The Economics of Enough

We need to internalize a sense of responsibility to others, including those not yet born, in order to restore the moral fiber that is needed for market capitalism to deliver social well-being.

In complicated modern economies, a wider portfolio of institutions is likely to be needed, and we should get out of our heads the few, simple categories of organization we are used to thinking about.

Managing change as a society, or indeed as a closely linked group of societies, will only happen if there is a shared analysis.

There is no firm evidence that inequality is tolerable or even necessary because it improves the economy’s performance.

There is no firm evidence that inequality is tolerable or even necessary because it improves the economy’s performance.

Among the rich countries, there is no obvious relationship between level of income inequality and growth rates.

Poor countries are more unequal than rich ones but it is not clear whether the inequality is a cause or a consequence of their failure to grow.

Now, from the perspective of the most serious recession and biggest financial crisis since the 1930s, the benefits of markets are doubted and the question of values has come to the fore.

We have to identify what we value in the context of an economy whose structure has been changing in fundamental ways, because better measurements in themselves won’t improve social welfare.

Economists and statisticians need to work on the concept of comprehensive wealth and its components, in order to bring future impacts of current policies into decision-making.

Improving the statistics we use to steer the economy is in principle the easiest reform, but nevertheless hard enough in practice.

When an ecosystem collapses, so do the societies relying on it; indeed the human society should be thought of as part of ecosystem.

Many of the world’s various ecosystems, large and small scale, are under threat, whether areas of rainforest that provide a living to poor rural communities, coral reefs, or major fish stocks in oceans.

People will act in self-interested ways, where self-interest can include considerations of the wider good or straightforward altruism.

Natural capital is the stock of natural resources of all kinds, the world’s environmental wealth.

Much of economics is about trying to understand the collective outcome of many individual decisions.

The economist Adam Smith argued that people who carried out virtuous acts were often not motivated by specifically moral considerations but rather were acting “naturally” or instinctively.

Perceived fairness can create a political backlash, which can take various forms. It can also potentially undermine the strength of the economy, both the aggregate growth rate and the prosperity of citizens.

We should realize the economic inequality and the extent to which inequality we observe now is compatible with that fundamental sense of fairness.

Debt is not just a financial indicator. It reflects the depletion of social as well as financial obligations.

Happiness = Biological set point + Conditions of your life + Voluntary Activities.

There are no easy ways to calculate natural wealth because markets under-value many natural assets — there are many externalities that make property rights over natural resources hard to enforce and the “tragedy of the commons” ensues.

The policy challenge for governments is to deliver economic growth while ensuring it does not undermine other important goals, or indeed the health of the economy further into the future. Often this is described as “sustainability”.

Growth does not make us happier, easily seen perhaps as the mirror of the unhappiness caused by economic recession.

Economists themselves are now asking: Do the higher incomes created by economic growth make people happy? If not, what will increase people’s happiness, and what economic policies will help?

Economists themselves are now asking: Do the higher incomes created by economic growth make people happy? If not, what will increase people’s happiness, and what economic policies will help?

The challenge to the central importance of growth as a policy goal dates back some years but has been strongly reinforced by the recent financial and economic crisis.

In the richest countries, the relevance of growth as the central aim of policy has increasingly come to be questioned.

During the past hundred years, psychologists have accumulated experimental results about the reality rather than the theory of happiness. In just the past decade or so, economists have muscled into the happiness debate.

If a picture of a dollar bill or credit card, or of the earning or spending of money, stimulated any emotional reaction it would most likely be a negative one.

The top priority must be ensuring that we get a true picture of long-term economic prospects, with the development of official statistics on national wealth in its broadest sense, including natural and human resources.

The financial meltdown may not be over, climate change threatens major global disruption, economic inequality has reached extremes not seen for a century, and government and business are widely distrusted.