A Theoretical Analysis Of Economic Welfare And Its Measurement With China As A Case

Over the past thirty years,1979-2008, China has experienced some of the world's highest rates of economic growth and achieves the rapid expansion of total output since the Reform and Opening up policies was adopted. Currently, Chinese aggregate products, measured by GDP, have got to the top three positions, even the first two levels in the world. Meanwhile, the welfare of the members in the society has not distinguished improved, especially in the last more than 10 years. More and more empirical studies showed that, GDP, as one of the most important indicators to measures a country's economic welfare, is far from complete. For example, the economic welfare in the most Nordic countries has been declined from the 80's last century to today. Many economists therefore clear that, since economic growth caused social, environmental, ecological factors changed, which have done the adverse effects on welfare, the target of economic growth has been "obsolete" or "undesirable". According to the experience of developing countries, it is very common that Economic welfare has been improved just a little relative to the high economic growth. But comparative with the rapid economic growth, the gap lagged of Economic welfare is so great that caught worldwide attention, and we would like to know why.In order to explain this, many domestic scholars propose well-being, happiness index and welfare to the public, these issues have aroused discuss widely and strong concern among the most Chinese, and then it has become one of the focal point in China today. As to illustrate the reasons for the big gap between China's economic growth and welfare improvement, most researchers attribute it to the income distribution; they said it is income inequality that makes the rate of consumption growth was lower than economic growth rate. The others think that it is due to the characteristics of China economy, such as high energy consumption, high pollution, etc. Some of them are quite insight into the truths, but we almost have not seen the literatures about the relationship of consumer spending, economic growth and economic welfare. I think that, despite the serious inequality of income distribution and the extensive growth pattern, to a considerable extent, the two points can explain the dislocation between the economic growth and welfare improvement, more extensive and in-depth studies are necessary.There are some other conceptions linked to welfare, such as utility, happiness, well-being and satisfaction, they come from interdisciplinary of economics, psychology and sociology. We can estimate them both from the micro and the macro level. The psychological factors are barriers us to measure it, so we can avoid psychological factors to use objective tools, which can bring the persons happiness, as the indicator of economic welfare also. From this point of view, welfare seems to be easier to be measured in macro level through in-kind or money. As the founder of Welfare Economics Pigou said, Economic welfare is the part of social welfare, which can be measured by money. This paper studies the economic welfare and it's measurement in China under the conditions of the rapid economic growth.As we know, under the modern System of National Accounts (SNA), GDP and its growth appears to be one of the most important indicators to measure the economic welfare of a country. Economic welfare is not only the criteria to evaluate the results of the resources allocation and economic policy, but also the goal government and the social member pursue. But, there is a considerable part of GDP which can do nothing with the economic welfare (at least with the current economic welfare); On the other hand, there are so many things, which can benefit the people, excluded by GDP, they constitute an important part of the economic welfare. Therefore, it is essential to make examination and deconstruction of GDP, and give an alternative tool to measure economic welfare. We can use it to interpret severe dislocation between the economic growth and welfare improvement in china.The dissertation at first introduces the concept and definition of economic welfare and its measurement. Next, it points out the deviation of economic welfare from its indicator of GDP, so it analysis and deconstruct the composition of GDP and economic welfare. Then, it applies the existing economic welfare measurement methods to construct a complete theoretical framework which is, from the perspective of sustainable development, considered with Chinese Economy characteristics and with the factors affect the economic welfare in China especially. Finally, the dissertation uses the theoretical framework and the index system to estimate the economic welfare and its changes in 1979-2008 in China. The paper also makes an international comparison in order to reason the dislocation between the economic growth and welfare improvement in China. The thesis reaches some conclusions that the most important reasons for widening gap between the rapid economic growth and welfare improvement in lag are income distribution, economic structural imbalances, the extensive mode of economic growth and the severe environmental damage etc.The article concludes that China should pursuit of alternative goals for welfare enhancing in place of simply achieving economic growth. We should use series of alternative indicators of GDP to evaluate the social progress and development; they must be direct reflection of the human being (including per capita income, nutrition, health, education, life expectancy, freedom and the social justice, etc.). At Finally, the paper pointed out that the rapid economic growth in China,with high saving, high energy consumption, high pollution and low private consumption is weak sustainable. Because the different capital cannot substitute each other completely, the natural capital and the environment is irreplaceable, we should concern more about the factors for sustainability.