Beyond Income and Wealth

This paper proposes four criteria for the selection of a better measure of living standards: it should be comprehensive, correlation sensitive, preference based, and fairness based. These criteria are applied to the following measures: income, equivalent income, capabilities, and satisfaction. The paper then explores the relationship between the space of goods and services, the space of budgets, and the more fundamental space of the aspects of life that people really care about. The importance of the fairness principles guiding interpersonal comparisons is highlighted.