From Angus Deaton’s superb new book, The Great Escape: Health, Wealth, and the Origins of Inequality:
Economists — my own tribe — think that people are better off if they have more money — which is fine as far as it goes. So if a few people get a lot more money and most people get little or nothing, but do not lose out, economists will usually argue that the world is a better place. And indeed there is enormous appeal to the idea that, as long as no one gets hurt, better off is better; it is called the Pareto criterion. Yet this idea is completely undermined if wellbeing is defined too narrowly; people have to be better off, or no worse off, in wellbeing, not just in material living standards. If those who get rich get favorable political treatment, or undermine the public health or education systems, so that those who do less well lose out in politics, health, or education, then those who have done less well may have gained money but they are not better off. One cannot assess society, or justice, using living standards alone. Yet economists routinely and incorrectly apply the Pareto argument to income, ignoring other aspects of wellbeing.
