Gross Domestic Product: Measure of Human Well-Being

Gross Domestic Product (GDP) has long been used to assess the welfare and prosperity of a country. However, its inadequacies in capturing a society’s well-being have derived growing criticism. The exclusive reliance on GDP as a measure of prosperity is problematic because it fails to account for important factors essential to understanding actual economic development and the well-being of society.

GDP is frequently criticized for measuring only economic activity and ignoring other aspects that affect social well-being. For instance, the distribution of wealth, social equity, and environmental sustainability are not considered by GDP. As a result, a nation with a high GDP may still have high degrees of inequality, low living standards, and a polluted environment. Additionally, GDP does not consider unpaid domestic labor, such as housework and child care, which is primarily done by women and significantly impacts society. Moreover, GDP excludes non-monetary activities such as housework, volunteerism, and the care of young children and the elderly and only gauges monetized economic activities. These activities contribute to the well-being of society but are not considered in GDP calculations.

One strategy that may be employed to improve GDP is adopting a more comprehensive measure of well-being, such as the Genuine Progress Index (GPI). The GPI incorporates elements unrelated to GDP, such as societal welfare, environmental sustainability, and income distribution prosperity (Lemoine, 2022). Another alternative is changing the emphasis of economic policies from GDP growth to social and environmental sustainability. Rethinking our approach to economic development and emphasizing inclusive and sustainable growth over merely growing the economy would be required to implement this strategy.

In my opinion, the limitations of GDP as a measure of prosperity are clear. Although GDP growth is a significant indicator of economic health, it does not always equate to increased well-being for most people. A society’s overall health and prosperity are greatly impacted by social and environmental variables, which the GDP disregards (Lemoine, 2022). In order to guarantee that economic policies align with the objective of creating sustainable, equitable, and prosperous societies, a more thorough measure of well-being, such as the GPI, is required.

One article that critiques GDP is “GDP Is Not a Measure of Human Well-Being” by Kapoor and Debroy. It argues that the GDP is an insufficient measure of prosperity because it excludes non-market activities such as household maintenance and child-rearing (Kapoor & Debroy, 2019). In order to improve measures of social and environmental well-being, the piece contends that people should take non-market activities into account. Another article, “Is it Time to Stop Our Fixation with GDP and Growth?” by Richard Partington (2019), argues that GDP rewards and promotes environmentally destructive behavior. In regards to accounting for social equity and environmental sustainability, the article recommends that lawmakers use “green GDP” or “inclusive wealth” measures (Partington, 2019). These measures would consider the health effects of pollution, the depletion of natural resources, and the value of societal goods such as education and healthcare. The articles have helped me to understand how we can improve GDP measurement through non-monetary factors and the use of GPI, which accounts for externalities.

In conclusion, GDP is an inaccurate indicator of a nation’s prosperity because it overlooks several elements necessary for a healthy and prosperous society. Additionally, alternative metrics, such as the GPI, offer a more thorough understanding of a nation’s well-being. People must create alternative metrics that account for income distribution, environmental sustainability, and social welfare in addition to GDP to measure prosperity in its truest sense.

References

Kapoor, A., & Debroy, B. (2019). GDP is not a measure of human well-being. Harvard Business Review. Web.

Lemoine, J. (2022). The key to national progress is no longer GDP growth. It’s prosperity. Atlantic Council. Web.

Partington, R. (2019). Is it time to end our fixation with GDP and growth? The Guardian. Web.