It's called the Human Development Index. How do we grow an economy? How do we increase Real GDP per capita? GDP includes spending on medical care, but does not address whether life expectancy or infant mortality have risen or fallen.
GDP has nothing to say about the level of inequality in society. Regional variations in income and spending: National data can hide regional variations in output, employment and income per head of the population Inequalities in income and wealth: Average mean incomes might rise but inequality could grow Leisure and working hours and working conditions: An increase in real GDP might have been achieved at the expense of leisure time if workers are working longer hours or if working conditions have deteriorated Imbalances between consumption and investment: High levels of investment as a share of GDP might be superb for creating extra capacity to produce but at the expense of consumer goods and services for the current generation Changes in life expectancy: Improvements in life expectancy don't always show through in GDP accounts.
The standard of living in, for example, or was not affected only by how much money people had—it was also affected by what they could buy.
Application and Shortcomings While standard of living is a complex topic with no universally objective measurement, rising global income since the Industrial Revolution has undeniably been accompanied by global poverty reduction, improved life expectancy, increased investment in technology development and a high material standard of living in general.
If people are led by a rising fear of crime, to pay for installation of bars and burglar alarms on all their windows, it is hard to believe that this increase in GDP has made them better off. GDP per capita misses the distribution of income.
It combines measures of life expectancy, education, and standard of living. In certain cases, it is not clear that a rise in GDP is even a good thing.
However, GDP per capita is far from perfect. So, you might think that all three countries have similar living standards.
One caveat: For reasons to be discussed shortly, GDP per capita can give us only a rough idea of the differences in living standards across countries.