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Dialogue: 0,0:00:00.00,0:00:03.07,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:14.00,0:00:18.99,Default,,0000,0000,0000,,- [Alex] Is Real GDP per capita\Na good measure of the standard of living?
Dialogue: 0,0:00:18.99,0:00:20.35,Default,,0000,0000,0000,,People tell me all the time,
Dialogue: 0,0:00:20.35,0:00:22.72,Default,,0000,0000,0000,,"You economists,\Nyou're too materialistic."
Dialogue: 0,0:00:22.72,0:00:27.11,Default,,0000,0000,0000,,Doesn't Real GDP per capita\Njust measure the things we buy?
Dialogue: 0,0:00:27.11,0:00:30.17,Default,,0000,0000,0000,,What about our health,\Nour happiness, education?
Dialogue: 0,0:00:31.25,0:00:34.60,Default,,0000,0000,0000,,Well, Real GDP per capita --\Nit's not a perfect measure.
Dialogue: 0,0:00:34.90,0:00:37.20,Default,,0000,0000,0000,,But I want to show you why it's probably
Dialogue: 0,0:00:37.20,0:00:41.81,Default,,0000,0000,0000,,the best single measure of the average\Nstandard of living in a country.
Dialogue: 0,0:00:41.81,0:00:45.95,Default,,0000,0000,0000,,And that's not because material goods\Nare the most important goods.
Dialogue: 0,0:00:45.95,0:00:48.16,Default,,0000,0000,0000,,It's because Real GDP per capita
Dialogue: 0,0:00:48.16,0:00:52.58,Default,,0000,0000,0000,,is correlated with many\Nof the other things that we care about.
Dialogue: 0,0:00:53.35,0:00:55.31,Default,,0000,0000,0000,,Let's start with life expectancy.
Dialogue: 0,0:00:55.48,0:00:59.32,Default,,0000,0000,0000,,Here we show Real GDP per capita\Nalong the horizontal axis
Dialogue: 0,0:00:59.32,0:01:02.38,Default,,0000,0000,0000,,and life expectancy\Nalong the vertical axis.
Dialogue: 0,0:01:02.76,0:01:05.84,Default,,0000,0000,0000,,As you can see,\Nthere's a positive correlation.
Dialogue: 0,0:01:05.84,0:01:09.02,Default,,0000,0000,0000,,Countries that have\Na higher GDP per capita
Dialogue: 0,0:01:09.02,0:01:11.87,Default,,0000,0000,0000,,also have a higher life expectancy.
Dialogue: 0,0:01:12.47,0:01:14.54,Default,,0000,0000,0000,,Perhaps that's not too surprising.
Dialogue: 0,0:01:15.08,0:01:20.24,Default,,0000,0000,0000,,Let's take a look at happiness.\NMaybe this is a more surprising fact.
Dialogue: 0,0:01:20.24,0:01:24.26,Default,,0000,0000,0000,,This chart shows GDP per capita\Non the horizontal axis
Dialogue: 0,0:01:24.26,0:01:27.63,Default,,0000,0000,0000,,and now a measure of happiness\Non the vertical axis.
Dialogue: 0,0:01:28.02,0:01:30.79,Default,,0000,0000,0000,,Again, we see a positive correlation.
Dialogue: 0,0:01:31.13,0:01:33.98,Default,,0000,0000,0000,,Countries with a higher\NReal GDP per capita
Dialogue: 0,0:01:33.98,0:01:37.32,Default,,0000,0000,0000,,also tend to have\Nhappier people, on average.
Dialogue: 0,0:01:37.56,0:01:40.12,Default,,0000,0000,0000,,Here's a data set from the United Nations.
Dialogue: 0,0:01:40.12,0:01:43.29,Default,,0000,0000,0000,,It's called the Human Development Index.
Dialogue: 0,0:01:43.29,0:01:48.92,Default,,0000,0000,0000,,It combines measures of life expectancy,\Neducation, and standard of living.
Dialogue: 0,0:01:49.52,0:01:54.80,Default,,0000,0000,0000,,Overall you can see, in general,\Nas GDP per capita increases,
Dialogue: 0,0:01:54.80,0:01:59.42,Default,,0000,0000,0000,,so does human development --\Nat least as measured by this index.
Dialogue: 0,0:02:00.46,0:02:04.22,Default,,0000,0000,0000,,The basic story -- it's pretty simple.\NWhen we have more goods and services,
Dialogue: 0,0:02:04.22,0:02:08.02,Default,,0000,0000,0000,,we can usually afford\Nmore of the other good things in life.
Dialogue: 0,0:02:08.34,0:02:10.100,Default,,0000,0000,0000,,So the good things in life --\Nthey tend to go together.
Dialogue: 0,0:02:11.64,0:02:14.98,Default,,0000,0000,0000,,However, GDP per capita \Nis far from perfect.
Dialogue: 0,0:02:15.40,0:02:17.08,Default,,0000,0000,0000,,Here's one problem.
Dialogue: 0,0:02:17.08,0:02:21.100,Default,,0000,0000,0000,,GDP per capita misses\Nthe distribution of income.
Dialogue: 0,0:02:23.23,0:02:27.58,Default,,0000,0000,0000,,For example, let's compare\Nthe Real GDP per capita of Nigeria,
Dialogue: 0,0:02:27.58,0:02:30.32,Default,,0000,0000,0000,,Pakistan, and Honduras.
Dialogue: 0,0:02:30.32,0:02:32.02,Default,,0000,0000,0000,,It's actually pretty similar.
Dialogue: 0,0:02:32.02,0:02:33.96,Default,,0000,0000,0000,,So you might think \Nthat all three countries
Dialogue: 0,0:02:33.96,0:02:36.28,Default,,0000,0000,0000,,have similar living standards.
