Sponsored Ads

Search JC Economics Essays

Custom Search

Discuss the difficulties of comparing living standards between countries. [25]


Discuss the difficulties of comparing living standards between countries. [25]

Introduction

This paper discusses the difficulties of comparing living standards between countries. On the one hand, it does not seem difficult to compare living standards between countries because of the presence of economic indicators such as real GDP per capita. On the other hand, the issue is far more complicated than that because there are many other factors other that material economic welfare that come into play, and there are alternative indicators that give a different view of living standards across countries. The fundamental issue in the final analysis is that living standards are not easy to define, conceptualise, and consider.

Not difficult to compare living standards between countries

First and foremost, it is relatively easy to compare material SOL (or economic welfare) between countries, provided that economists have access to these indicators and that they are reliable. The most famous economic indicator is real GDP per capita.

First, Gross Domestic Product (GDP) is the measure of final goods and services produced within a country, in a given period of time, usually a year. Secondly, Real GDP means that the focus here is on actual goods and services produced, and the increases from year to year are not from nominal increases, or monetary/ money increases solely. Third, per capita is merely the fact that the real GDP has to be divided amongst the population of the country. Usually, there is one final calculation done before comparison between countries, and that is to standardise the currency (usually the US dollar) on which the comparison is made. Clearly, in terms of economic welfare, a country with a higher real GDP per capita means that its citizens are more likely to have a higher economic standard of living compared to another country with a lower real GDP per capita. This is because, on a per person basis, each citizen has access to real goods and services worth more than another country with a lower real GDP per capita. Hence, comparison between countries can be made with an eye to finding out differences in standards of living.

Difficult to compare living standards between countries

However, it is actually more difficult to compare living standards between countries than merely using real GDP per capita. First, sometimes the indicators might be inaccurate. For instance, Chinese GDP figures during the 1960s and 1970s were often fabricated and false, and when they were true they often suffered from measurement errors.

Second, when comparing between countries, there is a need to standardise the currency base for comparison, usually the US dollar. This leads to an interesting problem because the exchange rates differ from country to country, and as such sometimes a currency that is valued lower than the US dollar would lead to the country appearing “poorer” or with a lower “standard of living” than the US because when the national income figures are converted to US dollars, they look lower than they otherwise would have looked.

Third, there is also no mention of income or wealth distribution, which is a problem. A country with relatively high real GDP per capita might have an uneven income and wealth distribution, but a country with a lower real GDP per capita could have an equitable income and wealth distribution, and thus its citizens are actually much better off than the other country ranked higher on the real GDP per capita scale.

Fourth, in poorer countries or developed countries inflation is usually lower and the same dollar can buy more goods and services than developed countries, and as such poorer countries are not compared fairly to the richer ones, because they usually appear “poorer” although the same US dollar can buy more in the poorer country than the rich one.

Furthermore, the quality of life is dependent on other factors not captured by national income statistics. The definition of standard of living is under examination here. In other words, non-quantifiable aspects of life are not captured by national income statistics. We should consider information from the social, political, cultural, and environmental aspects of a country rather than purely economic indicators. For instance, countries high on national income estimates may fare poorly on social indicators, because countries involved in wars or fighting could have a higher production level but their people are suffering, or countries with high pollution that needs a lot of cleaning up could have a higher GDP but their people are also suffering from negative externalities. Hence, this is a limitation of using real GDP per capita as a measure of comparison.

Alternative indicators

There are also alternative indicators that could be used as well. One major example would be Human Development Index (HDI). Closely associated with economist Amartya Sen, the HDI is a measure of life expectancy, literacy, and education, among other social and political aspects, comprising the standards of living of a country. It is used to distinguish whether the country is a developed or developing country, and to measure the impact of economic policies on the quality of life in the country. However, alternative measures such as the HDI have not found as much favour or success as national income accounting statistics, as they are still difficult to quantify and are normative rather than positive. Normative means that these indicators have subjectivity and are ideal, subjective, and norm-based, rather than a factual, positive, real comparison.

Conclusions

In conclusion, while it does not seem difficult for economists to compare economic living standards between countries because of the presence of economic indicators such as real GDP per capita, the issue is more complicated than that because there are many other factors other that material economic welfare that come into play, and there are alternative indicators that give a different view of living standards across countries. The fundamental issue in the final analysis is that living standards (and the concomitant quality of life in a country) are not easy to define, conceptualise, and consider, and hence opinions and arguments will continue to differ on this subject.


JC Economics Essays – Tutor's Commentary: This Economics paper is OK, generally well-written, but it is not excellent, outstanding, or incredibly good. As an examination essay, it might fetch a borderline A for the "A" levels, and if it were benchmarked against much better Economics essays, might get a B rather than an A. Well, why is this the case - a borderline A grade Economics essay? Put yourself into your Economics tutor’s (or lecturer’s, or teacher’s shoes, for that matter). Think about how your Economics tutors in school would judge this essay. One hint is that the conclusion, while true, might not make a good evaluation. Economics tutors often lament that their students cannot write good evaluations. Think of how you would make the conclusion better. (Think also of how you could make the essay as a whole better. Maybe the distinction between material and non-material standard of living could be made more explicit and better explained, etc?) Well, the good news is that you might become the special Economics student who can prove to your Economics tutor that you can write an excellent evaluative conclusion for any Economics tests or examinations... this is because you have time to think about it, and figure out what is wrong now.  

Sponsored Ads

Please do NOT Plagiarise or Copy Economics Essays

It is one thing to learn how to write good economics essays from sample or model economics essays, but another thing if you plagiarise or copy. Do not copy economics essays.

First, if you are handing in an assignment online, there are checkers online which track sources (such as turnitin). Please craft assignments yourself. Second, if you are handing in a handwritten essay, if you copy, you will not learn and will thus not benefit, nor earn good grades when the real economics examination rolls round. Third, you can always write better essays given time and improvement. Fourth, copying is illegal under most conditions. Do not copy economics essays.

This is an economics site for you to learn how to write good economics essays by reading a range of useful articles on writing, study essay responses and contributions and sample/ model economics essays from students, teachers, and editors. We hope you can learn useful and relevant writing skills in the field of economics from our economics site. Thank you for reading and cheers!