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Misguided Ideas on 'Costs to the Economy' Harm Our Individual Right to Make Choices in a Free Market

July 24, 2018 in Economics

By Ryan Bourne

Ryan Bourne

One of the most cliched, misguided ideas in economic debate is
the view that politicians are focused on GDP above all else. Yes,
politicians of all parties clearly consider growth important.

But the existence of constrictive planning laws, migration
controls, and regulation for social ends makes a mockery of the
idea that MPs and government cast all other concerns aside for
raising GDP.

Over the past few years, I’ve noticed a proliferation of
economics-style campaigning that lends weight to the GDP-fetish
theorists.

Groups seeking the introduction of new regulations or spending
feel that they have to put economics front and centre of their
reasoning — pointing out how much the status quo “costs
the economy” and how their idea would boost it.

A simple search online, for example, implies that company
culture, the gender pay gap, lack of sleep, mothers opting out of
the labour force, obesity, and much else besides all “cost
the economy” billions of pounds per year. The implied message
is that if we only adopted some new intervention to counteract
these problems, we’d all be better off.

The essence of choice is
allowing people to take what they consider the best decision, given
the information and structures in front of them.

To be sure, some of these examples (obesity in particular) may
well have what we consider “social costs” —
effects on broader society beyond those faced by the
individual.

In most other cases though, the supposed problems arise out of
decisions made by free individuals, with no obvious harm to a third
party. Such behaviour should not be thought of as a cost to the
economy at all.

Take the example of lack of sleep. A report in late 2016 by the
Rand Corporation suggested that this cost the economy £40bn per
year, because tiredness sees employees less productive at work than
they might otherwise be, lowering measured output and hence
GDP.

But GDP is emphatically not economic welfare — the true
metric of our economic wellbeing.

Yes, being more productive at work comes at a cost. But our
starting assumption should surely be that people do what they
prefer — some people might value staying up late partying,
caring for their newborn child, or a whole range of other
activities.

People make these kinds of judgments every day, and they weigh
up any potential adverse effects on their work performance against
the enjoyment from all these other activities. When someone decides
to leave a lucrative job in the financial sector to become a
teacher, they might expect to be less “productive” from
the perspective of measured GDP contributions. If this person is a
woman, her decision might also …read more

Source: OP-EDS

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