Tuesday, May 30, 2006

Alternative Macroeconomic Measures

It's all what you believe in and how you get there

David Cameron, the leading british Tory, has spoken out for new measures of a society's success, above and beyond the traditional Gross Domestic Product. He is speaking out for something called General Well-Being, eg some kind of measure of happiness. Of course as a politician, and a Tory at that, you never know what the real reasons for this sophistry is, but at least he is doing something new.

As we have become more and more wealthy - albiet with alot left behind due to inadequate rule of law, protectionism and failed education in alot of places - people, even economists, are looking for alternative measures for the success of an economy. The ideas of 'relative' and 'absolute' wealth are appearing more and more in the mainstream press and economists are trying to measure happiness, not just money and 'utility'. Its not just if you have plumbing and a car and three fattening meals a day its now too if you are keeping up with your neighbors and how does this make you feel.

It boils down to, and I know sometimes we have a tendency to get reducto ad absurdum, whether or not the rich getting richer at a quicker pace than the poor get richer is bothersome to you. Yes the rich get rich at a faster rate than the poor get rich. And this means a widening wealth gap between poor and rich. But is not the alternative massive (or even less than massive) forced wealth redistribution? And does not this forced wealth redistribution then remove the incentives to creativity, hard-work, and risktaking entrepreneurship that makes the rich rich, and thus makes the poor rich? E.g. you cant have your cake and eat it too.

Egalitarianism works in small communities, voluntarily, not through massive national programs. Like Joe Strummer said, no matter what the political system, "it's the same 15% driving down the middle of the street in their shiny black cars".

Alternative measures are cool but be sure to keep your eye on the prize. Until we all have black cars let's keep growing the econony.