The numbers we use to make such claims are usually the annual average of purchasing-power-parity adjusted (PPP) gross domestic product per person (GDP per capita). That typically means we count up the value of all the goods and services consumed in a country each year and divide by the number of people. We then do something clever: anyone who has traveled outside the “developed” world knows that a dollar goes farther in some countries than in others, so we do a “PPP” adjustment to account for that.
Even with this correction it’s easy to object to this measure. For one thing, income is heavily skewed: the typical person in the country may consume nowhere near the average income. Since we construct mean per-person income by adding up expenditures and dividing, we can’t even talk about inequality if we want to – it’s not measured.
|Economic data shows that there is no market for haunted houses in the U.S.|
There are tons of other examples like these – mean PPP income turns out to predict all sorts of variables that actually are real and that we do believe in and care about, from life expectancy to the odds that kids go to school. We should certainly measure it as well as we possibly can, but never lose track of what PPP GDP per capita statistics really are: useful tools rather than ironclad facts. Institutions like the IMF and World Bank that publish them need to make this much more obvious.