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Gdi vs Gdp

By idreamparis May 06, 2013 492 Words
There are three examples of how GPI accounts for some of the flaws in GDP. First is GDP treats crime, divorce and natural disasters as economy gain. This is because when there is a robbery, for example, people are in loss; therefore they have to buy a replacement for their loss. Spending their money on producing goods and services would make the GDP to increase. Those people have made a growth in certain industries. Furthermore, if those people experience injury then they have to spend money on medical expenses to cure themselves. Then the hospital or the doctors they went to, make goods and services for them. Therefore, GDP increases too. Even though the GDP increases, it is a flaw to the people who experience crime. People, who are getting a loss at the situation, have to spend their savings to replace for their losses. Similarly, the GDP treats such expenses (people spend their money to produce goods and services) as additions to well-being. However, the GPI subtracts the costs arising from crime and divorce. GPI deducts those “bad news” that are supposedly to be a “good news” to GDP from happening. Second, GDP ignores the non-market economy of household and community. Most of this work is done in households and community settings, for example, childcare, home repairs, volunteer work and etc. These underground activities are not counted in GDP because their cash basis and the failure of the average teenager to properly report income. Those activities, such as babysitting and lawn care are sometimes illegal production that is excluded from GDP as it is hard to measure those numerous activities being done in times. However the GPI includes the value of this work figured at the approximate cost of hiring someone to do it. The GPI also takes into account with a more educated population. Third, GDP takes no account of people’s leisure time. The wealthier a nations is, the more leisure or free time the population has to spend time with their family or other activities. In recent years, the opposite has occurred, just like United States, they have the most working hours per day despite the high GDP. Basically if a person spends a lazy afternoon in the park watching people pass by, that person does have benefited but GDP does not change because that person does not experience any exchange of money. Furthermore if a person is working full time but his spouse stays at home, takes care of the kids, cleans the house, trim the garden and repaints one of the walls, those are not measured in GDP because his spouse does not spend money on them. Even though GDP ignores this loss of free time, but GPI treats leisure time as something valuable. When leisure time increases, GPI goes up and thus vice versa. In conclusion GPI is a new measure of sustainability, well-being and quality of life or standard of living.

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