Question

To what extent is it appropriate to evaluate a country’s economic performance by merely examining conventional macroeconomic indicators?

Answer 1

Conventional macroeconomic indicators such as per capita income, GDP, GDP growth rate, unemployment rate, etc. reflects the economic performance of a country to a great extent. For example, if we compare two countries such as India and China, the macroeconomic indicators will correctly indicate that the performance of China has been much greater than India. For example, a higher per capita income of China correctly predicts that an average Chinese is richer than an average Indian. The same is reflected by the total GDP of both the countries as well.

However, traditional microeconomic indicators do not show a complete picture of economic performance. Economic performance is reflected in the overall wellbeing of people. Well, being does not only include material possession but also various subjective notions of happiness, the status of physical and mental health, sense of fulfillment, social equality, democratic rights, etc. The traditional macroeconomic indicators, therefore, do not reflect the accurate picture of the well-being of people in an economy. This is the reason various new indicators like Human Development Index (HDI) or Gross National Happiness are being used.