Monarchy & Republic in the Laboratory of History by N. Fakhr - HTML preview

GDP per Capita

Why GDP per Capita?

Welfare is multidimensional, and no single indicator can measure all of its aspects on its own. Income, purchasing power, the distribution of wealth, the quality of education and healthcare, economic security, and many other factors all contribute to the well-being of citizens. For this reason, this book uses several complementary indicators to assess welfare, each shedding light on a different part of the picture.

In this chapter, we begin our examination of welfare with GDP per capita.

GDP per capita shows the average value of goods and services produced by a country’s economy per person over the course of a year. In general, the higher this figure is, the greater the economic resources available to a society to support the well-being of its citizens.

Of course, this indicator alone cannot capture every dimension of welfare. GDP per capita, for example, does not directly tell us how income is distributed, how unequal a society is, what citizens can actually afford with their income, or many other aspects of quality of life. It should therefore not be treated as a complete measure of welfare.

For this reason, the conclusions of this book do not rely on this indicator alone. In the following sections, we will also examine GDP per capita based on purchasing power parity (PPP) and the Gini coefficient to develop a more complete picture of citizens’ welfare. GDP per capita adjusted for purchasing power parity largely accounts for differences in price levels between countries, while the Gini coefficient provides a measure of how income is distributed within a society. Each of these indicators therefore captures a different dimension of welfare, and together they provide a broader basis for comparing the performance of governments.

Nevertheless, GDP per capita is strongly associated with many important aspects of well-being, including the quality of nutrition and housing, access to education and healthcare, and life expectancy. For this reason, economists and international institutions have long used it as one of the key indicators for comparing levels of welfare across countries.

It therefore provides a useful starting point for our examination of welfare. We can then add complementary indicators to build a more comprehensive picture of government performance.