Question

By now you have been introduced to the concept of measuring national output, or GDP. You know how GDP is calculated, and what its elements are. You also know that there are elements unaccounted for when calculating GDP. In other words, GDP is often underestimating national output. This article looks at household labor and unpaid labor, which are productive activities yet not included in GDP.

Should they be included in GDP? How do we approach in calculating them? What measures can we think of? In Folbre’s view, how has the failure to count household labor and production in official economic data had negative consequences, both on our economic understanding and economic policies?

Reuss' first article here addresses some criticism for the conventional measure of GDP, while his second article suggests a different measure, using Human Development Index. Folbre's article places economic valuation in the midst of today's coronavirus pandemic

Answer 1

Non market household services such as meal preparation and childcare are not included in GDP.According to Folbres view when such unpaid services are not included in GDP there are certain negative consequences .One such macroeconomic consequence is a tendency to overstate economic growth .When households collectively supply labor hours to the market their income goes up but they mostly use this increased income to purchase substitutes which they have provided once their own.Thus the increase in their money incomes overstates their genuinely increased disposable income.