Macroeconomic goals

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We have introduced the idea of an economy working “well” or “badly,” and have referred to high unemployment, persistent high inflation, and destruction of the natural environment as bad things that virtually no one wants. “Bad” and “good” are value-laden terms: Do they belong in an economic textbook?

Social scientists often make a distinction between positive questions, which concern issues of fact, or “what is,” and normative questions, which have to do with goals and values, or “what should be.” For example, “What is the level of production in our country?” is a positive question, requiring descriptive facts as an answer. “What level of production would be most desirable?” is a normative question, requiring analysis of what it is we value and what goals should be set. However, both of these questions require a definition of production; positive and normative issues are inevitably intertwined in efforts to reach such a definition.

Using both empirical evidence and various theories, we will describe—using the best available economic research—how an economy functions at the macro level. Yet, while perhaps a few people enjoy studying economic principles for their own sake, the main reason anyone would study macroeconomics is to try to understand how we—as a society, nation, and world—can reach the goals we desire. Thus we cannot avoid the normative question of what goals the macroeconomy should achieve.

Not everyone has the same goals, on a personal level, or in their idea of a “good” society. However, agreement becomes easier at a more general level. Therefore, we will start with the term well-being as a way of referring to the broad goal of promoting the sustenance and flourishing of life.

In the context of macroeconomics, we can say that three especially important components of well-being are: good living standards; stability and security; and sustainability.

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