Source: Random Critical Analysis





Much of the difference shouldn't last forever of course. How does the US consume more than we produce (GDP)? We borrow from abroad, and run trade deficits. Eventually that lending must be paid back. (Or at least those lending it to us hope so. We'll see.) Norway is the opposite. They produce a lot of oil, but use the results to save abroad in their sovereign wealth fund, which eventually they can draw on to finance consumption. (Or so they hope, also.)





In the meantime, though, the difference between income and consumption is quite large.





This difference is even more important in the cross-section. Income variation is often transitory -- you might have a bad year -- and consumption lasts longer. People in bad years draw down savings, borrow, or get help from relatives. Most of all, super-rich people save a lot. So inequality of consumption -- of actual standard of living -- is much smaller than inequality of one-year income or wealth.





RCA anticipates your first objection

this consumption measure includes government transfers, subsidies, etc, notably including the vast majority of healthcare and education spending, as Actual Individual Consumption (AIC) does. Since some people earlier seemed to miss to this point, I’ll repeat: the only form of consumption excluded from AIC is that which cannot be attributed directly to individuals or households, i.e, collective expenditures by government like military procurement and the like. I.e. the one thing that is also much larger in the US. And RCA adds nice confirmation. The average US person lives in twice as much space as the average european. And



To the narrow question, US healthcare expenses look out of line compared to GDP I.e. the one thing that is also much larger in the US. And RCA adds nice confirmation. The average US person lives in twice as much space as the average european. AndTo the narrow question, US healthcare expenses look out of line compared to GDP













but not at all relative to consumption. (Note the cool dynamic graph)

The post has lots more beautiful graphs on consumption and health care expenditures. But the main point -- consumption, not income (and especially not one year's income) is a much better measure of living standards -- is larger, and my point, so I'll stop here.





Oh, and I still think we're getting a massively raw deal from our inefficient health care system. As is much of europe.





