Question

Name three things you do that contributes to your (or others’) well-being that does NOT show up in GDP.   Why were these things excluded from GDP?   (What part of the definition was not met?)

There are many other alternative measures for well-being.  For this assignment, google “Alternatives to GDP” and provide a link to an alternative measure.   Provide a brief summary of one measure (one to two lines is plenty).  Then describe the strengths and weaknesses of this alternative measure compared to the standard of GDP.   Why do you suppose that economists still continue to use GDP as their primary measure?

Answer 1

Below are three things that I contribute to my (other's) well being but they do not show up in GDP -

1. Community work: My community work is not counted in the GDP. Often it leads to well being of others but since there is no market for community work, its not valued in GDP.

2. Environmental damage- When I drive to university, it causes some emissions of pollutants. However, it is not counted in the GDP as well even though it could be spoiling the air quality. Once again there is no clear consensus on how to price environment damage in the GDP.

3. Leisure time: There are times when I feel I could have worked part time but instead I enjoy my leisure time at home. GDP doesn't value my leisure time. The reason is that there is no market for valuing leisure.

One of the alternatives to GDP is Human Development Index. It is a qualitative measure of human being. It cover three most important aspects of human life - GDP per capita, health and education measures and average life expectancy.
Strength: HDI's strength is that it covers the development aspect of an economy something that one can't gauge using GDP.

Weakness: It doesn't focus on environmental damage caused by economic activity. Other non-market activities are also not captured in HDI.

Economists continue to use GDP since its relatively easier to measure than other measures of well-being. In terms of computation one looks at transactions in the domestic economy in a given year. There may not be a greater consensus over other measures.