Economic growth and standard of living

Question 1

What is standard of living?

Answer 1

a measure of economic welfare and wellbeing. While more income typically increases the standard of living the relationship is not exact.

Question 2

What are other factors that affect the standard of living?

Answer 2

Other factors that affect the standard of living include: access to good healthcare, access to good education and skills, quality of housing, quality of job, access to good quality public services, quality of environment, a sense of fairness, life satisfaction, personal freedom, political freedom etc.

Question 3

What does real GDP per capita mean?

Answer 3

Economists use real GDP per capita as a proxy/rough guide for the standard of living
Real – takes inflation into account; per capita– takes population change into account

Question 4

What are drawbacks of rGDP per capita?

Answer 4

• BUT real GDP per capita is still an average and it does not effectively take into account many other factors that influence the standard of living
• GDP data is also not necessarily accurate - difficulties collecting dataand making accurate calculations ; GDP measures looks backwards; GDP data often needs to be revised; some countries are likely to be have more accurate data than others.

Question 5

What other factors that influence the standard of living that are not taken into account?

Answer 5

• the distribution of income
• the value of unpaid work (housework, child care, DIY, voluntary work)
• environmental degradation and depletion/impact on natural capital
• negative externalities of consumption of goods that are bad for us (eg tobacco, alcohol) and production (eg pollution, congestion)
• shadow market activity/unofficial work
• impact on standard of living of changing working hours/conditions/leisure time/quality of jobs
• the changing quality of goods/services over time
• impact of technological improvements on the standard of living

Question 6

What is subjective happiness?

Answer 6

Subjective happiness refers to ‘self-reported’ levels of happiness with one’s life, usually determined using questionnaires which consider emotions, rather than asking about material well-being.

Question 7

What are factors that tend to affect your happiness?

Answer 7

your personality and genetics, social influences (e.g. friends), income and wealth (to a smaller degree than you might expect), health, and leisure time.

Question 8

What is the Easterlin Paradox?

Answer 8

life satisfaction does rise with average incomes but only up to a point that the marginal gain in happiness declines

Question 9

What is the Human Development Index?

Answer 9

The HDI is calculated by the United Nations as an indicator of economic development and broader measure of the standard of living.

Question 10

What does HDI look at?

Answer 10

• Health – life expectancy at birth;
• Education – mean years of schooling of adults and expected years of schooling of children;
• Living standards – GNI per capita.

Question 11

What are advantages of using HDI?

Answer 11

broader measure; better measure of development; better measure of standard of living and wellbeing

Question 12

What are disadvantages of using HDI?

Answer 12

still does not take all aspects of wellbeing into account; weighting of the three categories is arbitrary