Quality of Life and Living Standards Analysis

An Econometric Approach

Sergey Artemyevich Aivazian

• Publisher: De Gruyter
• Year: 2016
• eBook ISBN: 9783110382068
• Edition: 1
• Topic: Mathematics
• Subtopic: Probability & Statistics
• Index: Mathematics

This book is about the concept of "Quality of Life". What is necessary for quality of life, and how can it be measured?

The approach is a multicriterial scheme reduction which prevents as much information loss as possible when shifting from the set of partial criteria to their convolution.

This book is written for researchers, analysts and graduate and postgraduate students of mathematics and economics.

1 Main Theoretical Concepts of Quality of Life (QOL) and Examples of Approaches to its Measurement

1.1 The Choice of a Certain Theoretical Concept of Quality of Life Depends on the Answers to Which Questions?

When analysing the development of thought in the philosophical, economic, sociological and psychological sciences, we can find a very wide range of theoretical conceptual approaches to understanding, evaluation and interpretation of the notions of “quality of life of the individual” and “quality of life of a particular conglomerate of the population”. This variety of concepts is generated by differences in understanding the mechanism of formation of quality of life assessment. Is feeling of wealth and security of having all necessary commodities and services the main factor in this mechanism? Or is the feeling of achievability of those goods whose utility (i.e. a measure of willingness to pay for them) we recognize as the highest the decisive factor? Or is the expansion of human potential (in individual and social sense) the major thing? Which is more important in determining the quality of life – environmental conditions or the perception of these conditions?

One example of systematizing the content and structure of questions, the answers to which will allow us to choose a certain theoretical concept of quality of life (QOL), is given below.

(i)	What determines the QOL? – environmental conditions; – perception of these conditions; – both of these factors in a certain ratio.
(ii)	Which reality parameters surround us and which personality traits affect the assessment of QOL? – parameters of material well-being; – parameters of human development; – parameters of society; – environmental parameters.
(iii)	From whose point of view QOL should be assessed? – researchers; – an individual or group whose life is being evaluated.
(iv)	If the assessment of QOL should reflect both the opinion of the researcher and the opinion of the individual (or the conglomerate of the population) whose life is being assessed, then exactly how to synthesize these two views?

The following is a brief description of the three most common theoretical concepts of quality of life: economic prosperity, utilitarian and expansion of human capabilities, and determining the position of the author in this matter.

1.2 The Basic Theoretical Concepts of Quality of Life

If you do not go into the details and differences in shades of interpretation and of certain auxiliary notions used by numerous authors in the construction of their concepts of quality of life, we can distinguish three main theoretical concepts of this synthetic category.

Proponents of the first concept (today recognized as too narrow and limited) identify the quality of life theory with the theory of economic welfare. In the second concept (“utilitarian”) quality of life is determined by the concept of utility received by the person during his lifetime. Finally, the third concept (by far the most recognized and demanded at present time) examines the process of human development and raising the quality of life as a process of empowerment of the people in the choice of their fields of activity, methods of self-fulfilment, access to the accumulation of human knowledge, etc.

Let us briefly consider the essence of each of these three concepts.

1.2.1 The Concept of Economic Well-Being

We can say that this approach, considering the quality of life as a wealth, originates from the works of Adam Smith [Smith, 1776]. According to Smith, “the wealth of the nation – is the answer to the question of how the nation is equipped with all the necessary commodities and conveniences”, and the latter is precisely what determines the quality of life of the population.

Smith pointed to the two tasks of political economy (which he regarded as a branch of science intended for statesmen and legislators). The first task is to ensure that government revenue is sufficient to enable citizens to provide their own income, necessary for their existence. The second task is to ensure that the state income is sufficient for the exercise of public functions.

The concept of economic well-being emerged in the heyday of economic thought, which largely explains the desire of scientists of the time to measure quality of life in monetary units. Proponents of this concept are united in their belief that the quality of human life depends solely on its material prosperity. Differences in their thinking were related only to the choice of economic indicators used to assess the level of material well-being, and ultimately, – to assess the quality of life. All kinds of different things were used as these indicators: for example, the gross domestic product (GDP), or the number of years during which the person received a “decent” income or anthropometric measurements of children under 6 years old or the so-called green net national product, or based on consumption, accumulation of inventories and income inequality “index of economic well-being” (for more on this, see point 1.3.1).

