Dani Rodrik: Should economic policymakers maximize the welfare of consumers or workers?

What is an economy for? Since Adam Smith, economists have given a straightforward answer to this question: the economy increases our consumption possibilities. A well-functioning economy is one that offers a widening array of ever-more affordable goods and services, from food and consumer items to housing and transportation.

A poorly-functioning economy is one of scarcity, where the goods and services consumers seek are either unavailable or too expensive.This consumer-based view has traditionally been closely associated with academic economists and technocrats. But today, it pervades current thinking in progressive circles.In the US, the Democratic Party’s opposition to President Donald Trump has coalesced around the theme of ‘affordability,’ a clearly consumerist perspective.

Similarly, the ‘abundance’ agenda popularized by journalists Ezra Klein and Derek Thompson prioritizes expanding the availability of goods and services, albeit across a broader spectrum than consumer goods, one that includes housing, transportation and renewable energy.But there is an alternative perspective on the economy that emphasizes a different side of human nature and human needs. People are both consumers and producers.

We derive meaning, social recognition and life satisfaction as much from the work that we do as from the goods and services we consume—if not more so. Our jobs provide us with community, dignity and identity.That is why job loss is associated with declines in individual well-being that are multiples of the income drop generated by unemployment.