GDP 2
GDP and other quality of life
measurements

a briefing document

GDP 2: GDP and other quality of life measurements is one of a series of documents about economics and money at abelard.org.
gdp 1: gross domestic product
world information & data resources	index of information tables
		sustainable futures briefings documents
fiat money and inflation	e-gold information	moneybookers information

Index		site map advertising disclaimer
Problems with GDP and GNP as a measure of well-being
What makes people happy
Various quality of life indexes
Conclusion
End notes a reasonable standard of living
Problems with GDP and GNP as measures of well-being There are serious problems with using GDP as a measure of well-being. GDP measures rely upon money as a measure, some economies are considerably more monetarised than others. GDPs also tend to measure disasters and other waste as gains in GNP. For instance, the necessity to clear up a major oil spill results in a lot of work, thus increasing GDP, but that work can hardly be expected to improve the quality of life. Likewise, crashing your car gives work to the garage and maybe to the local hospital, again increases in the GDP that you, and your country, could well do without! What makes people happy In general, happiness is reported to increase until an annual income of approximately US$13,000 income is reached, whence basic needs are met. Happiness then remains stable, even though the income level becomes higher. PDF document with maps and charts, with general background. The document does not make clear how this applies to dependants and families. (Poverty can be regarded as having an individual income of less than $13,000 p.a. - 2003.) This is the home site for the happiness index. Subjective well-being by level of economic development summary chart is on page 4 of Genes, culture, democracy and happiness [19-page .pdf]. related material stress, status, politics and the human condition Various quality of life indexes You can find some comments here from Morris, a major worker in the field. Morris believes that the gross national product, used by the World Bank and USAID as a basic indicator of human well-being, is seriously flawed. “Obviously, no one could stay alive on what a dollar a day will buy at U.S. prices," Morris says. "But the GNP ignores differences in prices and the distribution of income. It also fails to illuminate how efficiently income is spent." For instance, U.S. health expenditures per capita are the highest in the world, but at least 22 countries had better infant and child mortality rates in 1993. “The PQLI, [2] on the other hand, "tells us not how much has been spent but how effectively lives have improved. While there are many other things we might want to know, infant mortality, life expectancy at age one and basic literacy are central to well-being of the poorest of the poor," he says.” The Estes approach to well being relies upon items such as school enrolment, life expectancy, external national debts. Estes uses the [World] Index of Social Progress [3]. See also the list of indicators used in the Index of Social Progress. More developed sources for reports of this type are indicated and linked from World information resources. Here you can see another attempt at a quality-of-life index, although it is almost as misleading as the GDP indices. It entirely ignores the clear gains in quality of life described in the PQLI and the WISP above. This index does, however, show up problems in all of the indices mentioned previously, even while adding other problems all its own! The link provided comes with a clear and useful summary of criticism of the rival indices, but avoids discussing the new problems that it introduces. Conclusion Only by looking at all the various methods, can you obtain a more rounded understanding of trends of advance or well being in society. Even with all these measures, it is important to realise that there are issues of sustainability. Continual rises in the standard of living are not going to be so marvellous if, at the end of the day, we end up destroying our environment and running out of energy! Items bearing on this may be found here, at replacing fossil fuels: the scale of the problem and at tragedy of the commons.

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Related further reading
	the mechanics of inflation – the great government swindle and how it works	Transferring value (money) using the internet
	gdp 1: gross domestic product	e-gold: a developing example of an independent monetary system
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short briefings documents on energy and society

End notes

GDP: gross domestic product;
GNP: gross national product.
For more background, see the mechanics of inflation: what is money worth?, including the links cited in that section.
PQLI: Physical Quality of Life Index.
WISP: World Index of Social Progress.

Table 1
The Index of Social Progress, (ISP2000, WISP2000)
(N= 10 Subindexes, 40 Indicators)

Indicators Grouped by WISP

Indicator Definition

Data Source(s)

EDUCATION SUBINDEX (N=3)

Adult Literacy Rate, 2000 (+)

The percentage of people aged 15 and above who can, with understanding, both read and write a short, simple statement on their everyday life (UNDP, 2002a: 266).

UNDP (2002a), Table 10.

Primary School Completion Rate, 1992-2000 (+)

The total number of students successfully completing (or graduating from) the last year of primary school in a given year, divided by the total number of children of official graduate age in the population (World Bank, 2002b: 97).

World Bank (2002b), Table 2.13.

Average Years of Schooling, 2000 (+)

The years of formal schooling received, on average, by adults ages 15 and over (World Bank, 2002b: 97). [Note: Because of data limitations it is was not possible to adjust the numbers reported for students who dropped out during the final year of school. Thus, proxy rates should be taken as an upper-bound estimate of the likely actual primary completion rate].

