What does GDP per person really tell you about how rich a country is?

GDP per person is a country's total output divided by its number of residents. GDP itself is the market value of all the final goods and services produced in a year, and dividing it by the population gives a rough average slice for each person. It is the number people usually reach for when they say one country is richer than another, because it is used for international comparisons as a broad measure of economic progress, and because it is measured frequently, widely and consistently for almost every country.

Comparing across borders needs one fix. Living costs differ from country to country, so figures are often adjusted for those differences using purchasing power parity.

The man who built the modern measure also warned about it. Simon Kuznets developed GDP for a 1934 report to the US Congress and cautioned against using it as a measure of welfare. His reason was that economic welfare cannot be properly measured unless the personal distribution of income is known, and an average hides exactly that. South Africa under apartheid ranked high in GDP per person, yet the benefits of that wealth were not shared equally among its citizens.

GDP also misses things that are not sold on a market: household production, bartering and volunteer work. Even on conservative estimates, unpaid labour in Australia is worth over half of the country's GDP. And pollution created by industry is not counted against the total.

So GDP per person is a useful rough thermometer for comparing countries, but it is not a verdict on how well people live.