The Price of Prestige

Moneybox
A blog about business and economics.
Aug. 3 2012 3:35 PM

The Price of Prestige

148780646
The space shuttle Enterprise

Bill Ingalls/NASA via Getty Images

Ryan Cooper asked the other day why smaller countries seem to run better macroeconomic stabilization policy, and conjectured it has something to do with the fact that they don't have such large banks. I think this is a multifaceted issue that extends beyond the narrow confines of monetary policy. When the world was more protectionist, big countries had the big advantage of a large internal market. But in today's world I think small countries are generally better-governed and have a brighter outlook going forward.

One reason is that small countries have less incentive to waste resources on prestige schemes. India, for example, can't keep electricity on in major cities but is planning to land a rover on Mars next year. If India was small, it would just be a small poor country trying to improve its shaky domestic infrastructure. But since India is big, it has great power aspirations notwithstanding its poverty. So they want to have a space program. Here in America, logic would say that since we're so much bigger than Canada we could get away with dedicating a smaller share of our national output to the military. But instead we dedicate a bigger share because we can realistically aspire to global military hegemony in a way that Canada can't. China is trying really hard to "win" the Olympic aggregate medal count.

Advertisement

None of that's 100 percent relevant to Cooper's question, but I do think it's plausible to think of a "strong dollar" (or euro or yen) policy as a costly national prestige project similar to a Mars mission or an aircraft carrier or a bunch of gold medals.

UPDATE:

Thanks to Kieran Healy for alerting me to the above relevant text.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Culturebox

The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer

Foreigners

Kiev Used to Be an Easygoing Place

Now it’s descending into madness.

Technology

Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Business
Moneybox
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
  Life
Outward
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
  Technology
Technology
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.