Macroeconomics 4.1c The Benefits and Costs of Economic Growth

benefits of economic growth

1. consumers get higher standard of living in form of more goods and services 2. opportunities to choose between work and leisure

costs of economic growth

1. loss of Earth's pleasantries 2. adverse environmental effects 3. people work too hard and enjoy too little leisure 4. growth of GDP does not guarantee improved health or human rights

3rd group of human well being

opportunity. includes personal rights, freedom, tolerance, and education

bottom line of SPI

policies that improve human welfare always make sense. policies that sacrifice human welfare to achieve growth for its own sake never do. there IS a positive correlation between growth of real GDP per capita and broad measures of human welfare, but relationship is much weaker for rich countries than poor countries

growth is not a sufficient condition, as it may lead to

rich getting richer

(SPI) Growth of GDP matters much less

to high income countries. this is because GDP does not effect factors like access to health care and education, freedom of information, and human rights

(SPI) Growth of GDP provides strong boost

to low income countries

for high income countries, strategies that focus on using GDP directly to improve well being

are far more attractive than policies that focus on growth and hope that well-being will take care of itself.

1st group of human well-being

basic human needs. includes nutrition, medical care, sanitation, safety

2nd group of human well being

foundations of well being. includes access to knowledge and information, heath, and environment

Social Progress Index (SPI)

measures noneconomic aspects of human welfare. combines data for 3 groups of factors that contribute to human well-being

many people see economic growth as

necessary condition for reducing poverty and economic injustice