World Bank (2002b), Table 2.13.

HEALTH STATUS SUBINDEX (N=7)

Life Expectation at Birth 1, 2000 (+)

The number of years a newborn would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life (World Bank, 2002b: 125).

World Bank (2002b), Tables 1.6 & 2.20.

Infant Mortality Rate, 2000 (-)

The number of infants dying before reaching the age of one year, per 1000 live births in a given year (World Bank, 2002b: 125).

World Bank (2002b), Table 2.20.

Under-Five Child Mortality Rate, 2000 (-)

The probability that a newborn baby will die before reaching age five, if subject to current age-specific mortality rates (World Bank, 2002b: 125).

World Bank (2002b), Table 2.20; UNDP (2002a), Table 8.

Physician Per 100,000 Population, 1990-99 (+)

Physicians are defined as graduates of any faculty or school of medicine who are working in the country in any medical field, i.e., practice, teaching, research (World Bank, 2002b: 105).

World Bank (2002b), Table 2.15; UNDP (2002a), Table 6.

Percent of Children Immunized Against DPT at Age 1, 1999 (+)

The percentage of children fully immunized against diphtheria, pertussis (whoop-ing cough) and tetanus (DPT) by age one year.

UNICEF (2002), Table 3.

Percentage of Population Using Proved Water Sources, 2000 (+)

The proportion of the population using any of the following types of water supply for drinking: piped water, a public tap, a borehole with a pump, a protected well, a protected spring or rainwater (UNDP, 2002a: 268).

UNDP (2002a), Table 6; UNDP (2002b), Table 8.

Percent of Population Undernourished, 1996-98 (-)

Food intake that is insufficient to meet dietary energy requirements continuously (UNFAO, 2002: 4).

UNFAO (2002), Table 1.

WOMEN STATUS SUBINDEX (N=5)

Female Adult Literacy as % of Males, 2000 (+)

The percentage of women aged 15 and over who can read and write relative to that of men in the same age cohort (UNICEF, 2002).

UNICEF (2002), Table 7; UNDP (2002a), Table 24.

Contraceptive Prevalence Among Married Women, 1990-2000 (+)

The percentage of married women ages 15-49 who are practicing, or whose sexual partners are practicing, any form of contraception (World Bank, 2002b: 113).

World Bank (2002b), Table 2.17; UNDP (2002a), Table 6; UNICEF (2002), Ta-ble 7.

Maternal Mortality Ratio, 1990-98 (-)

The number of women who die during pregnancy and childbirth, per 100,000 live births (World Bank, 2002b: 113).

World Bank (2002b), Table 2.17; UNDP (2002a), Table 8; UNDP (2002b), Table 7.

Female Secondary School Enrollment as % of Males, 1995-97 (+)

The number of girls enrolled in a secondary school, regardless of age, divided by the population of girls at the age group that officially corresponds to secondary schooling level compared with that of males in the same age cohort (ala UNICEF 2002).

UNICEF (2002), Table 7; UNDP (2002a), Table 24.

Seats in Parliament Held By Women as Percent of Total, 1991-2000 (+)

Refers to seats held by women in a lower or single house or an upper house or senate, where relevant (UNDP, 2002a: 267).

UNDP (2002a), Table 23.

DEFENSE EFFORT SUBINDEX (N=1)

Military Expenditures as % of GDP, 2000 (-)

All expenditures of the defense ministry and other ministries on recruiting and training military personnel as well as on construction and purchase of military supplies and equipment. Military assistance is included in the expenditures of the donor country (UNDP, 2002a: 266).

UNDP (2002a), Table 17; CIA, 2001.

ECONOMIC SUBINDEX (N=5)

Per Capita Gross National Income (as meas-ured by PPP), 2000 (+)

Gross national income converted to international dollars using purchasing power parity rates (PPP) divided by mid year population estimates (World Bank, 2002b: 21). [Note: PPP refers to a rate of exchange that accounts for price differences across countries, allowing international comparisons of real output and incomes. At the PPP US$ rate, PPP US$1 has the same purchasing power in the domestic economy as $1 has in the United States]. 12; UNDP (2002b), Table 37.

World Bank (2002b), Tables 1.1 & 1.6; UNDP (2002a), Table

Percent Growth in Gross Domestic Product (GDP), 1999-2000 (+)

The sum of value added by all resident producers plus any product taxes (less sub-sidies) not included in the valuation of the output. Growth is calculated from con-stant price GDP data in local currency (World Bank, 2002b: 21).

World Bank (2002b), Tables 1.1 & 1.6; CIA, 2001; UNDP (2002a), Table 12.

