28. Measuring Quality of Life

Life is good when quality of life is high. To many of us, an ideal quality of life index would measure a person’s overall well-being; that is, an individual’s total utility. An ideal index would depend upon things that money can buy. Traditional economic goods such as food and drink, shelter, clothing, transportation, and entertainment would be included among these things. An ideal index would depend also upon social, environmental, and perceptual dimensions of wellbeing. Moderate climate, fresh air, clean water, safe neighborhoods, good schools, and good government would be included among these things. Furthermore, an ideal, holistic index would depend on the way in which individuals and households combine marketed goods and services and environmental and community factors with their own time and energy to produce the things, such as happy homes, that give them utility directly and determine overall well-being. Money income can be used as a metric to measure well-being. The logic is straightforward. More money relaxes the budget constraint and allows a person to purchase more things and achieve a higher level of utility. Not surprisingly, great attention is given to average incomes in different areas, with the underlying notion that households are better off where incomes are higher because they can buy more. For example, in Berger and Blomquist (1988), we used US Census data to compare household incomes, poverty rates, and unemployment rates across urban areas. We made these comparisons for households of different ages and races, and with and without children. Chambers of Commerce, elected officials, and others talk about the importance of jobs, and the accompanying income, to the well-being of individuals who live in the area. Money income matters, for sure, but it is an imperfect measure of utility. In part, money income is imperfect because it does not measure the satisfaction that individuals and households derive from traditional market goods that are used