Why is the USA wealthy?

Interesting.

ECONOMIC gloom and doom aside, America remains the world’s richest large country. It’s generally estimated to have a per capita GDP level around $45,000, while the richest European nations manage only a $40,000 or so per capita GDP (setting aside low population, oil-rich states like Norway). Wealth underlies America’s sense of itself as a special country, and it’s also cited as evidence that America is better than other economies on a range of variables, from economic freedom to optimism to business savvy to work ethic.

But why exactly is America so rich? Karl Smith ventures an explanation:

I am going to go pretty conventional on this one and say a combination of three big factors

The Common Law

Massive Immigration

The Great Scientific Exodus during WWII

You’ll notice that four of the top five countries in the Human Development Index have the Common Law and the top, Norway, is a awash in oil. Without the petro-kronors they probably wouldn’t be so hot.You’ll also notice that 3 of the top 4, again with Norway the odd man out, are immigrant nations. The founder effect here should be clear.The bonus from the great exodus is definitely waning. Most of our hey-day German and Jewish scientists are dying off, but its still given us a boost that lingers to this day. There is no fundamental reason why the US should be the center of the scientific world but for a time it was the only place in the world safe for many scientists.

It’s a difficult question to tackle because there’s so very much to it. America jumped to a huge productivity lead early last century by developing a resource- and capital-intense, high-throughput style of manufacturing producing mass market goods. The fractious, class-riven European continent struggled to copy this technology, and while adoption of these methods eventually led to a period of rapid catch-up growth, the process of catch-up was never quite completed. And so that’s one gap to explore.

There’s also the question of what exactly one is comparing. What if we take similar European and American metropolitan areas and adjust for human capital and hours worked? On that basis, the difference between America and northern Europe looks relatively small. One might then focus on the ways in which America’s more integrated domestic market leads to a lower level of within-continent inequality, even though national inequality levels in Europe compare favourably with America’s.