“Please, sir, I want some more,” said Master Twist displaying (no doubt unwittingly) behaviour consistent with one of the fundamental principles of classical and neo-classical microeconomics. “More is better than less” is a doctrine that remains the bedrock of modern economics.

But is more, necessarily, better? The relentless demand for the latest electronic gadgetry would suggest the answer is yes. Aspirations for all manner of equipment - desktops, notebooks, home theatre, MP3 players, DVDs et al - is perhaps indicative that behaviour does indeed follow economic theory.

But another application of the more is better belief leads to a Super 14 competition to be thrust upon us next year. There are arguably many who would contest that the increase from 12 to 14 teams is a move for the better. What about the number of universities? Should this also follow the more is better line of reasoning? And when it comes to our dietary intake, many of us are repeatedly told to eat better - as opposed to eating more. These examples, among many others, appear to call into question the soundness of the more is better principle.

Of course, as a die-hard economist I feel compelled to defend the principle - so here goes. The defence revolves around the notion of quality. Implicit in the more is better doctrine is the assumption that quantity increases are not accompanied by any deterioration in quality. If (or when) such an assumption holds then, I would assert, more is better.

This brings me to the economic growth message. Question: is more economic growth better? Answer: yes, as long as the quality of that growth does not diminish. Of course, in the ideal world, both the quantity and the quality would be improving - but lets leave idealism to one side for a moment.

But, I hear you say, what do you mean by “… quality of that growth”? To help here I turn to my dictionary that suggests a concept related to excellence. Thus, I must concede, there are numerous types of economic growth and some types will inevitably rate higher on the quality or excellence scale than others.

Yes, as I have indicated in many previous articles, I believe growth is vital for the maintenance and improvement of NZers’ economic well-being. But it seems that its not just growth that’s important. The quality of growth is, at least, equally important. The need for growth is something NZers have been aware of for longer than we care to remember. But perhaps we have also been aware of the need for quality growth. I quote from the NZ Government’s Budget Statement of a quarter of a century ago.

“We are not rich enough to accept inefficiency of any form.  We can not afford to misuse our resources of labour, capital, land and entrepreneurial talent. All these resources must be employed in producing those things which we are best able to produce and we must get the maximum output from them.

“The Government is not seeking growth at all costs, but a faster rate of growth is nevertheless our goal.  …  Without growth in output the prospects for raising real income and for employment are bleak…”.

For my current discussion the interesting phrase is “… not seeking growth at all costs …”. This to me clearly implies there are costs arising from economic growth. From an academic economist’s perspective this suggests a benefit-cost analysis of growth. From such a perspective the quality of growth, or the degree of its excellence, is determined by the benefit-cost ratio. The higher the benefit-cost ratio, the higher the quality of the associated growth experience.

So, what are the benefits of the growth? In my mind the primary benefit of economic growth is an increase in the available number of jobs. This translates to more people in jobs, providing people with broader opportunities, with wider choices and with a stake in their future. The availability of opportunities, choices and a future potentially contributes to improvements across all dimensions of well-being as described in section 10 of the Local Government Act 2003 “… the economic, social, environmental, and cultural well-being of communities, in the present and for the future”.

But, what about the costs of growth? The key cost, I would argue, can be gauged by asking whether or not we have bought the growth? That is, has the growth borrowed something that has to be repaid later? Or have some resources been used or consumed but haven’t been replaced or replenished. In both examples, such costs are jeopardising or reducing future growth and thereby future choices and opportunities. This signals a relationship to the concept of sustainability.

At this somewhat primitive level, the jury is still undecided as to the quality of NZ’s current growth experience. The success story is employment - over 300,000 additional jobs over the past 7 years. The even greater plus, in my mind, is the change in labour force participation over this period. This aspect definitely adds to the index of quality. In particular, rates of labour force participation have risen significantly amongst older age groups as well as for females. The former is clearly relevant for future opportunities as it is embedding behaviour that can improve our ability to cope with the ageing NZ population.

It may seem to many that NZ’s ageing population implies increased dependency. But with rocketing participation rates amongst those in the 55-65 year-old cohorts, our 1960s concepts of retirement and dependency may well be out-dated if not out-moded. With technology making the work-from-home choice a reality for many, coupled with more flexible work practices (e.g. part-time work arrangements, mokopuna leave, extended sabbaticals), there is no reason why participation rates can not continue to grow.

The other benefit from the current growth experience has been the relative importance of investment rather than consumption. The picture highlights how important investment has been in the expansion of the past decade. Business and government investment has surged from 13% of GDP a decade ago to be now nearly a fifth of GDP. I put this squarely in the benefit category because investment, by definition, adds to our stock of productive resources available for the future.

However, the costs of NZ’s latest growth experience are reflected in a deteriorating current account imbalance. Put simply, this indicates that a fair proportion of the growth has very definitely been borrowed, or bought. Within the above framework this clearly suggests that future choices and opportunities will have been restricted.

This benefit-cost analysis remains inconclusive because there are some benefits and costs that haven’t been included. Some of these must await another article. However, the concept is clear. On the one hand, there is the widening of future choices and opportunities arising from changing employment conditions and behaviour along with the surge in investment in productive resources for the future. On the other hand there are restrictions on future choices and opportunities necessarily imposed by the element of growth that has been bought.

So, yes more growth is better with the one proviso … quality. The quality of NZ’s recent growth will essentially be determined by the success (or otherwise) of today’s employment and investment efforts in accruing benefits that more than compensate (or not) for the costs. Or, as Master Twist would probably have never said, the proof of the pudding is in the eating.