How Effective Is Gdp Per Capita as a Measure of Economic Well-Being Essay Example
How effective is GDP per capita as a measure of economic well-being?
Gross Domestic Product (GDP) is one of the primary measures used to gauge the state of a nation’s economy. It is a representation of all the goods and services produced by that nation over a specific time period. Normally GDP is compared on a quarterly or annual basis. For example if a nations GDP has risen by 2% in a period of time, then it is thought that that nation’s economy has grown by 2%. However, a recession is also identified if GDP drops for 2 consecutive quarters.
As a measure of economic well-being, GDP should not be the only measure taken into account. While GDP is a good measure of the size of the actual economy, it does not accurately measure the well-being of the people of that nation. GDP includes many items that do not help well-being: depreciation, income going to foreigners, and regrettables like security expenditure, Healthcare and Insurance. These items are called regrettables because if people had a choice then this would not be how they would want to spend their money.
Using GDP as a measure of well-being has many issues which may affect its accuracy. In this assignment I will explain some of the reasons against using GDP to measure economic well-being and offer some alternatives which may give a more accurate picture of economic well-being within a nation.
Issues which effect GDP
While GDP can be used to measure the state of the economy of a nation, there are a number of factors which must be taking into account as to why it does not give a true picture of the well-being of that nation.
GDP does not take into account or place any value to leisure. A workforce that spends more time working will have a higher GDP but this may not necessarily lead to a great well-being for that workforce. The non-paid sector is another area not taken into account when calculating GDP. Areas such as the volunteer sector, black market and household chores are not included.
Gross Domestic Product (GDP) is one of the primary measures used to gauge the state of a nation’s economy. It is a representation of all the goods and services produced by that nation over a specific time period. Normally GDP is compared on a quarterly or annual basis. For example if a nations GDP has risen by 2% in a period of time, then it is thought that that nation’s economy has grown by 2%. However, a recession is also identified if GDP drops for 2 consecutive quarters.
As a measure of economic well-being, GDP should not be the only measure taken into account. While GDP is a good measure of the size of the actual economy, it does not accurately measure the well-being of the people of that nation. GDP includes many items that do not help well-being: depreciation, income going to foreigners, and regrettables like security expenditure, Healthcare and Insurance. These items are called regrettables because if people had a choice then this would not be how they would want to spend their money.
Using GDP as a measure of well-being has many issues which may affect its accuracy. In this assignment I will explain some of the reasons against using GDP to measure economic well-being and offer some alternatives which may give a more accurate picture of economic well-being within a nation.
Issues which effect GDP
While GDP can be used to measure the state of the economy of a nation, there are a number of factors which must be taking into account as to why it does not give a true picture of the well-being of that nation.
GDP does not take into account or place any value to leisure. A workforce that spends more time working will have a higher GDP but this may not necessarily lead to a great well-being for that workforce. The non-paid sector is another area not taken into account when calculating GDP. Areas such as the volunteer sector, black market and household chores are not included.