Question

Why higher GDP per capital may not necessarily mean a higher non-material wellbeing? I saw when GDP per capital grew, the life or education improved as well (non-material wellbeing). Could you give me some ideas?

Answer 1

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We know that GDP per capita is an average value. We also know that averages can be a misleading representative of the data if there are large outliers. Outliers basically mean data points which are of extreme values. This is exactly the case in our population. We have around 80% majority of the GDP contributed by less than 10% of the population. This as a result increases the average value significantly. It is just like saying if BIll Gates was living in your neighborhood the per capita income of your neighborhood woill increase tremendously which is not an exact picture of the reality.

Hence an increase in GDP doesn't necessaruly equate to a higher non-material well being.

However if there is more equittable distribution of income and a large amount of expenditure is spent on merit goods like education then it will ensure all individuals can have access to basic failities at a cheaper transaction cost. This strategy will help to increase the non - material well being.