Economists always seem to be bagging on Europe. It has social problems, but materially, they seem to be doing a lot better than us. I wondered why they’re so down on it.
Piketty says this is because of bad metrics.A crucial issue in this fight is the choice of indicators used to measure human progress. This is not a mere technical matter; it is political and affects all citizens. All too often, the European debate becomes mired in outdated indicators that are completely unsuited to considering the future and social well-being in an era of climate change.
The most glaring and unfortunately common mistake is to compare GDP per capita using market exchange rates. This amounts to ignoring the surge in prices in the US. It is like examining the evolution of wages while forgetting inflation. In 2025, the average exchange rate was on average around $1.10 to €1 (about $1.05 at the beginning of the year and $1.15 at the end). However, to equalize price levels, the exchange rate would need to be approximately $1.50 to €1. By failing to use purchasing power parity – the only way to compare the real levels of goods and services produced in each region – people overstate US wealth by nearly 40% compared to European wealth.
The second mistake is to overlook differences in working hours. Europe chose shorter workweeks and longer vacations, which increased social well-being and reduced its material footprint. Taking both factors into account, hourly productivity, or GDP per hour worked, measured in purchasing power parity, is higher in northern Europe than in the US, whose lead in some sectors and regions is more than offset by lagging performance elsewhere.