Chapter 4 details
Link to publisher Palgrave Macmillan/Springer’s page for this chapter: https://link.springer.com/chapter/10.1007/978-3-031-37435-7_4
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Cite this chapter: Samans, R. (2024). From the Wealth to the Living Standards of Nations: Internalizing the Social Contract in Macroeconomic Theory and Policy. In: Human-Centred Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-37435-7_4
Abstract
This chapter proposes a reformulation and rebalancing of the standard liberal economic growth and development model by integrating key institutional dimensions of the social contract into the heart of macroeconomic theory. Specifically, it presents a simple model of the five main channels by which rising living standards propagate at the household level within an economy and maps the corresponding areas of enabling policy and institutional strength. These are represented as an economy’s “factors of distribution” and modelled as a system—an aggregate distribution function analogous to the aggregate production function.
This policy and institutional ecosystem is the practical manifestation of a country’s social contract—how it translates its values with respect to inclusion, sustainability and resilience into the rules of the game within its economy. The aggregate distribution function is the de facto income distribution system or “living standards diffusion mechanism” of modern market economies. It is the combination and indeed interaction of the aggregate distribution and production functions of an economy that determine its progress in median household living standards.
Macroeconomic theory and policy should be refocused on the goal of increasing the aggregate social welfare, or living standards, of nations rather than solely their wealth, or GDP, by placing equal and parallel emphasis on strengthening the aggregate production and distribution functions of economies. This is the golden rule of human-centred economics.
Important details for the book Human-Centred Economics by Richard Samans
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Cite the book as follows: Samans, Richard. Human-Centred Economics: The Living Standards of Nations. Cham, Switzerland: Palgrave Macmillan, 2024. | © ILO: International Labour Organization 2024. | Open Access This book is licensed under the terms of the Creative Commons Attribution 4.0 International License. | This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland. | The responsibility for opinions expressed in this book rests solely with the author (Richard Samans), and its publication does not constitute an endorsement by the ILO or its constituents of the opinions expressed herein. |
Published: 03 December 2023 | Print ISBN 978-3-031-37434-0 | Online ISBN 978-3-031-37435-7
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