Tuesday, January 03, 2012

Growth For Whom

I don't think there's much wrong with thinking that growth is important, what's problematic is the general unwillingness by economists to dirty their beautiful minds by concerning themselves with distributional aspects. Essentially the implicit welfare function is W=f(GDP), where higher GDP means higher social welfare. This is true even if the increase in GDP benefits, to use the current parlance, the 1% at the absolute expense of the 99%. Without getting too deeply into what a social welfare function should look like (and of course people will disagree), it seems reasonable to suggest increasing GDP to the detriment of most of the population shouldn't automatically be seen as an improvement.