Wilfred Beckerman

The Impact of Income Maintenance Payments on Poverty in Britain, 1975

Book description: This authoritative collection brings together 100 key articles on the subject of the welfare state selected by one of the world’s leading experts. The first volume discusses the economic theory and related matters which underpin analysis of the welfare state. Volume II is about income transfers, especially social security benefits and poverty relief. Volume III looks at benefits in kind, particularly health care and education. This important work provides an analytical background to the subject whilst illustrating the vast array of literature available. It will be invaluable to students and professionals alike.

The Environmental Limits to Growth: A Fresh Look

The proposition that there must be limits on the feasibility or desirability of economic growth set by the adverse impact of economic activity on the environment has always been just one strand in the frequently encountered arguments to the effect that continued economic growth is fraught with many dangers to the human race. Just over twenty years ago many people in developed countries began to express grave doubts as to the desirability of continued economic growth. The main reasons for this concern were first set out brilliantly by E.J. Mishan (1967), who enumerated various alleged shortcomings of economic growth. Pollution of the environment was only one of them. Others included congestion of travel facilities and holiday resorts, and other forms of externality, as well as less tangible effects, such as the subordination of nobler social values to the pursuit of commercial objectives and the consequent deterioration in society’s moral standards. Similar concerns were set out in well-known books by Fred Hirsch (1977) and E.F. Schumacher (1973).

The Discount Rate

The most important price in any CBA in the public domain is invariably the discount rate that is used. For in virtually any CBA in the public sphere, the costs and benefits involved do not usually accrue instantaneously at the point in time at which a particular project in question is carried out. They are usually spread over many years. For example, both the costs and the benefits that are expected from some new transport projects are expected to accrue over several decades. In other projects major costs are incurred at the end of the project’s operation. For example, a major cost in nuclear energy will be the costs of decommissioning and of disposing of the accumulated radioactive waste when the facility in question has reached the end of its useful life after two or three decades.

Limits to Growth

During the 1950s and the 1960s economic growth became one of the central preoccupations of economists and economic policy makers. This was probably the result mainly of the unprecedented rates of economic growth being achieved by the advanced countries of the world, together with significant differences in the growth rates of individual countries. Hence there was considerable interest in explaining the overall acceleration of growth and the causes of the inter-country differences.

The Price of Life

There are some things in life that cannot be valued in terms of money. One of these is death. It is true that Hamlet did a CBA of staying alive when he weighed up ‘…the whips and scorns of time, the pangs of despized love, the laws delay’, and so on, against the fear of the awful experiences one might have when one has ‘shuffled off this mortal coil’. But he did not try to put a monetary value on the components of his balance sheet.

The Role of Welfare Economics

The numerous value judgements in welfare economics identified in previous chapters mean that the welfare economics input into policy decisions has to be seriously qualified. But they do not mean that it is irrelevant. It merely implies that CBA, which is welfare economics in action, has also to be treated as being a ‘decision tool, not a decision rule’.

From Economic ‘Efficiency’ to Economic Welfare

The basic theory of welfare economics enables one to identify how far the market is operating ‘efficiently’. This is taken to mean how far the market allocates resources in such a way as to make the maximum contribution – given resources and technical knowledge – to society’s economic welfare.

GDP and Friends

Probably few topics in applied economics are given more attention in the media and in public debate than the growth of ‘national income’, or two related concepts, namely gross national product (GNP) and gross domestic product (GDP). All three concepts are approximate measures of how much income a country produces each year. Most people will have seen or heard claims about which country has the highest GDP per head, or the fastest growth rate of GDP and so on. At the same time there has been growing criticism of the national income concept as a measure of ‘welfare’. In the last five decades or so all the advanced countries of the world experienced historically unprecedented rates of economic growth, so that per capita real incomes soon reached levels that were way above those of the prewar period.

Fact and Value in Public Policy: Three Examples

One widely discussed conflict of values, in addition to uncertain positive relationships, is a conflict between equality and productive efficiency, which is what the late Arthur Okun called ‘the big trade-off’. In the interests of exposition, I shall defer to Chapters 15 and 16 some of the problems associated with the concept of ‘equality’.

Utilitarianism and Its Constraints

Most students of economics will be familiar with the concept of ‘constrained maximisation’. It is the bread and butter of students who take an interest in the basic mathematics of economic theory, where they soon encounter the notion of ‘constrained maximisation’. For this corresponds to fundamental concepts in economics, such as the notion that consumers maximise something that we shall call utility (for old times’ sake and for want of a better word), subject to some constraints including their incomes and the prices of goods. And the difference between Utilitarianism and some competing ethical systems can be seen as being simply all about whether one should just maximise ‘some unique intrinsically valuable objective, utility’, subject to some constraints or whether, instead, there are other independent intrinsically valuable top-level objectives.