By Tim Worstall
It’s not necessary to travel far - the opinion pages of The Guardian for example - to find people whining that economic growth just isn’t the thing. We need to concentrate upon the wider picture, leisure, externalities, the real and proper measures of consumption. Thus all conventional - for which read market, capitalist, non-socialist even - economics has to be disposed of.
A major question raised by critics of economic growth is whether we have been growing at all in any meaningful sense. Gross national product statistics cannot give the answers, for GNP is not a measure of economic welfare. Erlich is right in claiming that maximization of GNP is not a proper objective of policy. Economists all know that, and yet their everyday use of GNP as the standard measure of economic performance apparently conveys the impression that they are evangelistic workshipers of GNP.
An obvious shortcoming of GNP is that it is an index of production, not consumption. The goal of economic activity, after all, is consumption. Although this is the central premise of economics, the profession has been slow to develop, either conceptually or statistically, a measure of economic performance oriented to consumption, broadly defined and carefully calculated. We have constructed a primitive and experimental "measure of economic welfare" (MEW), in which we attempt to allow for the more obvious discrepancies between GNP and economic welfare.
That’s half a century old now, that observation. Yes, it is entirely mainstream, one of the authors went on to gain the Nobel for economics*. Thus much of the critique of standard economics rather falls away once standard economics is understood. We might even mutter that many of those criticising only do so from ignorance. Or, perhaps, spite.
As the obituary of Willan Nordhaus - one of the above authors - goes on to point out when we do include all these wider issues we get to an interesting result:
In one of his more amusing pieces of research, in 1996 Nordhaus ran an experiment to measure the energy required to light a room throughout the course of human history. He cut wood and burnt it, lit an antique oil lamp, measured one of Edison’s lightbulbs and then tried the modern version.
Back at the start of human history, he calculated, a day’s labour could light a room for ten minutes. By the end of the 20th century, a day’s labour could light a room for ten years. His conclusion was that conventional price indices vastly understate gains in living standards.
Those wider measures show that this free market capitalism stuff makes us wildly richer than the conventional - and criticised - measures indicate. Yea even to the point that we all enjoy vastly more leisure than our forbears.
Interesting to actually know about a subject, no?
*Yes, yes, we know, Sverige Riksbank, etc etc