Defining economic resources
People depend on a wide range of resources to maintain and enhance their wellbeing. Some resources such as air, water and food are essential to life. Clothing and shelter are basic needs. However, there is also a vast array of other goods and services that people seek to own and consume or to have accessible to satisfy their needs and wants. These include land and property, a diverse range of manufactured goods and various health, education, financial, personal, cultural and recreational services. Of course, in order to prosper, individuals need to use their own physical and mental resources, their health and education, to acquire other tangible and intangible resources. If their capacities are limited, they need the physical and mental resources of others within their family or in the wider community to help meet their needs. The goods and services that individuals or families are able to consume largely depend on their income and wealth.
All resources have a value to people and many have a quantifiable economic (or money) value. Those that are bought and sold in the marketplace have an obvious economic value. Those traded for services or other goods, rather than money, can also be considered to have an economic value. A person's health or their family and social relationships may be considered as being valuable resources but are not in themselves usually assessed in terms of a monetary value. Economic resources may thus be defined to cover those resources that have a monetary (or market) value and it is these that are referred to when considering a person's or family's income, consumption and wealth. These resources include goods and services, tangible and intangible assets, and financial assets and liabilities.
The concept of economic wellbeing relates to people's command over economic resources. This focus on economic wellbeing is embodied in questions such as: whether people have a high or low income; whether or not they are wealthy; whether or not they are experiencing financial hardship; whether or not they are dependent on welfare from government and charitable organisations; whether they have a high or low level of consumption, or, very similar in meaning, whether they have a high or low level of expenditure. Yet other questions relating to economic resources include: whether or not people have access to basic services; whether or not they can afford to buy or pay for particular goods and services, and, whether or not they have the means to get over a financial crisis.
LIVING STANDARDS AND POVERTY
The standard of living of people and their families is concerned with their consumption of goods and services. It depends on the wealth of economic, social, and cultural resources in the community in which they live and their ability to acquire them. The concept of living standards is a relative one: a person's living standards - whether they are rich or poor - is assessed relative to those of other people or relative to some statement of minimal needs. People with a low standard of living may be considered to be in poverty if the range and quality of resources available to them and their ability to participate in society falls below community standards. There is no general agreement on what the 'community standards' are - indeed many standards exist (see Measurement issues - Measuring poverty). Thus poverty, as with living standards, is a relative and quite subjective concept.
INCOME, CONSUMPTION AND WEALTH
Among the various concepts used when considering the economic wellbeing of people, the most common are those developed by economists and accountants, dealing with income, consumption and wealth; these particular concepts are also used in relation to other entities such as corporations and whole national economies. Although these notions have different meanings to different people, and even experts have different views as to how they might be defined for different purposes, they are generally concerned with describing the total economic value of the resources received, owned, or finally used up by people. As illustrated, at a broad level in the diagram below, the concepts are inter-related.
Thus, using familiar ideas (more rigorous definitions of each concept and others closely related to them are given later in this chapter in the 'Frameworks' section), it is evident that the cash income people receive can be used to purchase goods and services or saved and invested so helping to expand a person's wealth. The financial and non-financial resources that have been accumulated can also be used to meet a households needs or wants for goods and services. Since both income and wealth can be used to support consumption it is apparent that economic wellbeing depends on the presence of both types of resources. Together the notions of income and wealth are sometimes collectively referred to as the 'means' of living.
The nature of the inter-relationships can differ. For example, people may have a low income for a period of time but enjoy a high level of consumption during that period because they can draw on their stock of wealth. Alternatively, they may have low levels of consumption despite having a high income if they are saving or paying off debts. Yet again some people can have a great deal of wealth but low income and low levels of consumption if their wealth cannot be readily used. This last situation, encapsulated by the expression 'asset rich but income poor' tends to be more common among those groups of people whose assets are tied up in their own business (e.g. farmers).
It can therefore be misleading to assess people's relative economic wellbeing by using any of the three concepts - income, consumption or wealth - in isolation. It is for this reason that other measures, such as people's experience of financial hardship or their own subjective assessments of their economic wellbeing, can provide useful additional perspectives on people's economic wellbeing.