220 Final Notes - Easterlin paradox(Richard Easterlin Once...

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Easterlin paradox: ( Richard Easterlin ) Once people can afford their basic needs, levels of happiness don’t correlate to income o Relative income o Easier to adjust to income gains o Too many choices when we can afford it makes us stressed 1970s PQLI (physical quality of life index) – not based on income Measures: infant mortality, life expectancy, and literacy 1990s HDI (human development index) Measures: life expectancy, education, and real GDP per capita Living Planet Index (LPI) – forests, freshwater and marine ecosystems GDP started to plateau and LPI started to decrease Wealth – stock of assets held by a person Income – flow of earnings from assets and labour earned in a year Pareto efficiency – when one party cannot be made better off without taking away from another party (eg. when available resources are shared equally and exhausted) GNP (gross national product) /GDP (gross domestic product) Both: measure national wealth and are used to compare economies GNP Market value of final goods and services produced by a country’s nationals (overall) - including overseas operations GDP Market value of goods and services produced within the country’s borders Global GDP continues to rise but shortcomings of these measures are: Only count what is being bought and sold of the market o No value given to the entire price of natural resources – accounts for when a product is sold but not the price of extracting the materials Includes things we don’t consider to be enhancing our welfare o Example: the costs of crime and tanks Tell us very little about distribution o Relative income and how wealth is actually distributed within a country GPI (genuine progress indicator) / ISEW (index of sustainable economic welfare)
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