Question

Is GDP a good measure of our economic well being? Should GDP take into account environmental issues, distributional issues, and health and welfare issues? Why or why not?

Answer 1

Gross domestic product (GDP): This is the monetary value of all finished goods produced in an economy domestically during a year.

Components of GDP = Consumption + Investment + Government spending + (Export – Import)

Yes, GDP is a good measure because it has quantitative approach; and an economy depends on quantity, like the monetary value of GDP increases from the last year; it indicates growth of that economy.

GDP should not take into all those issues, because an issue means problems which can’t be measured in monetary value actually; if it is done in anyways the figures should be assumption based; and GDP doesn’t consider assumption. Rather, all these issues should come under gross national happiness (GNH).

Gross national happiness (GNH): This is the aggregate of economical and non-economical growth of a country in a year.

Components of GNH = GDP + Spiritual growth + Cultural growth + Mental health + Physical health + Corporate strength + Political strength

GNH is not a reliable measure of economy’s performance of a developed nation, since the country is progressing fast its non-economical activities like spirituality may go down. Sometimes it becomes negative. It reduces the total GNH.

Issues are not so important for economy’s performance. Only GDP can serve that purpose.