Question

Identify the advantages and disadvantages of alternate measures of a country's standard of living.

Answer 1

The standard of living measures our meterial welfare. The baseline measure is real national output per head of population or real real GDP per capita or gross national income per capita.

Advantages:

• Standard of living is meteeial well being of the average person in a given population. It is typically measured using GDP per capita.
• standard of livng and quality of life are similar in that they utilize some of the same data, but standard of living represents a more physical aspect of lifewhile quality of life represents the more intangible aspects of life
• One alternative standard of living data set is the HDI, Human Development Index, which uses many factors from life expectancy and education, to GNI, and homicide rates

Disadvantages:

GDP is useful indicator of a nation's economic performance, and it is the most commonly used measure of well-being. Hoever, it has some important limitations, including:

• The exclusion of non-market transactions
• The failure to account for or represent the degree of income inequality in society
• The failure to account for the costs imposed on human health and the environment of nedative externalities arising from the production or consumption of the nation's output
• Treating the replacement of depreciated capital the same as the creation of new capital

Alternative indicators have been developed to provide a more well-rounded measure of a nation's quality of lifeby different national and international organizations. These inclide:

• The Human Development Index (HDI)
• The Genuine Progress Indicator (GPI)
• The Happy Planet Index (HPI)

Each of the index is a composite measure weighting both income and non-income variables such as life expectancy, literacy rates, environmental indicators, measures of inequality and so on. By including these variables, they provide a measure of life quality that goes beyond the narrowness of nation's GDP value.