Joshua wrote:
" If you multiply the standard of living index times GDP (per capita
times
population) I think you'd get a more meaningful index of what Bob
Summers at
Penn had in mind when he devised that index. I'm not expert on it,
though.
"
I really think that the index as presented is meant more as
comparison tool across countries, not within them.
For example, the eighties are commonly demonized as the "decade of
greed", by which I assume is meant that people spent more for
themselves and saved & invested less. If that were in fact what
happened, the standard of living variable would have shown it as an
_increase_ in standard of living in the united states, since C and G
would have been rising, and I would be falling, improving the ratio.
Multiplying this ratio by GDP would show the average of total
consumption per person -- not reflecting savings balances,
investments, and so on. This index was probably more useful for
comparing economies during the cold war, when there really were
different economic systems in operation. The whole thing is fairly
spurrious, anyway, because you pay a price when you shift resources
to consumption: Less production in the future. So, if you were to
have 1.0 on the Standard of living scale, life would be good -- for a
very short time. In that schenario, "the people" (i.e. consumers)
would literally consume everything the economy has, and future
consumption would be projected to zero. (Investment is a measure of
future consumption, because it determines future production -- no
production in the future=no consumption in the future.)
--Greg