Unemployment Rate, 1998-2000 (-)

The share of the labor force without work but available for and seeking employ-ment (World Bank, 2002b: 63).

World Bank (2002b), Table 2.4; UNDP (2002a), Table 18.

Total External Debt Service As Percentage of Exports of Goods and Services, 2000 (-)

The sum of principal repayments and interest actually paid in foreign currency, goods, or services on long-term debt, interest paid on short-term debt, and repay-ments (repurchases and charges) to the International Monetary Fund as a percent-age of all exported goods and services (World Bank, 2002b: 271).

World Bank (2002b), Table 4.17; UNDP (2002a), Table 16.

GINI Index Score, varied (-)

The GINI Index measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. A GINI Index of “0” repre-sents perfect equality, while an index of “100” implies perfect inequality (World Bank, 2002b: 77).

World Bank (2002b), Table 2.8.

DEMOGRAPHY SUBINDEX (N=3)

Average Annual Population Growth Rate, 1990-2000 (-)

Reflects the exponential change in country population size for each year of the period shown (World Bank, 2002b: 51).

World Bank (2002b), Table 2.1; UNICEF (2002), Table 5.

Percent of Population Aged 14 Years and Younger, 2000 (-)

The ratio of persons 14 years of age and younger to the working age population between the ages of 15 and 64 years (World Bank, 2002b: 51).

World Bank (2002b), Table 2.1; UNDP (2002a), Table 5; CIA, 2001.

Percent of Population Aged 65 Years and Older, 2000 (+)

The ratio of persons 65 years of age and older to the working age population be-tween the ages of 15 and 64 years (World Bank, 2002b: 51).

World Bank (2002b), Table 2.1; UNDP (2002a), Table 5; CIA, 2001.

ENVIRONMENTAL SUBINDEX (N=3)

Nationally Protected Areas, 1999 (+)

Refers to totally or partially protected areas of at least 1,000 hectares that are des-ignated as national parks, natural monuments, nature reserves, wildlife sanctuaries, protected landscapes and seascapes, or scientific reserves with limited public access. The indicator is calculated as a percentage of total area. For small coun-tries whose protected areas may be smaller than 1,000 hectares, this limit will re-sult in an underestimate of the extent and number of protected areas. The data do not include sites protected under local or provincial law (World Bank, 2001:323).

World Bank (2001), Table 9; Asian Development Bank (2002), Table 9.

Average Annual Disaster-Related Deaths Per Million Population, 1990-2000 (-)

Disasters refer to situations or events that overwhelm local capacity and necessi-tate a request to national or international level for external assistance. The deaths reflected on this indicator are associated only with disasters in which at least 10 people either were confirmed to have died or went missing and were presumed to have died in the disastrous event.

IFRC (2002), Table 13.

Per Capita Metric Tons of Carbon Dioxide Emissions, 1998 (-)

Per capita metric tons of anthropogenic (human-originated) carbon dioxide emis-sions stemming from the burning of fossil fuels and the production of cement. Emissions are calculated from data on the consumption of solid, liquid and gase-ous fuels and gas flaring (UNDP, 2002a: 262).

World Bank (2002b), Table 3.8; UNDP (2002a), Table 19.

SOCIAL CHAOS SUBINDEX (N=5)

Strength of Political Rights, 2000 (+)

Refers to the extent to which people are able to participate freely in the political processes of their society, i.e., in the systems by which the polity chooses the au-thoritative policy makers and attempts to make binding decisions affecting the national, regional or local community. A score of “1” on the Political Rights In-dex represents the most free societies and “7” those that are least free (Freedom House, 1997).

Freedom House (2002).

Strength of Civil Liberties, 2000 (+)

Refers to the extent to which people are able to develop views, institutions and personal autonomy apart from the state. A score of “1” on the Civil Liberties In-dex represents the most free societies and “7” those that are least free (Freedom House, 1997).

Freedom House (2002).

Total Deaths in Major Armed Conflicts Since Inception, 2000 (-)

Number of persons reported to have been killed in major armed conflicts since the year government forces joined the conflict and 2000. Owing to the secretive na-ture of war and other armed conflicts, the data reported on this indicator reflect estimates only and are believed to substantially under-count the number of per-sons to have perished in major armed conflicts (Sollenberg & Wallensteen, 2001).

Sollenberg & Wallen-steen (2001) 57-64.

Number of Externally Displaced Persons Per 100,000 Population, 1999 (-)

The number of nationals of a country who have crossed international borders and--in accordance with the 1951 United Nations Refugee Convention or the 1969 OAU Refugee Convention and the UNHCR Statute--are granted international hu-manitarian status. Refugees include persons who have been granted temporary protection by the UNHCR (UNHCR, 2000: 309).

