Cross-national standards of living comparisons : an honors thesis [(HONRS 499)]

Abstract

Economists throughout the world are interested in developing a workable simple technique to compare standards of living among nations. The scientific curiosity has resulted in a variety of methods being applied to measuring living standards among countries.1 The two most widely employed techniques are Gross National Product-based and social indicators-based standard of living comparisons. There are problems, however, with both methods. GNP was developed to measure the level of national income not standard of living. Social indicator indexes, on the other hand, are highly correlated with GNP numbers and tend to be very subjective, carrying a great deal of bias toward their architects' values. Thus, a search for a practical measure of standard of living continues. The paper is an investigation into the existing techniques and their weaknesses. It is also an attempt to provide a new practical approach to cross-national standard of living comparisons.1 The need for such comparisons is not limited to pure scientific interest. It is rooted into human nature. People are naturally competitive, and an individual always wants to know how well he does in respect to others. Similarly a country must be able to evaluate their citizens' standard of living relatively to other countries in order to plan and evaluate the performance of its economic and social policies.