Wednesday, August 04, 2010

W=GDP/N

Mike Konczal:
I think this sets people off. There are those who think that once you focus on growth nothing else matters, and that worrying about the distribution is a waste of time.

A big problem with economists is that they do a bit of sleight of hand with policy analysis. First they'll come up with some policy change which, IN THEORY GIVEN APPROPRIATE REDISTRIBUTION OF BENEFITS, can be Pareto Improving, that is make everyone as well or better off without making things worse for anyone. That is, because the policy change increases the size of the pie - makes per capita gdp higher - there's more to go around. But the next step, the actual redistribution, of course does not happen so GDP enhancing policies might give Bill Gates an extra billion bucks while leaving the rest of us with $500 million less.