I suppose it bears frequent mentioning(*) that standard of living is not the same as quality of life. Standard of living, like GDP, is an economic measure that tries to estimate quality of life by measuring how many products a person buys or in general how many economic transactions the person engages in. But does cost of living measure what really matters?

(*) Because due to human nature, a statement becomes more true if it is repeated often.

While this may hold for a poor person or for someone with a poverty mentality, I find it hard to believe that it also holds for the average person or for the Mexican fisherman. Indeed, using the standard of living measure a person working twice as hard to spend twice as much consequently has a standard of living which is twice as high.

The standard of living reasoning is dumb for two reasons. First, many studies have shown a diminishing return in terms of happiness when it comes to spending.

Second, and more importantly, by only considering the expense side of the ledger, the down side of spending is ignored. I would also expect that doubling the amount of work actually increases pain by more than a factor two. Conversely, working half as much would feel more than twice as good. This is an exercise in missing the point. I do not know for sure, but I also suspect the cost of drugs to alleviate some of the symptoms of lifestyle diseases actually count as a positive to standard of living calculations much in the same way that traffic accidents contribute to GDP.

If measured by how much I shop, my standard of living is quite low, simply because I don’t happen to shop a lot. However, I would argue that my quality of life is actually very high. In many ways it is quite a bit higher than when I was working.

So everybody: Please stop confusing quality of life with how much a person shops. This connection really only pertains to consumers, but that does not mean everybody. For anyone whose main hobby is not shopping, or who is not deeply enthralled by researching and buying consumer gadgets (“I just upgraded my fridge with a WiFi connection and downloaded a fridge door opening tone for it. It was only $99.95 for the upgrade and $3.99 for the door opening tone.”), or who is not looking to impress susceptible neighbors with the size of house, friends with the mileage of his two week vacation, or potential girlfriends with the size of his … car, standard of living has very little bearing on quality of life.

Of course, for recovering consumers it requires some time to learn to enjoy activities that do not revolve around spending money and shopping. It requires some time to develop one’s self-worth and the perception of others in ways that are not associated with the size of the house you or they live in or the particular vehicle(s) you or they use.

Also, hard as it is, this necessitating an intellectual rather than a visceral observation, signs of spending money should never be confused with having money(*). Presuming that a guy is loaded just because he drives a fancy car is pretty naive. Now, if he had a bumper sticker that said “My other car is 2000 shares of General Electric” or “My other car is a maxed out retirement account”, that would be a different matter.

(*) In fact, unless you have evidence to the contrary, you can pretty much assume an inverse relationship between people who appear to be rich and how much wealth they actually have.

More comments:

Getting back to the original point of the post, for me spending money to enjoy myself and even spending money on needs (such as transport) is simply a non-issue. This is why standard-of-living, which as Macs correctly pointed out would more aptly be called cost-of-living, is a fairly useless indicator for those whose behavior is not well-correlated with the consumer lifestyle.

In fact in such cases, the reverse, that is, how little you spend is a fine indicator of how independent, skilled, and self-sufficient you are.

To illustrate the point.

Person 1 has an apple tree in his yard. He gets free organic apples without effort.

Person 2 has no trees. He pays for his apples which he buys from the supermarket 10 miles from where he lives. It takes him 20 minutes to get there.

According to the normal metric, #1’s standard of living is low and he lives a miserable life.

Conversely, since #2 is spending money, his standard of living is high and he lives the good life…all the way on the drive down to the supermarket and back again.

Does this make any sense whatsoever?!

I don’t know if anyone watched the TED talk I linked to at the very beginning, but the speaker makes the point that “standard of living” is an industrialized way of looking at things. This works fine if you start from having very little. Then you can measure your standard on what you spent on your toilet, your towel, your sink, your clothes, etc. However, once these are satisfied it makes little sense to keep using the same standard to measure the second toilet, the second TV, the second … and the third and the fourth. The quality of life is now disconnected with the cost of living.

Originally posted 2010-06-26 19:01:17.