Measurement of Economic Development with Combining GDP and Life Expectancy:

Some economists are of the view that human welfare is the product of life expectancy and per capita real output. Accordingly, we should take into account not just the annual level of goods and services that is produced by the economy, but also how long people live to enjoy such annual amounts of goods and services. If an economy provides the conditions under which individuals expect to live longer it will lead to increase the welfare of individuals. Thus, the proper measure of individual welfare is the standard of living (represented by average per capita real GDP) multiplied by the average number of years the economy can sustain a human Me.

Such measure is given the name of "Expected Individual Welfare", which is the product of per capita real GDP and average life expectancy. For example, the Indian economy in 1992 had the real per capita GDP of $1348 (following purchasing power criteria) and the average life expectancy was 56 years. As a result, the expected individual welfare will be $75488. While in US in 1992, the economy provided on the average, $21558 worth of goods and services and the average life-span was 75 years; hence US expected welfare was $1616850.

Apparently, the per capita real GDP of US was 16 times higher than that of India, but the expected individual welfare of US was 22 times higher than that of an Indian. This is because of the reason that Americans live longer than Indians. We have employed a table on the previous page which shows that the picture of economic growth changes when we look at the measure of expected individual welfare.

The other combinations of growth indicators may also give us different results. As we take the combination of education and per capita real GDP. Because educated people make better choices, they will enjoy greater welfare than less educated people in an economy with same productive capacity. Similarly, economic freedom and per capita real GDP may have an expanded effect on human welfare. As greater economic freedom permits consumers, workers and producers to make better choices. As a result, a given amount of output creates a greater sum of individual welfare.

Table/Schedule for Expected Individual Welfare: