Social Assets, Technical Progress and Long-Run Welfare

The scope of this chapter is to confute the idea that technical progress is necessarily welfare increasing. Indeed, we show that policies stimulating technical progress that augments the efficiency of the inputs used in the production of market goods can lead to an acceleration of output growth, but they may depress long-run individual well-being. At the root of this undesirable effect of growth-enhancing policies, we identify the detrimental impact of higher levels of consumption on social and environmental assets constituting important sources of people’s welfare. In turn, the decline in the quantity and quality of these common property resources may feed the growth process by inducing the economic agents to intensify both the accumulation of private assets and the work effort, so as to have access to more market goods as substitutes for the declining quality of social and environmental assets. Conversely, we demonstrate that policies creating incentives for a more sober lifestyle improve long-run welfare, but they tend to depress productivity and output growth by inducing the economic agents to allocate less efforts and resources to enhance the production of market goods. Finally, we consider policies aimed at reducing the negative effects of consumers’ activities on social and environmental assets, and we show that in the long run they lead to a lower rate of output growth and to a higher level of individual well-being.