Question

3. What is development? Sustainable development? We often use real per capita GDP as a proxy for the level of development. What is GDP and real per capita GDP? What are some of the problems with this indicator for measuring development? Why is it still so commonly used?

Answer 1

What is Development?

Development define as the improvement in country’s economic and social condition. Development is improving the way of managing the human as we as natural resources to improve lives of nation.

What is Sustainable Development?

Sustainable development is defined as the development which fulfills the present needs and requirement without compromising with the needs and requirements of future generation.

Using GDP per capita as a proxy for development because it provides an accurate measure of any country’s capacity to manage the material needs of its people. GDP per capita could be expected to meeting the basic needs of population. But in many aspects it fails to take into accounts many other important factors.

What is GDP?

The Gross Domestic Product according to The Economics times “is the final value of the goods and services produced within the geographic boundaries of any country during a particular time period (a year). (https://economictimes.indiatimes.com/definition/gross-domestic-product)

It is the total value of goods and services produced in a specific time within the country.

What is Real Per Capita GDP:

It is the measure of the total output of country that takes into account the Gross Domestic Products and divide it by the total population of that country (number of people of a country) .

What are some of the problems with this indicator for measuring development?

Problems with development indicators:

There are many indicators of measuring development such as per capita income, GNP, life expectancy, poverty and education. United Nations Development Programme has provided three broad areas to measure economic development- Per capita income, health and education. But yet no indicator provides a satisfactory and universally accepted index of measuring the development of country.

The only focus on certain aspects of development and exclude many aspects such as crime, deprivation, corruption, illegal transaction etc.

It doesn’t account for improving the longevity of human life, quality of environment etc.

GDP per capita is one of these indicators to measure standard of living, but there is no mention of the income distribution.

GPD calculated in terms of PPP (Purchasing Power Parity), whose value can change.

GDP excludes a range of non-market activities that influence well-being, It exclude domestic production and household works(Childcare)

Why is it still so commonly used?

It is (GDP per capita) still used to measure the economic development because it is the best method of measuring economic development. In the words of prof. R.G. Lipsey. “there may be changes comes in future in development measures but present measures (Gross National Product)cannot fully replaced. GDP per capita correlate broader qualitative measures of prosperity. If we argue that these measure of development doesn’t include environmental effect, happiness, unpaid work, equality etc. but it is very difficult to measure these aspects.