UNHCR (2000), An-nex 6; UNDP (2002a), Table 20.

Perceived Corruption Index, 2000 (-)

First launched in 1995, the Corruption Perception Index (CPI) is a poll of polls. Scores reported on this indicator were drawn from 14 surveys undertaken by seven independent institutions. The surveys reflect the perceptions of business people, academics and country analysts and were undertaken during the most re-cent three year period. CPI scores range from “10” (highly clean) to “0” (highly corrupt) [TI, 2001: 7].

Transparency International (2001), pp. 234-236.

CULTURAL DIVERSITY SUBINDEX (N=3)

Largest Percentage of Population Sharing the Same or Similar Racial/Ethnic Origins, 2000 (+)

Indicates the largest proportion of the population that share the same or similar ethnic or racial group origins as measured by racial and/or ethnic group stock, tribal affiliations, cultural traditions, and the like.

Famighetti (2001); CIA (2001).

Largest Percentage of Population Sharing the Same or Similar Religious Beliefs, 2000 (+)

Indicates the largest proportion of the population that share the same or similar religious beliefs.

Famighetti (2001); CIA (2001).

Largest Share of Population Sharing the Same Mother Tongue, 2000 (+)

Indicates the largest proportion of the population that speak the same mother tongue.

Famighetti (2001); CIA (2001).

WELFARE EFFORT SUBINDEX (N=5)

Age First National Law—Old Age, Invalidity & Death, 1999 (+)

Indicates the year in which the central government assumed at least limited re-sponsibility for reducing of income loss to workers associated with old age, dis-ability or premature death. Typically, social protection of this type takes the form of compulsory social insurance or provident funds that are administered centrally but financed through contributions from workers, employers, the state, or all three (USDHHS, 1984).

USDHHS (1999).

Age First National Law—Sickness & Maternity, 1999 (+)

Indicates the year in which the central government assumed at least limited re-sponsibility for reducing income loss to workers resulting from sickness, pregnancy, and non-work related injuries. Typically, social protection of this type takes the form of compulsory social insurance trust funds that are administered centrally but financed through contributions from workers, employers, the state, or all three (USDHHS, 1984).

USDHHS (1999).

Age First National Law—Work Injury, 1999 (+)

Indicates the year in which the central government assumed at least limited re-sponsibility for reducing income loss to workers associated work or work-related injuries and accidents. Typically, social protection of this type takes the form of compulsory social insurance trust funds that are administered either centrally or locally, or both, but financed through contributions from workers, employers, the state, or all three (USDHHS, 1984).

USDHHS (1999).

Age First National Law—Unemployment, 1999 (+)

Indicates the year in which the central government assumed at least limited re-sponsibility for reducing income loss to workers associated involuntary job loss. Typically, social protection of this type takes the form of compulsory social insurance trust funds that are administered either centrally or locally, or both, but fi-nanced through contributions from workers, employers, the state, or all three (USDHHS, 1984).

USDHHS (1999).

Age First National Law—Family Allowance, 1999 (+)

Indicates the year in which the central government assumed at least limited re-sponsibility for increasing income to households with age-dependent children and youth. Typically, social protection of this type is universal in nature and is fi-nanced through general tax revenues (USDHHS, 1984).

USDHHS (1999).

a reasonable standard of living

It is reckoned that individual ‘happiness’ increases until an annual income of approximately US$13,000 is reached [as at 2003], whence basic needs are met. I am defining “an annual income of approximately US$13,000” as a reasonable standard of living.

At such an income level, ‘happiness’ then remains stable, even though the income level becomes higher. (For a simple outline, see this PDF document.)

According to statistics from Nationmaster.com, there are 36 countries which reach an average PPP level of at least $13,000 per individual [2003].
They are (in order from highest PPP down) :
Luxembourg, United States of America, Norway, Iceland, Ireland, Switzerland, Denmark, Belgium, Japan, Canada, Austria, Netherlands, Germany, Australia, Finland, Sweden, France, Italy, United Kingdom, Israel, Cyprus, Singapore, United Arab Emirates, New Zealand, Spain, Slovenia, The Bahamas, Portugal, South Korea, Malta, Greece, Bahrain, Barbados, Kuwait, Czech Republic, Equatorial Guinea.
Their total population was about 1, 484,972,000 in July 2003. This is 24% of the world’s population.

The population of the world was 6,300,000,000 in December 2003; in mid-2004 it was 6,396,000,000.

Obviously there are both very rich and rather poor people in most countries, and the PPP level given above can only provide an approximate idea of the proportion of people in the world living at this “reasonable” standard of living.

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