[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Thinking Like an Economist
TRADE-OFFS AND THE COSTS OF ECONOMIC GROWTH
Faith in the virtues of economic progress is widespread. Few
openly embrace the alternative of economic stagnation and
lower standards of living. Yet not everyone benefits from
changes in technology, and there may be environmental and
other costs associated with growth.
In the early 1800s, English workmen destroyed labor-saving
machinery rather than see it take over their jobs. They were
referred to as Luddites, after their leader, Neil Ludd (whose
role may have been largely mythical). Concerns about workers
thrown out of their jobs as a result of some innovations are no
less real today.
What needs to be kept in mind, and has already been stressed
earlier in this book, is that technological progress creates jobs
as it destroys them. Of course, it can be hard to retrain workers
in declining industries to gain the skills necessary for new jobs,
so middle-aged or older workers who lose jobs may have real
difficulty in getting another one that is as good.
Not surprisingly, technical progress frequently meets
with resistance. Although there is growing acceptance that
such resistance is futile—change will eventually come—and
that the benefits of economic progress exceed the costs, many
also recognize the role of government in assisting individuals
who are displaced by technological change in their
transition to alternative employment. Such assistance can
be thought of as a form of insurance. Most workers face
the possibility that their jobs will be made technologically
obsolete. Knowing that if they are thrown out of work for
this reason they will be at least partially protected helps
create a sense of security, something most workers value
highly.
An important cost of economic growth can be its toll on
the environment. As we noted in Chapter 22, a green GDP
measure might give a different picture of growth as it would
include the economic costs to the environment of producing
more goods and services. Accounting for all the costs, as well
as the benefits, of growth would provide a clearer picture of the
trade-offs that growth can involve.
environment. Nevertheless, a sensitivity to the quality of our environment may
affect how we go about growing. This sensitivity is building a new consensus in favor
of sustainable development—that is, growth not based on the exploitation of natural
resources and the environment in a way that cannot be sustained. In many
cases, policies can be devised to improve economic efficiency, and thus promote
economic growth, at the same time that they decrease adverse environmental effects.
These include elimination of energy subsidies and certain agricultural subsidies
that encourage farmers to use excessive amounts of fertilizers and pesticides.
ARE THERE LIMITS TO ECONOMIC GROWTH? ∂ 601