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Kerala PSC Indian Economy Book Study Materials Page 55Book's First Page
Growth, Development and Happiness 2.15 are still other general reasons to doubt income19—after a certain point, the gains the formula of ever rising GNP per are very small. This means that poor person as the route to happiness. While people benefit far more than rich people higher income may raise happiness to from an added dollar of income. This is a some extent, the quest for higher income good reason why tax-and-transfer systems may actually reduce one’s happiness. among high-income OECD countries In other words, it may be nice to have on balance take in net revenues from more money, but not so nice to crave for high-income households and make net it. Psychologists have found repeatedly transfers to low-income households. Put that individuals who put a high premium another way, the inequality of household on higher incomes generally are less income is systematically lower with net of happy and more vulnerable to other taxes and transfers than before taxes and psychological ills than individuals who do transfers.20 not crave higher incomes. Aristotle and (x) The western economist’s logic of ever the Buddha advised humanity to follow higher GNP is built on a vision of humanity a middle path between asceticism on the completely at variance with the wisdom one side and craving material goods on of the sages, the research of psychologists, the other. and the practices of advertisers. (viii) Another problem is the creation of new Economists assume that individuals are material ‘wants’ through the incessant ‘rational decision-makers’ who know advertising of products using powerful what they want and how to get it, or imagery and other means of persuasion. to get as close to it as possible, given Since the imagery is ubiquitous on all their budget. Individuals care largely of our digital devices, the stream of about themselves and derive pleasure advertising is more relentless than ever mainly through their consumption. The before. Advertising is now a business of individual’s preferences as consumers around US $500 billion per year. Its goal are a given or change in ways actually is to overcome satiety by creating wants anticipated in advance by the individuals and longings where none previously themselves. Some economists even say existed. Advertisers and marketers do that drug addicts have acted ‘rationally’, this in part by preying on psychological 19. Suppose that a poor household at Rs. 1,000 income weaknesses and unconscious urges. requires an extra Rs. 100 to raise its life satisfaction Cigarettes, caffeine, sugar, and trans- level (or happiness) by one notch. A rich household at fats, all cause cravings if not outright Rs. 1,000,000 income (one thousand times as much as the poor household) would need one thousand times addictions. Fashions are sold through more money, or Rs. 100,000, to raise its well-being increasingly explicit sexual imagery. by the same one notch. Gains in income have to be of Product lines are generally sold by equal proportions to household income to have the same enefit in units of life satisfaction. associating the products with high social 20. On an average across, the OECD countries, cash status rather than with real needs. transfers and income taxes reduce inequality by one (ix) The thinking of becoming happier by third. Poverty is around 60 per cent lower than it would e without taxes and enefits. ven among the becoming richer is challenged by the working-age population, government redistribution law of diminishing marginal utility of reduces poverty by about 50 per cent (OECD, 2008).