Proxy Indicators and the Real World

Measures of standard of living and of poverty are plagued by the obvious gap between the relative simplicity of the indices and the infinite complexity of what they are trying to capture. Some trade-off between the simplicity desirable in an index, and real-life complexity is inevitable. The paper takes the approach of defining standard of living narrowly, but then using a relatively elaborate index, full income. Full income supplements equivalent income (the measure normally used in poverty studies) with the value of assets, of time, and of receipts in kind. Using this measure, and drawing on data from the Australian Standard of Living Study, the paper asks what story it tells of inequality in ownership of possessions, ranging from those most commonly held, to the goods of affluence. It then asks how useful it is as a proxy measure for people's level of participation in society. The paper concludes with a cautionary note about the limitations of even a rich index such as full income.