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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

Economists as the high priests « Previous | |Next »
November 21, 2005

What is missing from the image is welfare-to-welfare reform. What we have is a trifecta of reforms that are justified because they will boost economic growth and provide prosperity for all. The Howard Government says that as it has a good record on economic growth and poverty reduction so you can trust us. The ends justify the means is the argument.

Paul Zanetti

Economists often make economic growth the absolute end of public policy. More economic growth is needed to provide the resources to deliver the much needed services, such as education, health, repair to the environment, so as to ensure public welfare. Economists wax lyrical at this happiness point, as some even go on to assert that that economic growth has moral benefits as well as the obvious economic benefits. Economic growth has the potential to improve the environment, reduce poverty, it even promotes democracy, and hey, it even makes for a more open and tolerant liberal society.

At this point in the expostion, I stop listening. I interpres economists as naive cheerleaders and boosters for the market economy. When I hear this spin I remind myself that growth has not always brought the promised benefits, that market economy does not automatically guarantee growth, social justice, or even economic efficiency and competition; and that achieving welfare ends requires that government play an important role.

You rarely hear the economic spinners highlighting the importance of externalities -- situations in which an economic actions have negative consequences for others for which that actor does not pay (pollution) or for which he is not compensated (farmers downstream from cotton farms that take all the water).These are "market failures" (the market on its own does not produce efficient outcomes). The end result is extensive damage to the environment (as has happened in the Murray-Darling Basin and the Great Barrier Reef).

Everybody knows about market failure. We know that market economies produce inequalities.

| Posted by Gary Sauer-Thompson at 7:03 AM | | Comments (0)