Question

Real GDP per capita tells us the average level of income (and expenditure) for a person in the economy. While countries with higher levels of GDP per capita tend to enjoy better healthcare, higher levels of life expectancy or higher average years of schooling (to mention a few), compared to countries with low levels of real GDP per capita, many still argue that this is an imperfect measure of the true level of well-being for members of an economy. Explain why you believe real GDP per capita may not be a very good measure of economic well-being, and briefly mention and elaborate on one or two alternative indexes or metrics that could be used instead (or in addition to). If you believe real GDP is, in fact, a near-perfect measure of economic well-being, support your position defending this measure of well-being explaining why it is a superior measure of compared to other metrics.

Answer 1

Real GDP per capita may not be a good measure of economic well being, because it is an average measure that may not be a reality when there is a huge level of inequality in income distribution and resource allocation. Due to the presence of inequality, few people might be getting huge amount of income than the real GDP per capita, but most of the people might not be getting half of it in the economy. Besides, real GDP per capita does not explain about quality of life, ecology conservation and overall happiness of the people in the country. So, real GDP per capita is not considered as a perfect measure of well being in the economy.

As an alternative measure of real GDP per capita, it is Gross national happiness (GNH) that should be considered to measure the well being of the country. Here, GNH is based on living standard of people, governance done by the authorities, health of the people, ecological diversity and environmental conservation and psychological well being of the people among the others. These dimensions are first collected by interacting with the huge sample size and then a score is achieved to rate the well being and happiness of the country. It will tell the true picture of what people face and get in their own country's environment.

So, despite real GDP as a measure to be get the output level of the economy, well being of the economy should be judged on the basis of different index such as gross national happiness.