Comparisons of interpersonal well-being across nations have been the focus of increasing attention over the past few years (see, e.g., Tol, 1999a,b), but it is clear that these comparisons involve more than one element. The conventional approach to making such comparisons is to use purchasing power parity (PPP) to adjust the calculation of gross domestic product (GDP). The technique is flawed, however, in many ways. First, GDP is now widely recognized to be a poor indicator of well-being (e.g., UNDP, 1990). This recognition has inspired many attempts to create other measures, such as the physical quality of life index (PQLI) (Morris, 1979) and various versions of the human development index (HDI) by the United Nations Development Programme (UNDP). However, many researchers, including Srinivasan (1994), have criticized the HDI for theoretical inadequacies. Nevertheless, the major point that GDP misses too much continues to be emphasized exclusively. Calculations of the Index of Sustainable Economic Welfare (ISEW) by Daly and Cobb (1994) have shown, for example, that the ISEW for the United States has fallen since 1970 even though GDP has grown substantially.
In addition, real-world comparisons must account for many commodities, services, and attributes. This causes enormous index number problems in computing conversion factors such as the PPP. Indeed, one country's income can be higher or lower than another depending on which country is used as the base for the PPP index.
Third, different societies, cultures, and nations have different social structures, mores, and public institutions. The public goods, services, and safety net provisions of each are different. Moreover, activity outside the marketplace can differ substantially. With industrial development, for example, the clan seems to change to a joint family structure, then to a nuclear family, and perhaps to temporary nuclear families in postindustrial societies. More to the point, the nature of social and human capital and the scope of the marketplace are very different from place to place, depending on the stage of development. And if welfare involves having, being, doing, relating, and caring, a more complex measure of welfare is required to accommodate the multiple stresses of climate change.
Fourth, Sen (1985) suggests that equality in persons' "capabilities" that are determined by income and access to public goods, services, social capital, and institutions should be a global objective. Each of these determinants clearly varies from nation to nation.
Fifth, the principle of "anonymity" that is used in welfare comparisons is highly suspect. Deliberations of climate impacts and climate policy clearly should keep track of who is affected and where (within and across countries) they live.
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