Thursday, May 19, 2005

Economics: Standard of Life Vs Quality of Life

I was glanzing through UNDP's Human Development Index which ranks countries according to standard of living. As I went through it, I could not help but notice the obvious phenomenon of how developed countries and industrialized countries naturally have a high ranking while developing countries have a relatively lower ranking. This led to me question not the validity but the value of such an index. In other words how meaningful is this index.

After I realized that I personally have given up living in Canada, a country with a high HDI ranking, after having lived there for six years and had chosen to relocate to Singapore, a country with a lower HDI ranking. It became apparent that the standard of living didnt affect my decision to leave Canada even though it is the main detereminant for immigrants to migrate to Canada. Then there must naturally be another characteristic/s of Singapore that drew me back which is relatively lacking in Canada. Indeed after a few honey moon years in Canada, when reality started to hit me, I personally felt quality of life to be better in Singapore. This then gives rise to the following questions - Does the HDI index reflect only standard of living or quality of living too? Is standard of living a sufficient measure to rank a country?

Indeed Canada without dispute has a higher standard of living than Singapore and therefore as HDI indicates has a higher ranking. But quality of life, as i mentioned earlier is better in Singapore. This truely is not indicated by HDI. In other words, HDI is really not able to capture quality of life in a country nor is it able to reflect the differences in quality of life amongst countries. How one can actually measure quality of life is another issue indeed.

Well what do i mean by quality of life? Let me first define standard of life to be economic factors such as health care, housing, basic amenities, education etc. So what is quality of life? Well it will be social factors such as family, marriage, children, extended family, community, village, town, kinship, etc etc....

Indeed in the developed and industrialized countries these latter factors are more dismal than the developing countries. We often see high divorce rates, low marriage rates, low fertility rates etc within the more developed countries. The very nature of economic growth as prescribed by western economics lead to a state where societies' standard of living increases but quality of life decreases as such economic growth erodes family bonds, communal bonds, kinship, appetite for marriage, child bearing and child rearing activities etc.... This because as a utility maximizing individual continues indefinitely to maximize individual utility, he/she looses the incentive to consider or maximize familial or marital utility or community utility or social utility.

Should economists choose to exclue quality of life and simply look at standard of life, they may not be able to adequately explain phenomenons such as migration by those westerners to the east seeking culture. Likewise economists will not be able to adequately explain the resistance by those easteners, who can afford to but choose not to migrate to the West.

Just as how Singapore's quality of life is better than Canada, Malaysia which has a lower HDI ranking has a better quality of life than Singapore and so on. In turn other countries that have a lower HDI ranking relative to Malaysia, have a higher quality of life.

Nevertheless we cannot conclude that any strict inverse relationship between quality of life and standard of life exists but a general relationship can be observed. Indeed what can be concluded is a positive relationship between economic development and standard of living and a negative relationship between economic development and quality of life.


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