Standard of Living and GDP
GDP per capita is not a measurement of the standard of living in an economy; however, it is often used as such an indicator, on the rationale that all citizens would benefit from their country's increased economic production. Similarly, GDP per capita is not a measure of personal income. GDP may increase while real incomes for the majority decline. The major advantage of GDP per capita as an indicator of standard of living is that it is measured frequently, widely, and consistently. It is measured frequently in that most countries provide information on GDP on a quarterly basis, allowing trends to be seen quickly. It is measured widely in that some measure of GDP is available for almost every country in the world, allowing inter-country comparisons. It is measured consistently in that the technical definition of GDP is relatively consistent among countries.
The major disadvantage is that it is not a measure of standard of living. GDP is intended to be a measure of total national economic activity—a separate concept.
The argument for using GDP as a standard-of-living proxy is not that it is a good indicator of the absolute level of standard of living, but that living standards tend to move with per-capita GDP, so that changes in living standards are readily detected through changes in GDP.
Read more about this topic: Gross Domestic Product
Famous quotes containing the words standard of, standard and/or living:
“Any honest examination of the national life proves how far we are from the standard of human freedom with which we began. The recovery of this standard demands of everyone who loves this country a hard look at himself, for the greatest achievments must begin somewhere, and they always begin with the person. If we are not capable of this examination, we may yet become one of the most distinguished and monumental failures in the history of nations.”
—James Baldwin (1924–1987)
“An indirect quotation we can usually expect to rate only as better or worse, more or less faithful, and we cannot even hope for a strict standard of more and less; what is involved is evaluation, relative to special purposes, of an essentially dramatic act.”
—Willard Van Orman Quine (b. 1908)
“We are living in a demented world. And we know it. It would not come as a surprise to anyone if tomorrow the madness gave way to a frenzy which would leave our poor Europe in a state of distracted stupor, with engines still turning and flags streaming in the breeze, but with the spirit gone.”
—Johan Huizinga (1872–1945)