Economic growth = good or bad?

Posted on March 7, 2010

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Money can't buy you happiness

Economic growth = good, right? Well, not necessarily. Or so says head of Cardiff Journalism School, Justin Lewis. Why is this?

The idea that economic growth is good is just accepted as fact in economic journalism. If the specialists say so, it would be an easy assumption for us non-specialists to make as well. But consider this example.

Two people are travelling to work, with separate scenarios:

1. Person one cycles to his local train station on his bike, hops on the train and travels to work. Thumbs up on the environmental side.

2. Person two travels in his car (environmental thumbs down) and gets into a minor crash. Both parties are slightly injured, have to go to hospital and get their cars repaired.

Which scenario is better? Clearly, scenario 1 is more healthy, the person is presumably happier having not encountered a car crash and not having to take time off work to go to hospital.

BUT: scenario 2 is better for economic growth. Why? Well, if person 1 hadn’t got on that train, it would have run anyway. His three-pound-something train fare probably didn’t have that much economic gravity. But person 2 had done marvelous things for the economy with his little crash. He had to go to hospital, he had to have his car fixed, he had to sort out his insurance claim – all fantastic news in terms of the economy. But is he happy about all of this? Is it a good thing that he crashed? Well…no.

Economic growth and quality of life do not correlate. They’re not the same thing.

A quote by Layard sums up perfectly our interpretation of economic growth:

“People in the west have got no happier in the last 50 years. They have become much richer…but they are no happier. This shocking fact should be the starting point for much of our social science.”

So why is it accepted that economic growth is a good thing? Certainly, if climate change does start to become more accepted – as discussed in Climate change – gagging the skeptics – we will almost certainly have to reduce our levels of consumption. And that is not conducive to economic growth.

Perhaps a survey on quality of life in Wales by the Welsh Assembly Government will give some insight, but it will take a lot to convince people that money doesn’t mean happiness. But with that in mind, one last thought.

In one study, people were told that either:

1. The average wage is £20,000 and you earn £25,000, or;

2. The average wage is £40,000 and you earn £35,000.

Most people chose scenario 1.

Image taken from Toban Black‘s photostream.

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