Answer to Question #111867 in Macroeconomics for Amanda

Question

Economists teach that “there is no free lunch”. As it concerns Economic Growth, the benefits are well known, but what are the costs? Discuss.

Answer 1

This consistent phrase can be applied to many aspects.

As for economic growth, the benefits on the one hand are higher living standards, and on the other the following negative consequences, which can lead to even greater costs:

• Environmental pollution. Almost everything that is involved in production returns over time to the environment in the form of waste, since the production process only converts resources, but does not completely utilize them. Therefore, for countries with a high level of production development, there is a threat of an environmental crisis.
• Economic growth does not solve all problems. For example, the poverty level in a country depends not on the volume of production, but on the existing mechanisms for the distribution of national income.
• Lack of warranties. Rapid economic growth poses a threat to employment, as cars can crowd out people, rob them of their jobs and incomes.
• Neglect of human values. Economic growth means industrialization, mass production, which is not creative and does not bring satisfaction to the employee.

These negative consequences will result in future costs for society.

Although, on the other hand, there are serious arguments in defense of economic growth:

• Improving the standard of living. In the context of growth, the choice of social goals is becoming less acute. You can solve several problems at the same time - to modernize the army, help the poor, improve the education system, etc.
• The problems of growth and environmental pollution can be divided. Pollution is not the result of economic growth, but the wasteful use of resources. A significant part of natural resources (rivers, lakes, oceans and air) is considered as common property and has no price. Therefore, these resources are used excessively intensively, which worsens their condition. Cessation of economic growth will not solve the problem. In this case, government intervention is required, which establishes environmental standards by law.
• The opportunity to achieve social equality. Each society has its own ideas about the quality of life, but it is universally recognized that people should be provided with minimal means of livelihood. In the case of economic growth, it is easier for the state to find means to solve the problem of poverty; the growth of national income increases the welfare of the whole society.
• Non-economic reasons. Slowing down or stopping growth will not automatically provide a "good life." On the contrary, the conservation of existing economic relations will lead to a decline and degradation of society. Countries of a progressive type of development cannot simply take and stay in one place. On the other hand, it should be remembered that economic growth brings an improvement in working conditions and allows people to spend more time on education, reflection and self-realization.

Positive and negative consequences will always go hand in hand with economic growth. Therefore, the task of society is to minimize the negative effects of economic growth and maximize the positive effects.