Five Measures of Economic Well-Being
What says more about the overall economic well-being of a nation: the average amount of money each person in the country spends each year? The amount of pollution the country emits? Or the average height of the adult population? The five economic indicators shown here use these and other criteria to assess the well-being of 10 countries. Four of the indicators are indexes, which use a formula to measure well-being. One—human height—provides comparative data. The United States ranks high by some measures and low by others. Which indicator do you think is the most valid?
Nominal GDP
Nominal gross domestic product is the value of all final goods and services produced during a given year, expressed in current prices. The four largest economies in the world, based on estimated 2018 GDP include the United States ($20,494), China ($13,407), Japan ($4,971), and Germany ($4,000). This is followed by a sampling of countries with lower GDPs, such as Brazil ($1,868), Canada ($1,711), and Russia ($1,630). Note that the dollar figures are given in billions. For example, $20,494 means $20,494,000,000,000, or $20 trillion.
Per Capita GDP
Per capita GDP is calculated by dividing a country's GDP by its population. The result —a country's average economic output per person—is a better measure than nominal GDP for comparing the living standards of two or more countries. The number one country in this ranking is Qatar, whose per capita GDP was $124,100 in 2017. Qatar has prospered in recent years due to its oil and gas reserves.
Human Development Index (HDI)
The Human Development Index is an economic indicator favored by the United Nations. It looks beyond a country's GDP to gain a broader perspective on well-being. The HDI combines per capita GDP with life expectancy, the adult literacy rate, and school enrollment. Based on this measure of well-being, the UN ranks countries according to how well they are doing at promoting human development.
Happy Planet Index (HPI)
The Happy Planet Index does not include any measure of GDP. Instead it measures the degree to which a country provides well-being to its people and the planet. The HPI is based on a combination of life expectancy, life satisfaction, and “ecological footprint”—the fairness and responsibility with which a country consumes its resources. The tiny nation of Costa Rica came in first in this ranking, with a value of 44.7. Chad came in last.
Human Height
Scientists who study human growth argue that a population's average height is a better indicator of well-being than GDP or per capita GDP. People grow taller, they say, when they have more healthful diets, greater wealth, better housing, lower levels of pollution, and less disease and stress. Height is largely a function of genes—tall parents tend to have tall children. But nutrition and other environmental factors, these scientists insist, can explain differences in genetically similar populations. In their view, human height and well-being rise together.
Improving Economic Well-Being
There are many multinational organizations that work to increase economic well-being around the world. One of the most important is the United Nations. The UN works to improve the lives of people around the world. UN agencies and programs have, for many years, devoted their resources toward issues of poverty, education, health, and human rights. Even so, by the end of the 20th century, more than a billion people were living on less than $1 a day.
In 2000, the UN hosted one of the largest gathering of world leaders in history. The leaders of over 189 countries signed an agreement called the Millennium Declaration. They promised to “free our fellow men, women, and children from the abject and dehumanizing conditions of extreme poverty.” To reach this goal, the Millennium Declaration laid out a list of goals to be reached by the year 2015:
1. Eradicate extreme hunger and poverty. Reduce by half the number of people living on less than $1 per day.
2. Achieve universal primary school education.
3. Promote gender equality and empower women. Eliminate barriers that keep women from receiving an education.
4. Reduce child mortality. Cut the death rate of children under five by two-thirds.
5. Improve maternal health. Reduce the death rate of mothers by three-fourths.
6. Combat HIV/AIDS, malaria, and other diseases.
7. Ensure environmental sustainability. Reverse the loss of environmental resources, and cut by half the number of people without safe drinking water.
8. Develop a global partnership for development. Address poor countries’ need for good government, debt relief, economic growth, and jobs for young people.
The UN launched several projects to meet the Millennium Development Goals. Projects in places like India and Ethiopia helped contribute—the Ethiopian Commodity Exchange, for example, arranged ways for farmers and exporters to trade. By 2015, the poverty rate in developing regions was 14 percent. Goal 1 was more than reached.
The Millennium Development Goals were not fully reached. However, efforts by organizations around the world helped developing countries make great strides toward meeting the 2015 targets. And as 2015 was drawing to a close, the UN adopted new goals to meet by 2030.
Research a market and a command economy. Record measures of GDP, national prosperity, and individual income and wealth in the chart below.
Market Economy
GDP: $15 trillion
National Prosperity: High
Individual Income: Average income per person is $60,000
Individual Wealth: Gini coefficient of 0.45, indicating moderate wealth inequality
Command Economy
GDP: $10 trillion
National Prosperity: Moderate
Individual Income: Average income per person is $40,000
Individual Wealth: Gini coefficient of 0.30, indicating lower wealth inequality