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The Economics of Inclusion

Any strategy for inclusive economic growth must empower people by including them in the networks that make them productive. Inclusiveness thus should be seen not as a restriction on growth to make it morally palatable, but as a strategy to enhance it.

CAMBRIDGE – Many people find economic growth to be a morally ambiguous goal – palatable, they would argue, only if it is broadly shared and environmentally sustainable. But, as my father likes to say, “Why make something difficult if you can make it impossible?” If we do not know how to make economies grow, it follows that we do not know how to make them grow in an inclusive and sustainable way.

Economists have struggled with the tradeoff between growth and equity for centuries. What is the nature of the tradeoff? How can it be minimized? Can growth be sustained if it leads to greater inequality? Does redistribution hamper growth?

I believe that both inequality and slow growth often result from a particular form of exclusion. Adam Smith famously argued that, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” So why would growth not include people out of self-interest, rather than requiring deliberate collective action?

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