Changing Trends in Economic Well-being in OECD Countries: What Measure Is Most Relevant for Health?

Abstract

The connection between health and economic well-being has become a growing area of research, and there has been much debate about how best to measure "health." In this discussion we look at the other side of the issue-how best to measure economic well-being-to better understand the relationship between economic well-being and health. The most commonly used measure of economic well-being at the national level has been average money incomes-specifically, per capita gross domestic product (GDP). However, this measure is blind to many things that people clearly care about. Money income from market transactions omits consideration of the goods and services produced outside the market, as well as any changes in life span and in leisure. In general, economic well-being also depends on the size of the bequest this generation will leave for the benefit of future generations, which current money incomes do not reveal. Average money income also does not indicate how unequally incomes are distributed and, therefore, does not indicate how likely it is that any particular individual will share in average prosperity. Finally, average money incomes do not reflect the degree of anxiety and insecurity with which individuals contemplate their own futures. We therefore argue that a better index of a society's economic well-being should be composed of four components: • current effective per capita consumption flows • net societal accumulation of stocks of productive resources • income distribution • economic security Name /oxc05/26940_u11 06/27/05 11:59AM Plate # 0-Composite pg 297 # 2 Trends in Economic Well-being in OECD Countries 297 Ϫ1 0 ϩ1 In this chapter we develop such an index of economic well-being for selected Organization for Economic Cooperation and Development (OECD) countries for the period 1980-1999 and compare trends in economic well-being to trends in GDP per person. Estimates of the overall index and the subcomponents are presented for 1980 through 1999 for the United States, the United Kingdom, Canada, Australia, Norway, and Sweden. In every case, growth in economic well-being proved less than growth in GDP per capita, although to different degrees in different countries. We conclude with a discussion of why the connection between health and trends in economic well-being might be stronger than the relationship between health and GDP per person.