cafeconomics

GDP, Per Capita GDP, GDP growth rates etc may not always capture the welfare and standard of living of the people. GDP growth is dependent on a number of factors including global economic environment and natural calamities which are well beyond the control of any one country or group. Even in the "rich" economies of the west, economic inequality is surprisingly high. In case of emerging market economies with high populations this contrast is even starker. The scope for re-distributive taxes is limited in case of emerging markets, they would not want to hurt their growth prospects. For low and middle income group countries the transition to high income group may last several decades and growth (and development) may remain "top heavy" for a long time to come. As such these low or middle income economies will have to make the best of what they have by focusing on administrative/governance procedures and outcomes. The target must be to provide at least a minimum sta...

Reference: Chapter - 17 Economics by Nordhaus and Samuelson  The debate between equality and efficiency is not new and no economy in this world is immune to this trade-off. Let us examine the main propositions in this debate: Proposition 1: The Theme of Welfare Economics is Universally Accepted In an ideal scenario, markets should be able to balance between equality and efficiency and governments do not have to interfere with market mechanisms but in reality, capitalist economies are like jungles, only those who are fit enough can survive. So it is widely accepted that the responsibility of the welfare of the poor and ill-equipped falls on the governments of the day. Governments across the world undertake several welfare schemes including social security, health care, pensions for the elderly and unemployed, insurance, women and child welfare, cash transfers, income - support etc. Proposition 2: The Bucket is Leaky Consider the figure above in which real incomes of the upper half a...