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4 Ways to Measure Your Standard of Living

by Matador Creators Jan 11, 2011
“Standard of living” should not equate to “amount of spending”.

When I sat down to write an article on the countries with the highest standard of living, I thought it would be easy. But, how do you define “standard of living”? says it means:

1 : the necessities, comforts, and luxuries enjoyed or aspired to by an individual or group
2 : a minimum of necessities, comforts, or luxuries held essential to maintaining a person or group in customary or proper status or circumstances

The World Bank says:

The level of well-being (of an individual, group or the population of a country) as measured by the level of income (for example, GNP per capita) or by the quantity of various goods and services consumed (for example, the number of cars per 1,000 people or the number of television sets per capita).

The Merriam-Webster definition is rather ambiguous – it depends what you define as “necessities” and “comforts” – but the World Bank definition seems unashamedly material: that standard of living is related to how much money you have and what you spend it on.

Yet many different agents have come up with many different ways to define, measure, and rank standard of living, and they aren’t all based purely on economics. Here are four methods, with the top ten ranked countries under each system.

1. Gross Domestic Product

Gross Domestic Product is the total market value of all the goods and services produced in a country in a year. Since our prevailing world view is still stuck on more money = better life, GDP is often used as a quick and dirty way to infer a country’s standard of living.

This is, to use a technical term, complete crap. Not only can money not buy happiness, but not all spending is good spending. Clearing up a pesky oil spill or sustaining multiple wars in foreign lands might be great for expenditure and therefore GDP, but doesn’t mean the country or its people are any ‘better off’ than they were beforehand.

There are tons of other reasons why GDP is not a good indicator of standard of living – for example, it doesn’t factor in wealth distribution, or the negative effects of higher production – but it’s regularly and easily measured, and relatively easy to compare across countries. For now, at least, it’s here to stay.


What people really want is to live long, fulfilling lives, not just to be filthy rich.
GDP top 10 in 2010 according to the IMF (GDP given in millions of $):

1. United States(14,624,184)
2. China (5,745,133)
3. Japan (5,390,897)
4. Germany (3,305,898)
5. France (2,555,439)
6. United Kingdom (2,258,565)
7. Italy (2,036,687)
8. Brazil (2,023,528)
9. Canada (1,563,664)
10. Russia (1,476,912)

2. Human Development Index

The Human Development Index was instituted in 1990 as a way to assess development in terms of human wellbeing as well as economics. It’s a composite statistic that takes into account health, education, and income.

It’s used by the UN Development Programme each year in its Human Development Reports to produce a sort of league table of countries, each of which are placed in one of three divisions: developed, developing, or underdeveloped. But country rankings are relative rather than absolute, and there is no ecological dimension to the index.

HDI top 10 in 2010 according to the UN:

1. Norway
2. Australia
3. New Zealand
4. United States
5. Ireland
6. Lichtenstein
7. Netherlands
8. Canada
9. Sweden
10. Germany

3. Satisfaction With Life Index

Developed by a psychologist at the University of Leicester, the Satisfaction With Life Index attempts to measure happiness directly, by asking people how happy they are with their health, wealth, and education, and assigning a weighting to these answers.

This concept is related to the idea of Gross National Happiness that came from Bhutan in the 1970’s. Although it may sound like a country-wide gurning contest, it was actually a casual remark by the king that was taken seriously by the Centre for Bhutan Studies, which set about designing a survey to measure the population’s well-being. The idea is that material and spiritual development should take place side by side, underpinned by sustainable development, cultural values, conservation, and good governance.

Satisfaction With Life Index top 10 in 2006 :

1. Denmark
2. Switzerland
3. Austria
4. Iceland
5. The Bahamas
6. Finland
7. Sweden
8. Bhutan
9. Brunei
10. Canada

4. Happy Planet Index

The Happy Planet Index was introduced by the New Economics Foundation in 2006. The premise is that what people really want is to live long and fulfilling lives, not just to be filthy rich. The kicker is that this has to be sustainable both worldwide and down through the generations.

The HPI is calculated based on life satisfaction, life expectancy, and ecological footprint. It doesn’t measure how happy a country is, but how environmentally efficient it is to support well-being in that country.

In other words, if people are happy but they’re guzzling more than their fair share of natural resources, the country will not have a high Happy Planet Index. But if people are happy and have a medium environmental impact, or are moderately happy and with a low impact, the country’s score will be high.

Happy Planet Index top 10 in 2009:

1. Costa Rica
2. Dominican Republic
3. Jamaica
4. Guatemala
5. Vietnam
6. Colombia
7. Cuba
8. El Salvador
9. Brazil
10. Honduras


What do you think of these measurements of standard of living? Do any of the countries in the top tens surprise you? Share your thoughts in the comments below.

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