Today, however, the global scientific community as well as acting heads of national socio-economic structures more and more come to a conclusion about the need to expand the concept of economic development. It is emphasized that the purely economic indicators such as GDP, income and consumption should be supplemented by indicators of employment, social conditions and the environment. National statistical offices are encouraged to give more attention not to productivity indicators but to the measurements of well-being and quality of life in its broadest sense [Report, 2010–2011]. One of the areas of modern scientific thought that is developing this idea further is presented, for example, in the work of Easterlin [Easterlin, 2002], in which an attempt is made to explain why the so-called happiness index is often higher in the not most economically developed countries (“Easterlin paradox”). There are also some fragments on this topic in the very interesting, in my opinion, fundamental work of V. L. Makarov “Social clasterizm. Russian challenge” [Макаров, 2010].

1.2.2 Utilitarian Concept of Quality of Life

A look at the quality of life from the perspective of the concept of utility is well represented in the works of Pigou [Pigou, 1952]. Proponents of the theory of utilitarianism recognize that the concept of “utility” has several different meanings. Pigou himself draws a distinction between the concepts of “satisfaction” and “degree (intensity) of desire”, which he refers to as “desirability”. True to the theory of utilitarianism Pigou argues that the term “satisfaction” should be used in determining the usefulness or quality of life, but at the same time he protects the concept of “desirability” (and such a measure as willingness to pay), arguing that “it is obvious to assume that most goods, especially consumer benefits, such as food and clothing, will be in demand as means to meet the needs and, therefore, are desired to be in proportion to the expected satisfaction from them”.

It can be stated that nowadays many proponents of utilitarianism look at the utility theory only from the angle of “desire” without linking it with satisfaction. They evaluate the degree of fulfilment of desires, but not the amount of satisfaction that was brought with this fulfilment. Nevertheless, there is a pretty wide recognition for the view, according to which the subjective assessment of quality of life could be best represented as a concept encompassing three major aspects [Diener, 1984]:

–	overall judgement of the people themselves on the quality of their lives at a given time;

–	presence of a flow of positive emotions (such as feeling joy or sense of vitality and energy) at different times;
–	lack of (temporary) negative feelings or emotional reactions (such as feelings of resentment, sadness or depression).

There is already a database covering all these three aspects and allowing to implement a similar approach (survey “World Gallup poll” conducted in 140 countries, as well as a survey of the population “World Values Survey”).

I’d like to point out that the utilitarian concept is used in the design of methodologies for assessing the quality of life only within the micro (subjectivist) approach to assessing the quality of life, or an approach that combines both objectivist and subjectivist criteria (on this, see points 1.3.2 and 1.3.3).

1.2.3 Concept of Expansion of Human Capabilities

The basis of this concept is the understanding of the quality of life as a process of freedom of man in terms of expanding his capabilities in the selection of areas of activity, methods of self-realization and access to the accumulation of human knowledge. In this case, freedom is understood in its positive value, that is, man is free to do anything or be anyone, without harming or disturbing anyone.

Even according to Aristotle: “Wealth is obviously not a fact to which we aspire, because it simply is useful and serves some other purpose. … It is only a necessary condition for people to lead a prosperous life”.

Accordingly, income and economic growth are the means, not the goals, of development.

This thesis was buried for more than two millennia, until Arthur Lewis, Theodore Schultz and Gary Becker (50s–60s of the last century), and then Amartya Sen and Robert Lane (at the turn of the 21st century) caught up with it and gave it a modern development.

So, Arthur Lewis in the appendix ...

Table of contents

• Cover
• Title
• Copyright
• Preface
• Contents
• Introduction
• 1 Main Theoretical Concepts of Quality of Life (QOL) and Examples of Approaches to its Measurement
• 2 Macroeconometric Analysis of Quality of Life: Measurement of the Synthetic Latent Categories
• 3 Macro-Econometric Analysis of Quality of Life Within the Framework of Evaluating the Effectiveness of Socio-Economic Policy
• 4 Microeconometric Analysis of Quality of Life and Living Standards
• A2 Appendices to Chapter 2
• A3 Appendices to Chapter 3
• A4 Appendices to Chapter 4
• References
• Endnotes