When something like a natural disaster occurs, or even instances of divorce, people may need some assistance.  Government funded programs are available for those that have been victim to a natural...

When something like a natural disaster occurs, or even instances of divorce, people may need some assistance.  Government funded programs are available for those that have been victim to a natural disaster.  Those who divorce may be more likely to need public assistance.  Do you think that the increase of government spending to those that find themselves in these situations is an economic gain?  Why or why not?

Asked on by sj83

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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While these sorts of payments are certainly economic gains for the individuals who receive them, I do not believe that they are economic gains for the country as a whole.  Because you have tagged this with “gross domestic product,” I assume you are asking whether we think such payments should be included in GDP.  I would say that they should not be.

When people get public assistance, it certainly helps them.  It allows them, for example, to be able to buy things that they would not be able to afford on their own.  Therefore, it is an economic gain for them.  But that does not mean it is an economic gain for society as a whole.  If we did not give public assistance to the people who have been affected by these misfortunes, taxpayers would simply spend the money that now goes to public assistance.  Therefore, the public assistance does not change the amount of demand in the economy as a whole.

Of course, these payments may constitute a social gain.  They may be better for our society than allowing the victims of these misfortunes to suffer.  But this is not the same thing as an economic gain.

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