ADVANTAGES

The UN has encouraged its members to prepare uniform national income calculations, but comparisons of the resulting per capita national incomes must be interpreted with care for 3 reasons. First, the exchange rates used to put such measures into a common currency, so that the comparisons can be made, reflect the comparative prices in each currency only of goods that are traded internationally (comparative prices of untraded goods may not be at all well reflected in exchange rates); second, the size of nonmarket production and hence the portion of production that is not measured in national income estimates vary greatly among countries (typically, less-developed countries have relatively large nonmarket sectors of production); third, patterns of consumption vary greatly among countries and comparisons of money incomes may not reflect the effect of these variations on a population's well-being.

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