Total Income, Population, and Per Capita Income

Although total income grew faster under dictatorships (at the rate of 4.42) than under democracies (3.95), the observed average rate of growth of per capita income was higher under democracy: Per capita income grew at the rate of 2.46 under democracy and at the rate of 2.00 under dictatorship. The same is true of consumption. Whereas total consumption increased at the rate of 4.24 under dictatorship and 3.92 under democracy, per capita consumption grew faster under the latter, at 2.43 per year as opposed to 1.82 under dictatorship.

Because what matters for individual well-being is the growth of each person's income and consumption, rather than the development of the aggregate economy, the impact of regimes on the growth of per capita income and consumption is what we ultimately care about. Indeed, Lucas (1988: 3) saw the problem of economic development as “simply the problem of accounting for the observed pattern, across countries and across time, in levels and rates of growth of per capita income.”

That is why most studies take the growth of income per capita as the variable to be explained. Yet even if per capita income is the correct focus, treating it as the single explanandum confounds the effects of two social processes that are to some extent independent: the growth of total output and the dynamics of population.