What is GDP?
The Gross Domestic Product (GDP) has been the most widely used indicator of a nation’s welfare since 1944. For decades, people regard countries with higher GDP as stronger ones and whatever is good for the GDP is also good for the nation. But is that true? And what does GDP actually measure?
In my opinion, GDP only measures part of the economic growth, while ignores the economic health and human well-being. First of all, GDP counts all the money transitions of goods and services; however, not everything can be included in GDP. As proposed by Gibson-Graham (2013) that Economy is like an Iceberg, all the visible/measurable economic activities in mainstream economy are above the waterline. Meanwhile, contributions made by people such as social workers, volunteers or housewives are mostly under the waterline, those value created are not calculated in GDP. Moreover, GDP couldn’t value natural resources until they are consumed. In other words, woods would be no value before sold as boards. Secondly, as GDP mainly makes no distinction between productive and destructive activities, the quality of life could decline with an increase in GDP. For example, illness, crime, and natural disasters all could increase money consumptions thereby affect GDP growth, but also has severe impact in happy life. In short, GDP is still widely accepted as the crucial metric to measure national welfare. Even though using GDP alone has certain limitations, we can not simply dethrone GDP. Meanwhile, there are some alternatives should be added to form a comprehensive method to evaluate a nation’s sustainable well-being.
Critical Analysis of the 3 alternatives
• Adjusted economic measures
Genuine Progress Indicator (GPI), similar to GDP is also expressed in monetary units; therefore is most comparable. GPI also account for the value of volunteer work and the costs of crime and pollution, which are neglected in GDP but crucial to human well-being. Moreover,