Well-Being vs. Wealth (1) – Quality of Life

Following up on Partha Dasgupta’s book review here is a bit more on inclusive wealth and wellbeing. This is the first of three posts.

GDP vs. Well-being

Earlier this year in World Development Charles Kenny from the World Bank had a paper Why Are We Worried About Income? Nearly Everything that Matters is Converging (33(1) 1-19).

In the paper Kenny argues

Summary: Convergence of national GDP/capita numbers is a common, but narrow, measure of global success or failure in development. This paper takes a broader range of quality of life variables covering health, education, rights and infrastructure and examines if they are converging across countries. It finds that these measures are converging as a rule and (where we have data) that they have been converging for some time. The paper turns to a discussion of what might be driving convergence in quality of life even as incomes diverge, and what this might mean for the donor community.

The below graph of trends in the human development index shows the type of pattern Charles Kenny discusses in his paper.

trends in human development index

From UNDP 2004. HUMAN DEVELOPMENT REPORT 2004: Cultural liberty in today’s diverse world (page 134).

The figure shows, that according to the human development index, more people are better off than they were twenty five years ago. For the poor, well-being (measured in terms of such things as literacy and life expectancy), is increasing faster than that of the rich. There are substantial departures from this general pattern and progress is slow, but overall this is positive.

Kenny shows that the same income (measured in constant dollars) buys much more well being now than it did a century or fifty years ago. He argues that this suggests:

The extent of the role that governments have had to play in improving quality of life remains arguable. Literacy appears to be an important factor and government efforts to expand schooling must have played a role here. It seems plausible to argue that even though some government health expenditure is wasted, efforts to (for example) spread vaccines and improve primary care can have a significant payoff.

Whatever the role of government, literacy and vaccine programs surely helped only in combination with technologies that the skill of literacy or the vaccine programs helped to spread. These technologies, which appeared to have done little in increasing Third World income, have at least improved other measures of the quality of life. Given the role that globalization has been argued to play in transferring technology it may be that, along with government, globalization has been too quickly dismissed by some as a driver of development.

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