National Income and Economic Welfare

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National income is a measure of production activity. So, a higher national income overtime should mean more production and more availability of goods and services to the people. Should more goods mean that people are better off? Are they better of in physical terms, or in psychological terms or both? Are there things other than national income which also contribute to the feeling of better off among people ? Are their things counted in national income but do not really lead to betterment of life, or at least not in the same proportion as the monetary value attached to them? Broadly, the point to be examined is that does rise in national income mean that people are better off. 8.2 MEANING OF ECONOMIC WELFARE Welfare is taken to mean a sense of weN being or a feeling of better off. Welfare of a person is determined by a large number of factors. There are certain factors which lead to rise in welfare, like use of goods and services leading to a comfortable living,better understandingwith familymembers, relations and friends, better natural surroundings, better social and political atmosphere and so on. There are other factors which may lead to decline in welfare like illness, tensions with family members, relations and friends, pollu~ion,unsecured society, etc. The combined effect of all these factors determines whether welfare rises or falls. Welfare as a concept may look alright, but when it comes to measurement of welfare, problems arise. We can measure value of goods and services but we cannot measure the positive values of understanding, natural surroundings, etc. or the negative values of pollution, tension, insecurity, etc. So, we cannot measure everything that affects welfare positively or negatively. Only those factors which can really be measured be expressed in quantities. This leads us to the distinction between economic and non-economic welfare.

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