Title:	Wealth, Income Inequalities, and Demography
Authors:	Luigi Paganetto
Keywords:	Wealth
Issue Date:	2014
Publisher:	Springer
Description:	Fifty years ago, the American Economic Review published a short article titled “The Golden Rule of Accumulation”. In it, Edmund Phelps, an American economist, proposed a simple rule for a nation’s wealth to grow and provide the highest standard of living for its citizens—present and future (Phelps 1961). The rule essentially specified how much people had to work, save, and invest today so that future generations could be at least as well off as they were. The paper used the insights of economists from around the world, including France, Germany, Hungary, the Netherlands, and the United Kingdom.1 All were to have distinguished careers, and some would get the Nobel Prize. In 2006, the Nobel Committee awarded the prize to Phelps for “his analysis of intertemporal tradeoffs in macroeconomic policy.” Many economists still consider the golden rule the most basic proposition of optimum growth theory. It is the inspiration for the title of this report, and forms the roots of its policy prescriptions. Following the golden rule means that today’s Europeans work and consume just so much that future generations neither resent them for consuming too much, nor pity them for consuming too little. Keeping to the rule is perhaps the most telling sign of a country’s—or a continent’s—economic maturity. Europe’s growth is already different from other economies’ in two aspects, reflecting its cultural and demographic maturity. Perhaps more than others around the world, the citizens of Europe want economic growth to be smarter, kinder, and cleaner, and they are willing to accept less for “better” growth. The single word that summarizes these ideals might be “golden.” Europe’s growth will have to be golden in yet another sense. Economic prosperity has brought to Europeans the gift of longer lives, and the continent’s population has aged a lot over the last five decades. Over the next five, it will age even more: by 2060, almost a third of Europeans will be older than 65 years. Europe will have to rebuild its structures to make fuller use of the energies and experience of its more mature populations—people in their golden years. These desires and developments already make the European growth model distinct. Keeping to the discipline of the golden rule would make it distinguished. This report shows how Europeans have organized the six principal economic activities— trade, finance, enterprise, innovation, labor, and government—in unique ways. But policies in parts of Europe do not recognize the imperatives of demographic maturity and clash with growth’s golden rule. Making growth across the continent conform both to Europe’s ideals and to the iron laws of economics will require difficult decisions. This paper summaries a report that was written to inform them. Its findings: the changes needed to make trade and finance will not be as hard as those to improve enterprise and innovation; these in turn are not as arduous and urgent as the changes needed to restructure work and government. Its message: the remedies are not out of reach for a part of the world that has proven itself both intrepid and inclusive.2
URI:	http://10.6.20.12:80/handle/123456789/53126
ISBN:	978-3-319-05909-9
Appears in Collections:	Population Studies

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