Why the Standard of Living Cannot be Measured

You walk into a candy shop to buy a half dozen Hersey Kisses chocolate candies. They are available wrapped inĀ either silverĀ or gold colored foil, for the same price. You prefer, and purchase, the gold.

If we assume for simplicity that your preferences do not change, and that you are indifferent to whether the shop actually stocked any of the unpreferred silver colored foil units, then we can rank the standards of living that result from candy shops that carry only one choice as gold, then silver.

Since the prices are the same there is no way for an outside observer to distinguish, let alone measure, the standards of living that result from the consumption of gold vs silver foil wrapped candies.

While you may know that you prefer gold to silver, you have no way to quantify the difference, or the intensity of the preference, in the standards of living, at least without bring new subjectively valued goods into consideration.

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