implement socialist policies, and the result was less output in oil and other industries that were
nationalized. In other words, the lessons from socialized agriculture carry over to government
takeovers of oil, health insurance, and other modern industries: They produce less rather than
more, even in today’s information age, where central planning is possibly easier.
Proponents of socialism acknowledge that the experiences of the USSR and other highly
socialist countries are not worth repeating, but they continue to advocate for increased
taxation and state control in order to help low-income people. Such policies would also have
negative output effects, albeit of a lesser magnitude, as is seen in cross-country studies of the
effect on real GDP of greater economic freedom. A broad body of academic literature quantifies
the extent of economic freedom in several dimensions, including taxation and spending, the
extent of state-owned enterprises, economic regulation, and other factors. This literature finds
a strong association between greater economic freedom and better economic performance,
suggesting that replacing U.S. policies with highly socialist policies such as Venezuela’s would
reduce real GDP more than 40 percent in the long run, or about $24,000 per year for the average
person.
Despite this evidence, current socialists sometimes cite the Nordic countries as socialist
success stories. However, in many respects, the Nordic countries’ policies now differ
significantly from policies economists view as characteristic of socialism. Nordic healthcare is
not free but rather requires substantial cost sharing. As compared with the U.S. rates at
present, marginal labor income tax rates in the Nordic countries today are only somewhat
greater, and Nordic taxation overall is surprisingly less progressive than U.S. taxes. The Nordic
countries also tax capital income less and regulate product markets less than the United States
does, but regulate labor markets more. Living standards in the Nordic countries are at least 15
percent lower than in the United States.
The Nordic and European versions of socialized medicine have been viewed as so desirable by
modern U.S. socialists that they have proposed nationalizing payments for healthcare—which
makes up more than a sixth of the U.S. economy—through the recent “Medicare for All”
proposal. This proposal would create a monopoly government health insurer to provide
healthcare for “free” (i.e., without cost sharing) and to centrally set all prices paid to suppliers
such as doctors and hospitals. We find that if this policy were financed out of current Federal
spending without borrowing or tax increases, then more than half the entire existing Federal
budget would need to be cut. If it were financed through higher taxes, GDP would fall by 9
percent, or about $7,000 per person in 2022. Evidence on the productivity and effectiveness of
single-payer systems suggests that “Medicare for All” would reduce longevity and health,
particularly among the elderly, even though it would only slightly increase the fraction of the
population with health insurance.