Dialogue: 0,0:02:36.70,0:02:39.07,Default,,0000,0000,0000,,And yet, in Nigeria,
Dialogue: 0,0:02:39.07,0:02:44.98,Default,,0000,0000,0000,,about 80% of the population\Nlives on less than $2 a day.
Dialogue: 0,0:02:45.79,0:02:48.45,Default,,0000,0000,0000,,In Pakistan, it's only 60%
Dialogue: 0,0:02:48.75,0:02:51.84,Default,,0000,0000,0000,,In Honduras, it's only 33%.
Dialogue: 0,0:02:52.76,0:02:57.28,Default,,0000,0000,0000,,How can the number of people\Nliving in abject poverty be so different,
Dialogue: 0,0:02:57.28,0:03:00.29,Default,,0000,0000,0000,,when Real GDP per capita\Nis about the same?
Dialogue: 0,0:03:01.80,0:03:06.58,Default,,0000,0000,0000,,The reason is that income in Nigeria\Nis much more unequally distributed
Dialogue: 0,0:03:06.58,0:03:09.18,Default,,0000,0000,0000,,than in Pakistan or Honduras.
Dialogue: 0,0:03:09.47,0:03:15.15,Default,,0000,0000,0000,,Nigeria has many poor people,\Nbut also some very rich people.
Dialogue: 0,0:03:15.62,0:03:16.90,Default,,0000,0000,0000,,So average income --
Dialogue: 0,0:03:16.90,0:03:21.01,Default,,0000,0000,0000,,it's about the same in Nigeria,\NPakistan, or Honduras,
Dialogue: 0,0:03:21.01,0:03:24.96,Default,,0000,0000,0000,,even though there are\Nmore poor people in Nigeria.
Dialogue: 0,0:03:25.64,0:03:29.62,Default,,0000,0000,0000,,Over time, however, \Ngrowth in Real GDP per capita,
Dialogue: 0,0:03:29.62,0:03:33.18,Default,,0000,0000,0000,,whether in Nigeria, \NPakistan, or Honduras,
Dialogue: 0,0:03:33.18,0:03:37.26,Default,,0000,0000,0000,,usually does indicate growth\Nin everyone's incomes,
Dialogue: 0,0:03:37.26,0:03:39.68,Default,,0000,0000,0000,,including the incomes of the very poor.
Dialogue: 0,0:03:40.02,0:03:42.73,Default,,0000,0000,0000,,So this graph shows growth\Nin per capita incomes\N
Dialogue: 0,0:03:42.73,0:03:44.73,Default,,0000,0000,0000,,along the horizontal axis,
Dialogue: 0,0:03:44.73,0:03:50.70,Default,,0000,0000,0000,,with growth in the incomes\Nof the poorest 20% on the vertical axis.
Dialogue: 0,0:03:51.85,0:03:56.48,Default,,0000,0000,0000,,Once again you see, as average\Nper capita income increases,
Dialogue: 0,0:03:57.02,0:04:01.25,Default,,0000,0000,0000,,you also see increases\Nin income of the very poor.
Dialogue: 0,0:04:02.36,0:04:08.51,Default,,0000,0000,0000,,Overall, Real GDP and Real GDP per capita\Nhave proven to be useful measures
Dialogue: 0,0:04:08.51,0:04:11.70,Default,,0000,0000,0000,,for comparing the standard of living\Nof two different countries,
Dialogue: 0,0:04:11.70,0:04:15.22,Default,,0000,0000,0000,,or for comparing the same country\Nat different points in time.
Dialogue: 0,0:04:15.83,0:04:19.53,Default,,0000,0000,0000,,Okay. So now that you know\Nthat Real GDP per capita --
Dialogue: 0,0:04:19.53,0:04:21.61,Default,,0000,0000,0000,,it's a good measure\Nof the standard of living,
Dialogue: 0,0:04:21.61,0:04:23.80,Default,,0000,0000,0000,,we get to the really crucial question.
Dialogue: 0,0:04:23.80,0:04:27.52,Default,,0000,0000,0000,,How do we increase the standard of living?\NHow do we grow an economy?
Dialogue: 0,0:04:27.52,0:04:30.67,Default,,0000,0000,0000,,How do we increase Real GDP per capita?
Dialogue: 0,0:04:30.67,0:04:34.71,Default,,0000,0000,0000,,That is a big question,\Nthe big question of development.
Dialogue: 0,0:04:34.71,0:04:37.96,Default,,0000,0000,0000,,We'll be tackling it\Nin a number of future videos.
Dialogue: 0,0:04:38.39,0:04:42.02,Default,,0000,0000,0000,,But before you go, take a moment\Nto let us know how we're doing.
Dialogue: 0,0:04:42.02,0:04:44.49,Default,,0000,0000,0000,,What do you think of the videos?\NHow can we improve?
Dialogue: 0,0:04:44.76,0:04:47.42,Default,,0000,0000,0000,,Drop us an email or leave us\Nsome feedback on our website.
Dialogue: 0,0:04:47.98,0:04:49.21,Default,,0000,0000,0000,,Thanks.
Dialogue: 0,0:04:50.46,0:04:53.97,Default,,0000,0000,0000,,- [Narrator] If you want to test yourself,\Nclick "Practice Questions."
Dialogue: 0,0:04:53.97,0:04:57.91,Default,,0000,0000,0000,,Or, if you're ready to move on,\Nyou can click "Go to the Next Video."
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Dialogue: 0,0:05:06.70,0:05:08.70,Default,,0000,0000,0000,,♪ [music] ♪