Measuring economic welfare (updated)

John Taylor at the Economics One blog draws our attention to a new measure of economic welfare. The measure combines consumption, leisure, mortality, and even inequality. Interestingly, if not surprisingly, the new measure is positively correlated with GDP per capita. But as Taylor points out there are differences.

For example, income per capita in France is only 70 percent of that in the United States, while the new welfare measure for France is 97 percent of that in the United States. The difference is mainly due to more leisure and less income inequality in France.

One point that I'm sure that many people will not like is

[t]he gains and losses of utility from different levels of income inequality are based on the Rawls abstract concept of the veil of ignorance in which each person enters a lottery each year determining what country he or she will live in--one with less or more income inequality.

This idea has been criticized by a number of welfare economists.

The last point Taylor makes may be the most important,

Chad and Pete have a whole section on “caveats” in their interesting paper.

but you can bet they will be ignored.

Update: Tim Worstall comments here.