better measurement of living standards?

[Tom Rexton]

If you're somewhat familiar with Austrian school of economics and have also read Reisman's tome Capitalism, then you probably also know that GDP is not in any way a measure of the volume of production--only total expenditure, and mostly consumption expenditure at that. In other words, spending is not a measure of output. Even adjusting nominal GDP into "real" GDP via the GDP deflator is grossly inaccurate because of the inaccuracy of the price index.

Which leads me to conclude that GDP/capita may not be an accurate measure of living standards at all. It indicates, for instance, that several welfare-statist countries in North Western Europe have, according to GDP/capita statistics, the highest living standards in the world, despite the fact that more than 50% of that GDP/capita is GOVERNMENT expenditure, that some 40% to 60% of their income is taken away as taxes, that consumer goods prices are many times higher than they are in the US because of sales taxes and tariffs, and that health care is a government-run industry.

Do you know of any measurement other than GDP/capita that has been taken that more accurately measures comparative living standards (don't mention the UN Human Development Index )? If not, can you think of a more accurate measure? Or perhaps the more fundamental question is: can living standards be measured at all (i.e., quantitatively, not qualitatively)?

[BurgessLau]

Do you know of any measurement other than GDP/capita that has been taken that more accurately measures comparative living standards (don't mention the UN Human Development Index )?  If not, can you think of a more accurate measure?  Or perhaps the more fundamental question is:  can living standards be measured at all (i.e., quantitatively, not qualitatively)?

Maybe one step in that direction would be to say what you mean by "living standards." I am not asking for a list of usages recorded in a dictionary, but for your meaning of that phrase.

Your general question is intriguing to me personally because it got me thinking about what standard I would use for measuring the quality of life. It is immediately apparent that the quantity or quality of goods and services is not the most important thing. Happiness is, but a social requirement for the pursuit of happiness is freedom. So, I wonder, are we coming back to the question I asked in another thread: Can one measure freedom, and if so, how? The answer in that topic was: Yes, in a variety of ways, depending on one's purpose.

[Tom Rexton]

Maybe one step in that direction would be to say what you mean by "living standards." I am not asking for a list of usages recorded in a dictionary, but for your meaning of that phrase.

Your general question is intriguing to me personally because it got me thinking about what standard I would use for measuring the quality of life. It is immediately apparent that the quantity or quality of goods and services is not the most important thing. Happiness is, but a social requirement for the pursuit of happiness is freedom. So, I wonder, are we coming back to the question I asked in another thread: Can one measure freedom, and if so, how? The answer in that topic was: Yes, in a variety of ways, depending on one's purpose.

Well, I must admit the concept is rather vague to me. The economic textbooks do not help as they do not even define it. The dictionary provides a definition that I think is closest to what I (and most economist) mean:

A level of material comfort as measured by the goods, services, and luxuries available to an individual, group, or nation.

I think "living standards" is a narrower concept, included in "quality of life". It emphasizes material living conditions, rather than "happiness". For instance, a man who lives in a large house by the beach, with several fancy cars and all the modern amenities, is said to have a "high standard of living", regardless of of whether he is happy or suffering emotionally. On the other hand, Howard Roark in his early career could be said to have had a "low standard of living" because of his low income and spartan living quarters.

[Michelangelo]

As much as I can recall, living standards are based on the cost of and quality of goods and services. Can you think of something that isn't a good or services (excluding personal creations)? The house you live in, the car you drive, the food you eat are all goods. Your dentist/doctor/mechanic are the services provided to you. Naturally, if these same services are available to you at a lower cost, your standard of living will rise; you can spend the same amount of money on these services with money left in your pocket to purchase other 'things'.

[YGoldenberg]

Iv`e been comtemplating this question for a long time.

Suppose we are to estimate a nation's material prosperity (and not "living standards" which depend on one's preferences),

It`s clear that GDP is inadequate since it sums both private production and public "production".

I suggest that we compare real average income.

First we shall find the "average shopping cart" of two nations - this reflects what people usually buy in a year, averaged on both nations together (with proper weights). It`s a good approximation for people's preferences.

Example: the avg US shopping cart consists of: 1 HDTV set, 200 gallons of fuel, 100kg of food etc...

Now, to make "real average income" out of our "avg. shopping cart", calculate how many hours must a man work, earning the average wages, to buy that shopping cart.

Iv`e calculated the difference in material prosperity between Israel and the U.S, based on MY personal shopping cart.

That shopping cart consists mostly of Electronics, cars, books and very little food.

Also, Iv`e used MY income against the average income of a young top-notch US programmer (which is $90,000, U americans are so greedy )

The result was overwhelming: my US collegue is 15 to 20 times richer.