Friday, April 9, 2010

Generalising about Europe hides the truth again

I blogged before about the danger of generalising about "Europe" or "the West" since these collections of states hide major internal diversity. I am currently reading a report by professor of economics Glen Whitman on the role of the free market in health innovations. Whitman was concerned that reform of the American health system would damage the ability of the market to innovate new drugs and medical devices.

He may be dead right, I'm not sure yet, but I was drawn to one of his pieces of evidence - evidence that seemed weak. Whitman, who believes that the stronger government control of health systems in European countries blocks innovation, pointed out that the entire EU plus Switzerland (total population 499 million people) produced fewer of 30 leading medical innovations since 1975 than the US (total population 307 million).

This looks convincing at first. But why does he lump all these countries together? The report lists every one of these 30 great innovations. Some are listed as having more than one country of origin so I take the simpliest method of calculation by considering every single reference as one innovation, even when it was half-developed in another country.

The results show that the US was at least one of the source countries for a huge number of innovations: 22 altogether.

But there is something strange about the result. Whitman includes all the EU and Switzerland, but the only EU countries on the list are Germany, UK, France and Sweden. So when he judges the entire EU (plus Switzerland), he's including huge populations in eastern Europe, Italy, Spain, Ireland, etc. which aren't on the list at all.

If we look at the specific countries that are on it, in terms of great innovation per million population, our understanding completely changes.

US: 7.16
UK: 13.11
Switzerland: 26.3
Sweden: 21.7

So while the EU as a whole appears to score poorly, specific countries within it far outperform the US.

Why include these other countries at all, then? Much of the present EU was east of the Iron Curtain, stagnating under Communism, during much of the duration of this research. To me this is a pity: otherwise this paper seems well-written and insightful, but its vague generalisation about the EU disguises the truth.

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