Quantifying the Standard of Living
Posted Oct 25, 2019 10:21 AM
In this blog post we will be exploring how the Standard of Living is quantified within an economy. The standard of living in economics refers to the measure of the general well-being or total welfare of all individuals in an economy. When quantified, it can be used to compare economies globally to help us understand what makes an economy healthy for the population. Standard of Living in the general sense is the final result of an economy on its population. However, there are many different factors to population satisfaction and many different methods of measurement to account for these factors.
Material and Non-Material Factors
As most of us know, not everything in life is about fast cars and cocaine. In general, people gain satisfaction from many avenues and not all of them come into the realms of material possession. The measurement of something that doesn't physically exist is quite difficult, especially when we're talking about sample sizes that can exceed 100 million people.
Broadly speaking, material well-being is the easier of the two when it comes to measurement. It can generally be quantified by examining the availability of goods and services to members of the economy and, the satisfaction gained from having share of these goods and services. It's important to recognise that the availability of goods and services refers to the ability to purchase and consume them without restriction, and not whether they're available in the market. For example, while sports cars are always going to be available at a car dealership, they most certainly aren't a purchase that can be justified by most members of an economy. A material standard of living is often measured by use of GDP per capita, which is the value of the nations production divided by the number of participants in the economy. This can sometimes be misleading though, as income inequity cannot be accounted for in this method and nor can inflationary consequences.
Non-material well-being involves intangible qualities of a persons life experiences which combine to develop overall value in their life. Many of the intangible factors often impact on the persons emotional satisfaction and don't involve direct economic transactions. Non-material aspects can be roughly devised into social freedoms or liberties. Some of these intangible factors are; justice, financial security, job security, government satisfaction, self esteem and availability of enriching activities like religion and education. While these factors aren't always dictated by financial capacity of the individual, a characteristically healthy economy can provide their access on a macro-level and will greatly improve the economy's members life.
Human Development Index (HDI)
The Human Development Index, or HDI is an index comprised of 3 main "dimensions" which are indexes of their own. When collated they're widely accepted as a pretty good calculation of the wide factors of Living Standards. The 3 dimensions which encapsulate these factors are:
1) A long and healthy life index: formulated of life expectancy at birth.
2) Education index: formulated of the average years of schooling and expected years of schooling
3) A decent standard of living index: an indexation of Gross National Income per capita.
When the three are weighted together, they form the Human Development Index. As you can see from the map below you can get a pretty good idea on what parts of the world exceed in Living Standards, or alternatively, which parts of the world fall short.
Material and Non-Material Factors
As most of us know, not everything in life is about fast cars and cocaine. In general, people gain satisfaction from many avenues and not all of them come into the realms of material possession. The measurement of something that doesn't physically exist is quite difficult, especially when we're talking about sample sizes that can exceed 100 million people.
Broadly speaking, material well-being is the easier of the two when it comes to measurement. It can generally be quantified by examining the availability of goods and services to members of the economy and, the satisfaction gained from having share of these goods and services. It's important to recognise that the availability of goods and services refers to the ability to purchase and consume them without restriction, and not whether they're available in the market. For example, while sports cars are always going to be available at a car dealership, they most certainly aren't a purchase that can be justified by most members of an economy. A material standard of living is often measured by use of GDP per capita, which is the value of the nations production divided by the number of participants in the economy. This can sometimes be misleading though, as income inequity cannot be accounted for in this method and nor can inflationary consequences.
Non-material well-being involves intangible qualities of a persons life experiences which combine to develop overall value in their life. Many of the intangible factors often impact on the persons emotional satisfaction and don't involve direct economic transactions. Non-material aspects can be roughly devised into social freedoms or liberties. Some of these intangible factors are; justice, financial security, job security, government satisfaction, self esteem and availability of enriching activities like religion and education. While these factors aren't always dictated by financial capacity of the individual, a characteristically healthy economy can provide their access on a macro-level and will greatly improve the economy's members life.
Human Development Index (HDI)
The Human Development Index, or HDI is an index comprised of 3 main "dimensions" which are indexes of their own. When collated they're widely accepted as a pretty good calculation of the wide factors of Living Standards. The 3 dimensions which encapsulate these factors are:
1) A long and healthy life index: formulated of life expectancy at birth.
2) Education index: formulated of the average years of schooling and expected years of schooling
3) A decent standard of living index: an indexation of Gross National Income per capita.
When the three are weighted together, they form the Human Development Index. As you can see from the map below you can get a pretty good idea on what parts of the world exceed in Living Standards, or alternatively, which parts of the world fall short.
![[Image: d2ztwtjmaj021.png?width=960&crop=smart&a...cb435ff179]](https://preview.redd.it/d2ztwtjmaj021.png?width=960&crop=smart&auto=webp&s=8b1a34384c3f604d0876c53194c511cb435ff179)
Human Development Index - 2018
HF might find it interesting that the HDI of Afghanistan is greater than that of China.
