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Economics explains why we've never had it so good

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The 2002 Royal Economic Society Public Lecture

Today's young people really have never had it so good, and economics shows us why. Delivering the 2002 Royal Economic Society (RES) Public Lecture on Wednesday 4 December, Nick Crafts, professor of economic history at the London School of Economics (LSE), will demonstrate the incredible impact of scientific and technological change on the quality of our lives compared to people living just 100 years ago.

Nick Crafts said: 'We now expect to live on average 30 years longer, to work almost half the amount of time we used to every year, and to enjoy an array of new goods and services, including air travel, antibiotics, computers and televisions. It has also meant a cut in rates of carbon emissions and natural resource depletion never possible in the 20th century.'

The general public is deeply sceptical that living standards have improved over time. Many claim that the national income accounts overstate the rate of economic growth, partly because of our current awareness of green issues. It is perhaps not surprising then that claims of large benefits from scientific and technological progress are increasingly scorned.

But as Professor Crafts will show, there are two big reasons why conventional measures of economic growth understate improvements in average living standards:

First, the price indices used to convert past incomes into today's prices substantially exaggerate increases in the cost of living, particularly in recent times.

Second, the most important scientific achievement of the 20th century - the massive reduction in mortality risks - is not taken into account, although there is clear evidence that it is worth as much to people as a huge increase in material consumption.

An estimate of real national income that corrected for these errors would exhibit growth at least twice that of conventional real gross domestic product (GDP) per person in the last quarter of the 20th century. The apparent growth slowdown of recent decades is largely, or even wholly, a statistical artefact.

Professor Crafts will conclude his lecture with a paradox. Given the huge improvement in our longevity, the halving of our working hours and the availability even to people of modest means of an astounding array of new goods and services, it seems that we should feel sorry for JP Morgan, the richest person in the world a century ago. And yet, there is a great deal of evidence that we are no happier than our grandparents or great-grandparents. The resolution of this paradox seems to be that our material aspirations rise as fast as our incomes.


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The RES Public Lecture, Is Economic Growth Good for Us? by Nick Crafts, will be delivered at the Royal Institution at 3.30pm on Wednesday 4 December. A related paper, UK Real National Income, 1950-1998: some grounds for optimism, published by the National Institute for Economic and Social Research, is now available on the RES and LSE websites. To read this click here|.

Professor Nicholas Crafts has been teaching and researching in the Department of Economic History at LSE since 1995. He graduated with a first class honours degree from Cambridge, before lecturing at Exeter, Warwick, Oxford, and Leeds in the UK and Stanford and the University of California, Berkeley, in the USA. His latest book Britain's Relative Economic Performance 1870-1900 was published earlier this year.

The Royal Economic Society was founded in 1890. Now in its second century, the RES is one of the oldest economic associations in the world. Currently it has over 3,300 individual members, of whom 60 per cent live outside the United Kingdom. It is a professional association that promotes the encouragement of the study of economic science in academic life, government service, banking, industry and public affairs. For more information, visit www.res.org.uk| 

The first RES Public Lecture was delivered on 7 December 2001 by Professor John Sutton, Professor of Economics at LSE, on A World Divided - Globalisation Games.

Press cuttings

The Independent
Health, wealth, free time: 'We've never had it so good'
Nick Crafts, LSE, at a lecture given in the annual Royal Economic Society lecture, maintain scientific and technological advances such as increased life expectancy and free time had been wrongly excluded from calculations of the nation's wealth. 

The Daily Telegraph
Life is fine if you don't have to worry about paying butlers, says professor
Link: http://www.telegraph.co.uk/money/main.jhtml

4 December 2002