Períodos del modelo de Krol

Major criticisms leveled against aggregate standard national accounts, as measures of social welfare, have been identified (Islam and Clarke 2000). The inherent limitations of aggregate standard national include:

• registering only monetary changes in the economy and leaves out non-market transactions such as household production.

• attributing equal value to economic goods and economic bads. • double counting problems and their solutions.

• considering natural resources to be free. • placing no value on leisure.

• ignoring human freedom.

• ignoring the liabilities of living on foreign assets. • ignoring income distribution.

3.2.1.1 Household Production

Important components of social welfare are those activities undertaken within households such as child rearing, housekeeping and small-scale food production. These activities are not captured within aggregated standard national accounts and therefore are excluded from social welfare comparisons. Within poorer countries, much of the activities undertaken occur within this sector and therefore aggregate standard national account statistics are underestimated. These activities are only captured when they are moved into the official economy such as when others from outside the household are paid to undertake these duties. If a member of a household once cleaned the home and then stopped and began employing a professional cleaner to do this same work, social welfare for those in that household would not increase (ignoring for the moment the social

welfare benefits increased leisure from being freed from the drudgery of housework provides) but GDP per capita, for example, would (the reverse situation also holds true). As a social welfare indicator this falsely reports movements in welfare.

3.2.1.2 Economic Goods and Bads

Aggregate standard national accounts calculate the impacts of all economic activities, whether they are positive or negative. Should crime within a community increase dramatically and the need for jails subsequently increase, GDP per capita will note this increased economic activity as a positive outcome. Similarly, increasing spending on armaments is recorded as a positive increase in GDP per capita (and therefore a positive increase in welfare).

3.2.1.3 Double Counting

There is a lack of discrimination in the calculation of aggregate standard national accounts between the money spent on causing problems and the money spent on solving them. Thus, if production increases at a polluting factory, GDP per capita rises. If at the same time, the government increases spending on pollution control to combat the increased level of pollution caused by the increased production, this is also included in GDP per capita. Therefore, in order to maintain the original level of pollution (and social welfare), GDP per capita has double counted the activities undertaken. So whilst pollution levels have been maintained, GDP per capita has increased thus giving the false impression that social welfare has increased.

3.2.1.4 Free Natural Resources

Many economic activities treat natural resources to be free. That is, the cost of dumping wastes into rivers, or pollution into the atmosphere are not added to the cost of production and therefore are not considered to be economic costs. Likewise, soil quality is often reduced through over farming, yet the reduction of humus in soil is not included as a cost of production (Repetto et al. 1989; Daly and Cobb 1990; Hamilton 1998). If natural resource costs were internalised into the cost of production, the true cost of production would be increased, as would aggregate standard national account measures, such as

GDP per capita. In this instance, GDP per capita understates the true cost of economic activity.

3.2.1.5 Leisure

Social welfare can be increased though increased levels of leisure (Linder 1970), however, aggregate standard national accounts do not include the cost of leisure. If employees were forced to work 12 hours per day, six days a week, production and GDP per capita may increase but the loss of social welfare due to the loss of leisure would not be reflected in this heroic increase in GDP per capita. Leisure has been included in some adjusted aggregated standard national account measures of social welfare (Sametz 1968; Nordhaus and Tobin 1973), but not all (Daly and Cobb 1990).

3.2.1.6 Human Freedom

Similarly, human freedom is a concept closely linked to social welfare, but it is difficult to value in monetary terms. Again, aggregate standard national accounts could be increased dramatically if human choice was removed and economic activity took precedence over political and social demands. Social welfare is both physical and psychological (Liu 1977). Human and political freedom is a very important psychological factor in calculating social welfare, yet is entirely excluded in the calculation of statistics such as GDP.

3.2.1.7 Foreign Liabilities

Sustainable economic growth cannot be assumed if it is based on the liabilities of foreign assets. Loans for consumption or unproductive assets bolster aggregate standard national accounts in the short term, but reduce social welfare in the long run when increased resources must be diverted to repay these loans.

3.2.1.8 Income Distribution

A serious difficulty in social welfare measurement based on preference satisfaction is the treatment of income distribution (Sen 1976). The law of diminishing returns suggests that social welfare is intrinsically linked to income distribution. Aggregate standard national

account measures are income distribution neutral, in so far as income distribution is not a factor in calculating these statistics. ‘It is evident that any transference of income from a relatively rich man to a relatively poor man of similar temperament, since it enables more intense wants to be satisfied at the expense of less intense wants, must increase the aggregate sum of satisfaction’ (Pigou 1962, p. 89 – also see Dalton 1920). Using GDP per capita as a social welfare indicator is incomplete as it does not reflect changes in social welfare caused by income distribution.

3.2.1.9 International Comparisons

Using aggregated standard national accounts as measures of social welfare when comparing countries has three major difficulties (Nafziger 1997; Latouche 1996). Firstly, the aggregate standard national accounts understate economic activity, particularly for developing countries. Economic activity is only included in these statistics if it occurs within the “official” economy. It does not include goods and services produced within the home for their own use, rather then for sale in the market place. As this occurs more in developing countries, GDP per capita, for example, has a bias towards developed countries. Secondly, aggregated standard national accounts in developed countries is overstated because it includes goods and services that could be considered intermediate goods and services. These goods and services reflect the costs of producing (such as business suits, business lunches, pollution controls) or guarding income (such as national defense or law enforcement). Finally, as aggregate standard national accounts comparisons are usually made in US dollars, most developing countries have an undervalued currency. Exchange rates are determined, partly, through international trade levels, and as many developing countries do not trade their cheap, labour-intensive goods, there is no impact on the exchange rate (L. Johnson 1996). Under these circumstances the purchasing power parity (PPP) is a less biased tool of comparison (Nafziger 1997).

At the micro level, individuals in different countries have different life plans or expectations so that it is even more difficult to compare social welfare across cultures

unless the tastes of preferences of individuals are assume to be the same as is their ability to enjoy satisfaction.