Abstract

---

Gross Domestic Product (GDP) per capita is often used to indicate a nation’s economic well-being or “command over resources”. As such, it is a key component in the UNDP’s Human Development Index (HDI). However, since individual incomes are uncertain and unequally distributed, GDP per capita does not indicate the likelihood that any particular individual will share in prosperity or the degree of anxiety and insecurity with which individuals contemplate their futures. As well, GDP per capita ignores goods and services produced outside the market, as well as any changes in duration of consumption (life span) or in leisure and it does not reflect the savings rate of productive assets which this generation will leave for the benefit of future generations. We therefore argue that a better index of the economic well-being, or “command over resources” of a society should recognize four components: (1) Current effective per capita consumption flows; (2) Net societal accumulation of stocks of productive resources; (3) Income distribution; (4) Economic security. This paper develops such an Index of Economic Well being (IEWB) for the United States, the United Kingdom, Canada, Australia, Germany, Norway and Sweden for the period 1980 to 2001. Since using GDP per capita (or the HDI) as a measure of well-being implicitly makes the strong value judgment that inequality and insecurity do not matter, the paper demonstrates the sensitivity of international comparisons of well-being to such valuation. In every case, growth in economic well-being is less than growth in GDP per capita, although to different degrees in different countries. This implies that a better measure of “command over resources” would have a significant effect on the trend and level of the HDI – particularly for the United States, which slips to last place among the countries examined, when the IEWB is used to measure “command over resources”.