipping point.

Spending lots of money on social protection is not in and of itself helpful to the poor. Total social expenditures in the United States are greater than in Denmark and Sweden, because the US has a large private welfare state. But relatively little of America’s private social spending reaches the poor.

Public services are an important antipoverty tool. Their benefit doesn’t show up in income data, but they appear to play a key role in reducing material hardship. Services expand the sphere of consumption for which the cost is zero or minimal. And they help to boost the earnings and capabilities of the poor by enhancing human capital, assisting with job search and placement, and facilitating work-family balance.