Category: Economics: Ch 15

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Living standards – overtaking the USA in the slow lane?

In the 1990s UK living standards were estimated to be 4% below those of the USA, 33% less than in Germany and 26% lower than those in France. However, faster economic growth in the past two decades has, according to Oxford Economics, led to average incomes overtaking those in the USA and rising some 8% more than those of France and Germany.

UK living standards outstrip US Times Online (6/1/08)
…but at least we’ve got one up on the Yanks Guardian (6/1/08)

Questions

1. Explain the difference that the value of sterling makes to the measure of the standard of living.
2. “With an adjustment made for this “purchasing power parity”, the average American has more spending power than his UK counterpart and pays lower taxes”. Define what is meant by purchasing power parity (PPP). Why does the standard of living need to be measured at PPS rates?
3. Discuss the principal factors that have led to the increase in the standard of living in the UK.
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We’re growing and we’re happy, or are we?

Do you know what the current rate of economic growth is? Probably not. In the article below Larry Elliott argues that this may indicate that the link between economic growth and happiness has been broken and that alternative measures of GDP may be more helpful in analysing the performance of the economy.

Cameron should count on happiness Guardian (27/8/07)

Questions

1. Explain what is meant by the term ‘Index of sustainable economic welfare’.
2. Examine three factors that may raise economic welfare that are not included in a conventional measure of GDP.
3. Use the Friends of the Earth make your own ISEW site to analyse the factors that may contribute the most to economic welfare. Discuss the arguments for and against the introduction of an ISEW as an official government measure of economic welfare.