Mismeasuring the Economy: Is an Economy Successful if It Harms Those Living Within it?

The stock market has reached record highs. Unemployment rates have sunk to record lows.

PresidentTrump certainly celebrates these numbers, but are they a sound measure of most Americans’ health and well-being?

Joe Biden recently kicked off his presidential campaign arguing that most Americans are not feeling the benefits of, or sharing in the wealth being produced by, this “strong” economy. Certainly, the Trump tax cuts lined the pockets of the wealthy and did not provide the windfall promised to the average American, with many feeling the tax “reform” hurt them.

Perhaps unemployment rates and stock market averages do not accurately measure how well average Americans are faring in this economy.

Economists worth their salt will tell you that the objective of an economy is, or should be, to produce and distribute goods and services as efficiently and effectively as possible to meet human needs.

Let’s underline that last point: an economic system is effective to the extent it is able to meet human need, which means also that we should measure the efficacy of any economy by how well the needs of the people living within that system are being satisfied.

Adam Smith, for example, argued for the efficacy of capitalism in The Wealth of Nations not primarily because it allowed individuals to amass private fortunes but because he believed encouraging…