New book

Why is Norway so expensive?


Have you ever wondered why Norway is so expensive, why we can’t spend more of the oil money or who really determines the interest rates? In the book, “Alt du vil vite om samfunnsøkonomi, men aldri har våget å spørre om" (Everything you wanted to know about economics but never dared ask), Statistics Norway researcher Erling Røed Larsen writes in plain language about complex issues such as the interest rate, unemployment and inflation.

Manic productive: SSB researcher Erling Røed Larsen is an active participant in social debates, a chronicler and speaker with a passion for imparting economics theories and thoughts. He has now published his first book on economics for the public at large.
Photo: Hege Kristin Fosser Pedersen

Did you know that it can be beneficial to let NSB run at a loss, that unemployment is not due to more machines, women’s entry into the workforce or competition from Asia, that introducing the euro would make it easy for you to take out a mortgage in Frankfurt, or that Norway has three billion working hours at its disposal? Do not despair. You are not the only one to have asked first-time author and SSB researcher Erling Røed Larsen these questions. The public frequently ask the 65 researchers in SSB’s research division questions about social changes and phenomena.

“The basis for the book is the most common questions I have been asked. I give my answers in "Spørsmålenes ti-på-topp liste" (top ten list of questions) for interested readers. I have concentrated on making my writing both straightforward and entertaining, and hope that the book clears up the many socio-economic misconceptions,” says Erling Røed Larsen.

Mr Røed Larsen also hopes that the publication of the book will inspire his research colleagues to write something other than material for the prestigious international periodicals.

“It is important for society that we reach out with our research and knowledge, and this is one way to do it,” says Mr Røed Larsen.

Inspired by chronicle series

Erling Røed Larsen toyed with the idea of writing a book for a long time. The Larvik native is an active participant in social debates, a chronicler and speaker, with a passion for imparting economic theories and thoughts to the general public. He has a lot to offer, and can now finally combine his role of researcher with his dream of being a writer.

“When I returned from the USA in 2000, a great debate was raging in Norway on the use of the oil money. I wrote a feature article on this topic and was snowed under with the enquiries that followed; mostly from pensioners and students thanking me for writing about this topic in a way they could understand,” says the writer..

“When I wrote about interest rates at a later date, I also received questions from savings banks about bonds. After a number of articles in periodicals and newspapers, I received a great deal of questions from the readers, and I realised there was a need for an easily understandable book on important socio-economic issues,” he says.

Mr Røed Larsen draws on his distinguished specialist background for his answers. He attained a doctorate in economics at the University of California, Berkeley, and a Bachelor of Social Science, specialising in economics, at the University of Oslo. The book was reviewed by a number of Gyldendal’s specialist consultants before recently being released on the market.

Expensive financially, cheap in time

If you are wondering why Norges Bank is not reducing the interest rate this time, read the section on cutting interest rates. The media reports that unemployment is falling, read the section on unemployment to gain a better understanding of the situation. In short, if there is anything you are wondering about, or that you think is complicated in the world of economics, you might find the answers here. All of the questions are answered in separate chapters and the book is arranged so that you can page through to individual topics and read piecemeal and section by section.

The chapters contain introductions and brief summaries for readers who are short on time, and explanations are given for key economic terms.

Mr Røed Larsen has answered the question of why Norway is so expensive countless times. He says that, to a certain degree, it is correct when people say that Norway is expensive. However, after reading the first chapter of the book, we understand that it is primarily expensive for foreigners.

“Norwegians get a lot for their money. Norway is so expensive because it has productive workers who can be used for work that produces many valuable products in a short time. Hourly rates of pay in Norway are high. Because most products and services entail the application of manpower, labour costs are high in Norway. This in turn makes products and services sold in Norway expensive. A beer is expensive because the barman has to be paid to compensate him for not going to the North Sea to work on oil exploration. Espresso is expensive because the waiter has to be enticed into making coffee instead of working in Norsk Hydro. Norwegian products are primarily expensive for foreigners. For Norwegians, they are cheap in terms of working hours, and compared to what foreigners have to pay in working hours for similar products in their native country. The Italians and French have to pay more to buy a litre of petrol and loaf of bread than we do in terms of working hours. High prices therefore equate to time being cheap. High prices go hand in hand with a high standard of living,” explains Erling Røed Larsen.

Why do we have to save the oil money

You cover many sides of Norwegian society in your book. How would you say things are going in the country just now?”

“The Norwegian economy is well organised, and we are continually making good progress. The country is governed by applying know-how, and policies that are presented are done so after much deliberation. We are one of the few countries that have been able to manage a gigantic oil wealth,” he explains, and believes that we have little reason to complain.

So why can’t we use more of our oil money to build new hospitals , nurseries and provisions for the elderly ?”

“Some politicians and many voters believe that we can use the wealth to realise all of our wishes: that we can use the oil money to buy prosperity. However, all of society’s wishes for new hospitals, better schools, wider roads etc. entail someone having to build these. The limitation on what we can buy in Norway is not money, but the working hours we have at our disposal. We have approximately three billion working hours a year, i.e. approximately two million employees who work about 1 500 hours each in the year. That means strict prioritising. Just because we are well off financially doesn’t mean we can have more working hours, since we cannot buy working hours from each other if we don’t want to work more. If we took the entire national budget of Kuwait or buckets full of dollars, we still wouldn’t have more working hours. However, we can use the oil to trade abroad, where there is a vast quantity of available working hours. The oil can thus be used to buy school blackboards and x-ray facilities, but someone has to install them and operate them, and this generally requires Norwegian working hours. Consequently, it is the number of Norwegian working hours that determines how much of the oil money we can spend in Norway. In a country such as Norway, with its low unemployment level, there is not much scope for obtaining more working hours,” explains Erling Røed Larsen.

In the syllabus?

The energetic Erling Røed Larsen makes no excuses for believing that the book should be part of the school syllabus. The publisher has distributed an advertisement for the book to all Norwegian upper secondary schools, university colleges and universities.

“I also believe that all members of parliament can learn something from the book, and that Norway as a country can benefit from them reading it,” he smiles immodestly.

The aim has been to be objective; his own opinions on introducing the euro and the use of the oil fund should be in evidence to as small a degree as possible.

“I have tried to be generous with regard to other points of view,” he states.

Where many writers use “he”, Erling Røed Larsen has used “she”, and the women in his illustrations are economists, whilst the men are hairdressers and activists.

“I am a feminist and idealist. If the language can contribute to change in this area, I am happy to make the effort. After all, I do want to consider myself a modern person,” says Mr Røed Larsen.

Erling Røed Larsen is already working on a follow-up book: a newspaper reader’s guide to the Norwegian economy. This will be even more popular science, even more straightforward and with more shorter chapters covering, amongst other things, housing prices, nursery fees, sustainable development and oil prices.