Is Robert Kennedy Right To Believe That GDP Is A Deficient Measure Of An Economy S Welfare Explain Your Answer Stating Clearly Why Economists Care About GDP
Is Robert Kennedy right to believe that GDP is a deficient measure of an economy's welfare?
Explain your answer stating clearly why economists care about GDP.
Tia Patel
1120 words
GDP has been the long-established measure of a country’s economic progress. It is ‘an estimate of market throughput, adding together the value of all final goods and services that are produced and traded for money within a given period of time’ (Costanza, Hart, Posner and
Talberth 2009: 3). Whilst it was designed to measure a country’s economic activity, it is often considered a suitable reflection of economic welfare. Economic welfare is the quality of living standards and level of prosperity in an economy, and therefore may require different considerations to that of a country’s economic output. It is argued that GDP is a deficient measure of an economy’s welfare for a number of reasons, for one its primary function is to measure a country’s economic activity, which instantly makes it unsuitable for the more qualitative indicator of economic welfare. Moreover, economic welfare, amongst other components, composes of a society’s level of happiness. GDP can provide an indication of such levels, however is not a sufficient measure. Furthermore, GDP does not reflect the distribution of income within a society; a figure representing overall growth in a economy may only apply to a minority of the population, but this is not conveyed.
It is argued that GDP is a deficient measure of an economy’s welfare as it was primarily designed to be ‘a key measure of a country’s economic activity’ (Landefeld 2010). GDP excludes vital components of the economy such as non-market products, intermediate goods
(it only takes into account the value of final products), illegal goods, and the cost of pollution and resource depletion. In this sense, ‘GDP ignores changes in the natural, social, and human components of community capital on which the community relies for continued existence and
well-being’
Explain your answer stating clearly why economists care about GDP.
Tia Patel
1120 words
GDP has been the long-established measure of a country’s economic progress. It is ‘an estimate of market throughput, adding together the value of all final goods and services that are produced and traded for money within a given period of time’ (Costanza, Hart, Posner and
Talberth 2009: 3). Whilst it was designed to measure a country’s economic activity, it is often considered a suitable reflection of economic welfare. Economic welfare is the quality of living standards and level of prosperity in an economy, and therefore may require different considerations to that of a country’s economic output. It is argued that GDP is a deficient measure of an economy’s welfare for a number of reasons, for one its primary function is to measure a country’s economic activity, which instantly makes it unsuitable for the more qualitative indicator of economic welfare. Moreover, economic welfare, amongst other components, composes of a society’s level of happiness. GDP can provide an indication of such levels, however is not a sufficient measure. Furthermore, GDP does not reflect the distribution of income within a society; a figure representing overall growth in a economy may only apply to a minority of the population, but this is not conveyed.
It is argued that GDP is a deficient measure of an economy’s welfare as it was primarily designed to be ‘a key measure of a country’s economic activity’ (Landefeld 2010). GDP excludes vital components of the economy such as non-market products, intermediate goods
(it only takes into account the value of final products), illegal goods, and the cost of pollution and resource depletion. In this sense, ‘GDP ignores changes in the natural, social, and human components of community capital on which the community relies for continued existence and
well-being’