PPP-adjusted GDP/capita is about $16,000 right now. Imagine I waved a magic wand that magically redistributed all of this in the form of consumable income, with equal shares for all. That’d mean everyone on earth lives on $16,000 a year. Better than what we currently have for most people, but, still, a lot worse than what we see in, say, Appalachian USA.
But this is misleading because this isn’t even possible. Lots of that GDP is in the form of government or capital expenditures. We need some money not to be consumed but to be invested in public goods, capital, etc., so we can produce next year. Empirically, maybe only about half of that at most could in principle be consumed as income. So, perfect egalitarianism gets us to maybe $8000 per person right now. Still better than what many experience, but not real security or comfort.
Growth > equality when it comes to welfare for this reason. We need to make more pie so that everyone has enough; right now there is not enough pie for everyone to have a good slice, even if we gave everyone an equal slice.
You have written about the importance of economic growth—what do you make of Lant Pritchett’s arguments on that topic?
Economic growth is vital. Here’s why:
PPP-adjusted GDP/capita is about $16,000 right now. Imagine I waved a magic wand that magically redistributed all of this in the form of consumable income, with equal shares for all. That’d mean everyone on earth lives on $16,000 a year. Better than what we currently have for most people, but, still, a lot worse than what we see in, say, Appalachian USA.
But this is misleading because this isn’t even possible. Lots of that GDP is in the form of government or capital expenditures. We need some money not to be consumed but to be invested in public goods, capital, etc., so we can produce next year. Empirically, maybe only about half of that at most could in principle be consumed as income. So, perfect egalitarianism gets us to maybe $8000 per person right now. Still better than what many experience, but not real security or comfort.
Growth > equality when it comes to welfare for this reason. We need to make more pie so that everyone has enough; right now there is not enough pie for everyone to have a good slice, even if we gave everyone an equal slice.