The driving around test (Euro edition)

As part of the month-long debate about the extent of the European/American gap in living standards, Luis and Pieter Garicano suggested a “driving around test”: “Go to the periphery of any modern American city and see a level of new-built material wealth that is extremely uncommon in Europe.” With the World Cup underway in America, some European tourists are doing their own “driving around” tests and going viral, though these driving around tests are hardly scientific (the US may be wealthy, but free hotel rooms and meet-and-greets with our favorite singers do not come standard with road trips).

Nonetheless, for those worrying about the US-EU living standards gap, there’s plenty to read from the last few weeks. To start, Simon Johnson’s interview with economist Philippe Aghion covered a wide range of plausible factors explaining the gap: a lack of a single market, insufficient funding for long-run research, lack of DARPA-like agencies, a culture that doesn’t celebrate risk-taking, and excessive red tape. For more on this theme, see also Alex’s post below about European YIMBYs (or the lack thereof). While Aghion believes these factors are real, he pushes back when Johnson characterizes Europe as troubled:

I wouldn’t say “troubled.” Europe is not on the verge of a major crisis. Instead, the danger is a long period of stagnation or sluggish growth.

Unfortunately, the authors of Europe 2031 (the latest AI scenario microsite) worry that we are in an era when stagnation will impose heavy costs on Europe in the years ahead. One theme of the US-EU living standards debate has been on the importance of having a thriving domestic tech sector. So far, many of the benefits of the US tech sector have been shared by Europe, which, after all, has as much free access to Google and Facebook as it wants. The Europe 2031 authors paint a scenario where this assumption breaks down, and access to AI becomes nationalized as its security implications grow and compute for inference remains scarce. The microsite’s timing is eerie, coming shortly before the US government banned access to Anthropic’s latest model for foreign nationals (though, at least in this case, the ban meant that US citizens also lost access).