In the first blog entry I wrote about the meaning of the word “development” and it led us to an interesting discussion of whether our definitions of development are normative or positive. In the second part of the “Measuring Development” series I would like to talk a bit about an indicator of development: living standards.
Living standards are obviously of utmost importance to economics. Sen (1988, p.11), for instance, points out that “the enhancement of living conditions must clearly be an essential – if not the essential object of the entire economic exercise”. Clearly, we can mean different things when we talk about living standards. To start with a rather simple differentiation, I distinguish between material living standards (MLS) and a broader notion of living conditions (LC), which includes aspects of life that go beyond the material component (i.e. education, health, job satisfaction,… ). The following paragraphs discuss whether GDP per capita successfully measures MLS.