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57 Income is the most revered variable in economics. At an aggregate level, the total income generated in a country is a measure of the size of its economy. Per capita income reflects the conditions of productivity and the purchasing power of the population, and the growth rate of this variable is the yardstick by which the material progress of a country is usually measured. On an individual level, personal disposable income represents the range of options that individuals have available to achieve maximum satisfaction. According to conventional economic theory, each increase in income makes possible an increase in satisfaction, albeit in ever-decreasing quantities as needs tend to become satiated. However, when these theoretical predictions are matched against the opinions of people around the world, it becomes apparent that the relationship between income and satisfaction is more complex and less harmonious. Satisfaction in nearly all its dimensions tends to be on average greater in countries enjoying higher levels of per capita income. This chapter, however, demonstrates the existence of an “unhappy growth paradox”: economic growth, instead of increasing, actually reduces satisfaction with various aspects of people’s lives, especially in countries that have reached a certain standard of income and consumption. Similarly, although higher individual earnings tend to be reflected in greater satisfaction, an increase in income for the social group to which an individual belongs produces the opposite effect (especially with the material dimensions of well-being). As a result, changes in expectations and aspirations can counteract the The Conflictive Relationship between Satisfaction and Income eduardo lora and juan camilo chaparro 3 58 eduardo lora and juan camilo chaparro gains in satisfaction produced by increased income. This “aspiration treadmill” can lead to the paradox in which some of the most economically successful groups, with the highest aspirations, have lower levels of satisfaction than economically and socially marginalized groups with lower aspirations. The complex relationship between income and satisfaction poses multiple political conflicts. Is economic growth desirable, even though it may reduce satisfaction—at least temporarily? Is it justifiable to keep people who lack aspirations in ignorance to prevent a decrease in satisfaction? Should efforts to improve quality of life be concentrated on people who suffer more due to the effect of comparisons and competition with others, and who are not usually the poorest? Since political decisions in a democratic system are the result of conflicts and negotiations between groups with different views and interests, the answers to these questions should be the result of a public debate on the conflictive relationship between income and satisfaction. Satisfaction, Income, and Growth at Aggregate Level Governments make tremendous efforts to track Gross Domestic Product (GDP), the best known measure of productive activity and the size of an economy. Although GDP per capita is usually considered a good indicator of a society’s standard of living, it was not originally conceived with this end in mind. GDP does not take into account a number of activities that generate well-being, such as leisure, but it does include others that could well cause problems, such as depletion of nonrenewable natural resources or narcotics production (see Box 3.1). Despite these deficiencies, GDP does measure (after some accounting adjustments that need not be specified here)1 the total income that people receive, and therefore does have a bearing on satisfaction because an individual’s potential to consume is limited by income. In the last few decades, the main objective of economic policy in Latin America and the Caribbean (LAC) has been to accelerate GDP growth. After the “lost decade” of the 1980s, governments in the LAC region embraced, to a greater or lesser extent, the dictates of the Washington Consensus, with its promises to raise growth rates in a sustainable manner by combining fiscal and monetary policies to guarantee macroeconomic stability with privatization and market deregulation to raise efficiency. Since then, growth has improved in the region, but the gains have been modest in comparison with other regions of the developing world, especially East Asia. In this decade, per capita income in the region has grown somewhat more quickly than in the developed world, but it is still a long 1. Personal disposable income is obtained by deducting from GDP the costs of capital depreciation , corporate retained earnings, government income from its own properties and enterprises, net transfers of income from families to government, and net transfers of income to the rest of the world. [3.138.113.188] Project MUSE (2024-04-23...

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