We turn finally to some noneconomic measures of societal welfare, such as statistics on health and education. Table 3.8 Noneconomic Indicators of Welfare shows some examples of indicators for four countries. 1 Large differences in GDP per person, such as the difference between the United States and Argentina, are reflected in these other measures. GDP per person is about three times greater in the United States than in Argentina, and the United States also has higher adult literacy, higher secondary school enrolment, lower infant mortality, and higher life expectancy.
|
Indicator |
United States |
United Kingdom |
Greece |
Argentina |
|
GDP per person, 2005($US) |
42,000 |
30,900 |
22,800 |
13,700 |
|
Infant mortality rate, 2006 (deaths per 1,000 live births) |
6.43 |
5.08 |
5.43 |
14.73 |
|
Life expectancy at birth, 2006 (years) |
77.85 |
78.54 |
79.24 |
76.12 |
|
Adult literacy rate, 2003(%) |
99.0 |
99.0 |
97.5 |
97.1 |
|
Secondary school enrollment ratio, 2002-3(%) |
88 |
95 |
86 |
81 |
Differences in GDP per person are a much less reliable guide when we compare relatively rich countries. For example, the United States has greater GDP per person than the United Kingdom or Greece. But both of those countries have lower infant mortality rates and higher life expectancy. They also have similar rates of literacy and school enrollment. In fact, based on these measures, the United Kingdom looks like a more attractive country to live in than the United States, even though its GDP per person is 25 percent lower.
KEY TAKEAWAY
- Real GDP measures total output and thus total income in an economy, but it does not measure economic activity at home, ignores income distribution, and excludes the effects of economic activity on the environment.
- Measures of unemployment, real wages, and indicators of health and education are also useful indicators of economic welfare.
Checking Your Understanding
- If there is an increase in investment and an associated increase in real GDP, why does this increase economic welfare?
- If there is a decrease in real wages and an offsetting increase in a firm’s profits, does this affect overall household income? If not, what effect does it have on the household sector?
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