The Demographic Revolution: Reconceptualizing Macroeconomics

Orio Giarini
2013 unpublished
It is important to reconsider the measurements which refer to the "Wealth of Nations" and from which the most appropriate references for better welfare policies are derived. In the present Service Economy, not all the "value added" measures indicate an increase in the level of wealth (the costs to cope with pollution for instance), whereas many developments in service functions and performances (in the case of many communication systems for instance) add to real wealth much more than the usual
more » ... ore than the usual value added references indicate. In particular, the notion of productivity in a Service economy is much more relevant with reference to performance in time (hence in a probabilistic system) than to the production factor costs (in an equilibrium-based system). But all this is linked to progress in economics as a discipline, and to its integration with environmental issues (which also pretend to solve the problems of the "Wealth of Nations" on the basis of their "sustainability"). This will be a new era in economic development which will be beyond current extrapolations and will hope for "growth" in the traditional Industrial Revolution perspective. The global demographic revolution is taking place in a situation of profound economic change, which requires that we consider what today constitutes "The Wealth of Nations". This is of course a very complex matter that I have tried to deal with over the last 30 years. 1,* Only the main points of reference are listed hereunder for the sake of discussion and further research, keeping in mind the fact that the word "sustainability" is in fact an indicator of the necessity to reconceptualize macroeconomics and hence the definition and strategies for "wealth":-The notion of wealth is often considered similar to that of National Income, without our realizing that the first normally relates to a stock of goods and services, and the latter to a flow (of remunerated production, the "value added"). In this way, a country or town can be very "rich" by spending money on waste disposal, rebuilding houses destroyed by hurricanes or wars, cleaning water and air, but still be at the lowest level of development.-The basic implicit assumption when the discipline of economics was first developed (by Adam Smith and followers) was that in a world of scarcity, the value added was really