Case Study 2 — The Paradox of American Prosperity
The United States has the highest GDP per capita of any large country (~$85,000 in 2024). It is also the rich country where: - Life expectancy is lowest (~77, vs. ~82 in peer countries) - "Deaths of despair" (suicide, drug overdose, alcohol) have risen for two decades - Life satisfaction surveys have been flat or declining since the 1970s - Income inequality is highest (Gini ~0.39 vs. ~0.27 in Scandinavia) - Healthcare spending is highest but outcomes are worst (Chapter 14) - Social mobility is lower than in most peer countries (Chapter 13)
The paradox: by the GDP measure, Americans are the richest large-country population in the world. By many other measures, they are doing worse than people in countries that are materially poorer.
The explanation: GDP measures market production, not welfare. The U.S. produces a lot but distributes it unevenly, spends inefficiently on healthcare, underinvests in social infrastructure (childcare, public transit, housing), and has a social safety net that is weaker than peer countries'. The result: high GDP, middling wellbeing.
The lesson: GDP is necessary but not sufficient. A country can be productive and unhappy. The gap between production and welfare is where the other chapters of this book — inequality, healthcare, housing, behavioral economics, the efficiency-equity tradeoff — do their work.
Discussion questions
- The U.S. has the highest GDP per capita but lower life expectancy than 20+ countries. How is this possible?
- Would Americans be better off with Scandinavian-level GDP per capita ($60K instead of $85K) but Scandinavian-level social infrastructure?
- "The American Dream is about opportunity, not outcomes." Apply the intergenerational mobility data from Chapter 13. Is opportunity actually higher in the U.S.?