126.96.36.199. Comparisons Across Nations
Comparisons of interpersonal well-being across nations have been the focus
of increasing attention over the past few years (see, e.g., Tol, 1999a,b), but
it is clear that these comparisons involve more than one element. The conventional
approach to making such comparisons is to use purchasing power parity (PPP)
to adjust the calculation of gross domestic product (GDP). The technique is
flawed, however, in many ways. First, GDP is now widely recognized to be a poor
indicator of well-being (e.g., UNDP, 1990). This recognition has inspired many
attempts to create other measures, such as the physical quality of life index
(PQLI) (Morris, 1979) and various versions of the human development index (HDI)
by the United Nations Development Programme (UNDP). However, many researchers,
including Srinivasan (1994), have criticized the HDI for theoretical inadequacies.
Nevertheless, the major point that GDP misses too much continues to be emphasized
exclusively. Calculations of the Index of Sustainable Economic Welfare (ISEW)
by Daly and Cobb (1994) have shown, for example, that the ISEW for the United
States has fallen since 1970 even though GDP has grown substantially.
In addition, real-world comparisons must account for many commodities, services,
and attributes. This causes enormous index number problems in computing conversion
factors such as the PPP. Indeed, one country's income can be higher or
lower than another depending on which country is used as the base for the PPP
Third, different societies, cultures, and nations have different social structures,
mores, and public institutions. The public goods, services, and safety net provisions
of each are different. Moreover, activity outside the marketplace can differ
substantially. With industrial development, for example, the clan seems to change
to a joint family structure, then to a nuclear family, and perhaps to temporary
nuclear families in postindustrial societies. More to the point, the nature
of social and human capital and the scope of the marketplace are very different
from place to place, depending on the stage of development. And if welfare involves
having, being, doing, relating, and caring, a more complex measure of welfare
is required to accommodate the multiple stresses of climate change.
Fourth, Sen (1985) suggests that equality in persons' "capabilities"
that are determined by income and access to public goods, services, social capital,
and institutions should be a global objective. Each of these determinants clearly
varies from nation to nation.
Fifth, the principle of "anonymity" that is used in welfare comparisons
is highly suspect. Deliberations of climate impacts and climate policy clearly
should keep track of who is affected and where (within and across countries)