This argument has been debated through our bipartisan political system for hundreds of years, but the problem is that the politicians have been looking at it from the wrong point of view this entire time. To build this argument we must first define some key terms that are the foundation to the difference between welfare and prosperity.
Welfare (in the economic sense)- is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it.
GNP (Gross National Product)/GDP (Gross Domestic Product)- the market value of final goods and services purchased by households, by government, and by foreigners (net of what we purchase from them), in the current year. Alternatively, it is the sum of all value added to raw materials by labor and capital at each stage of production during the given year.
Circular Flow- the idea that since every expenditure by anyone is at the same time an equal receipt by someone else and receipts in turn become expenditures, money or exchange value flows in a circle. But physical factors and products do not flow in a circle.
GPI (Genuine Progress Indicator)- is an alternative metric system which is an addition to the national system of accounts that has been suggested to replace, or supplement, gross domestic product (GDP) as a metric of economic growth. The GPI is used in green economics, sustainability and more inclusive types of economics commonly known as "True Cost" economics.
Fallacy of Composition- the argument that what is true for the part must necessarily be true for the whole, or vice versa.Now that we have defined some key terms regarding the difference between welfare and prosperity we can begin to break the issues into separate pieces and later reconfigure them to create a society that is able to thrive. To begin we must distinguish between economic welfare and non-economic welfare, because these are two very different concepts of welfare. Economic welfare as stated in the definitions is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it. Non-economic welfare is a lesser known branch of economics that reevaluates the distribution of action in a microeconomic environment that provides precedence to the welfare that is experienced in the anti-act. An example of non-economic welfare is the leisure time that is experienced when an individual does not need to take the second job, or when an individual is able to leave work on time instead of staying late enabling them the ability to enjoy more time with their families, it is the welfare that brings true contentment. Examples of economic welfare are the paycheck you receive to buy food, and supply housing for yourself and your immediates. Also economic welfare includes the benefits you pay for such as healthcare and public infrastructure, which provide services to your life that provide economic welfare.
So how does non-economic welfare differ from prosperity? Well non-economic welfare does provide individuals with experiences that are not valued, but prosperity in society would encompass both economic welfare and non-economic welfare. Let’s not compare prosperity to total welfare, because for a society to prosper the economic welfare standards must change and non-economic welfare must be given more importance towards the overall well being of individuals as parts of societies.
Also welfare measures in economics are important, because to an extent they do provide beneficial aspects to large populations. Currently not every individual can feed themselves or their family, so we have developed a welfare system that can feed these individuals. Also some individuals experience medical costs that are impossible to pay, in response we have developed a welfare system that provides for those costs. The negatives from these systems we have developed come in the forms of entitlement and free-rider problems. With these systems individuals have realized that the supply and demand function of society now has a loop hole, as one individual does not necessarily need to supply yet his demands will be met none the less through the contributions of the rest of society. This has led to many critics of welfare states, but unfortunately these same critics advocate for pure competition in the stead of welfare which also does not produce prosperity.
So the challenge that falls on society is, how to develop a welfare system that incorporates more non-economic welfare and different economic welfare system standards. If societies can complete this task they will be on the road towards prosperity as societies recognize what benefits individuals and what harms individuals.
Thank you for your interest, please comment and subscribe.
Onward,
Hayden van Andel
