Premium Essay

Is Robert Kennedy Right to Believe That “Gdp Is a Deficient Measure of an Economy’s Welfare”?

In: Social Issues

Submitted By gseabrook
Words 1222
Pages 5
Gross Domestic Product (GDP) is defined as the market value for final goods and services produced in an economy over a certain period. There are three main approaches to GDP: production, expenditure and income. Although there are many components that make up these three categories, the basic principle according to national accounting is that Production=Expenditure=Income.
GDP is used very regularly when talking about an economy’s wellbeing, it is useful for seeing if an economy is expanding or contracting and if so at what rate.
Although GDP can be very useful, there are certain factors that it overlooks which are important. I am going to discus whether or not GDP is still a useful and reliable measure of the economy’s welfare.

Why is GDP used so much?
Although GDP may not be the only important figure giving all relevant information about an economy, it is certainly one useful tool in seeing the value of goods and services produced. Economic growth is defined as the increase in market value of goods and services produced in an economy over time. As GDP measures exactly this value, it makes perfect sense that it is used to measure economic growth. GDP is often converted into a single currency (often US dollars) to allow comparison between different economies. Real GDP is also adjusted for inflation so that a change in the price of goods does not give an inaccurate picture of the true growth of the economy. When interpreted well, the real GDP can be used to compare economies, and show us whether a given economy is expanding or contracting, and by what rate it is doing so.
Although GDP is not a measure directly of welfare (level of prosperity and living standards of either an individual or a group of persons), it can be considered as an aspect of welfare as it measures the production of goods and services in an economy. Therefore a higher GDP,…...

Similar Documents

Free Essay

Gdp Malaysia

...very rapidly. According to the United Nations, majority of the migrants are come from Asia. Malaysia has hosted more than one million of foreign immigrants, mostly from Indonesia, Bangladesh, Thailand, Myanmar and Philippines while Japan is home for immigrants from Vietnam, China and Myanmar. On the other hand, South Africa has many refugees and asylum seekers residing in it. The existence of immigrants would have played a vital role in the economy. They have contributed quite a large portion to the Gross Domestic Product (GDP). We are now going to analyze on the economic condition of Japan which is a developed country, Malaysia as a developing country, and South Africa as an undeveloped country. Analysis on immigrants’ contribution on the economic condition will be done. 2.0 Japan 2.1 Gross Domestic Product (GDP) from 2000 to 2008 Please refer to Attachment 1.0. It is a table of Gross Domestic Product of Japan since 2000 to 2008. The GDP of Japan shows increase since year 2000 to 2007. However, it suddenly declined 2.74% at year 2008. Reasons will be explained in detail in 2.4 Analysis on Data. 2.2 Number of Immigrants, Unemployment and Crime Incidents As shown in Attachment 1.1, during year 2000 to 2007, the numbers of immigrants keep increasing. However, the unemployment rates keep decreasing. 2.3 Illegal Immigrants in Japan Japan has a population of 127,433,494 as on July 2007 estimate and the news stated that approximately 10,000 illegal......

Words: 5898 - Pages: 24

Premium Essay

Why Gdp Is Not a Perfect Measure of Economic Well Being of a Nation.

...Explain why GDP is not a perfect measure of economic well being of a nation. By definition the GDP (Gross Domestic Product) is a measure of the income and expenditures of an economy. Also, it can be defined as the total market value of all final goods and services produced within a country in a given period of time. Base on GDP definition and base on many economist points of view regarding to the definition of well being. I understand that GDP is not a perfect measure of economic well being of a nation for many reasons: 1. The gross domestic product (GDP) is not a sufficient measure because it fails to capture important ingredients of prosperity, such as health, personal freedom, and security. 2. GDP excludes the value of leisure:  Leisure is an economic good. All other things being equal, more leisure is better than less leisure. But all other things are not likely to be equal when it comes to consuming leisure. Consuming more leisure means supplying less work effort. And that means producing less GDP. If everyone decided to work 10% fewer hours, GDP would fall. But that would not mean that people were worse off. In fact, their choice of more leisure would suggest they prefer the extra leisure to the goods and services they give up by consuming it. Consequently, a reduction in GDP would be accompanied by an increase in satisfaction, not a reduction. 3. GDP excludes the value of non-market activities, even though these activities are productive and......

Words: 628 - Pages: 3

Free Essay

Welfare Reform

...Work Activation Programs to Reform Welfare Tammy Wooten ITT Technical Institute Work Activation Programs to Reform Welfare In August of 1996, President Bill Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) (Welfare Reform section, 2010). Before that, federal welfare was an open-ended entitlement that encouraged long-term dependency (See Chart 2). It neither reduced poverty nor helped the poor become self-sufficient. It did however, encourage out-of-wedlock births and weaken the work ethic. The pathologies it engendered were passed from generation to generation. This reform was a step in the right direction, however, much more needs to be done. The next step should be to transfer full responsibility for funding and administering welfare programs to the states. Each state would then have the freedom to innovate their own low-income programs and would cause them to have stronger incentives to reduce taxpayer costs and maximize work requirements (Replacing Welfare with Private Charity section, 2010). The federal government funds an array of subsidy programs for low-income Americans. The two programs that are of the greatest concern to me are food stamps and Medicaid. When most people think of “welfare”, they are usually thinking of the joint federal-state cash assistance program, better known by its most recent name, as TANF or Temporary Assistance for Needy Families (Overview section, 2010). According to...

Words: 2490 - Pages: 10

Free Essay

Hdi and Gdp

...Product (GDP for short) has been used as a method of evaluating the human well-being for a long time all over the world. But with the introduction of Human Development Report in 1990, the Human Development Index (HDI) has attracted great attention of policy and academic circles, as well as broader community around the world. This appearance also helps raising the question: Is GDP still an adequate measure of societal well-being and should it be replaced by HDI? This question has attracted a lot of people and cause a controversy among them. So let’s have a look at that matter of argument. As you know the standard well-being varies from time to time, from place to place so we should at first understand: What is well-being? In general, well-being is the pursuit and fulfillment of personal aspirations and the development and exercise of human capabilities, within a context of mutual recognition, equality and interdependence. To make it more detailed here are some key criteria that we should include to valuate well-being: Material living standards (income, consumption and wealth); Health; Education; Personal activities including work; Political voice and governance; Social connections and relationships; Environment (present and future conditions); and Insecurity, of an economic as well as a physical nature. That is the overview of well-being. What about the effectiveness of GDP in measuring societal well-being? To answer this question we should have a quick look at: How GDP......

Words: 1727 - Pages: 7

Premium Essay

Gdp vs. Hdi- the Adequate Measure of Societal Well - Being.

...GDP vs. HDI- the adequate measure of societal well-being Introduction “We need a new economic paradigm that recognizes the parity between the three pillars of sustainable development. Social, economic and environmental well-being are indivisible. Together they define gross global happiness,” said the Secretary-General Ban Ki-moon in the high-level meeting – “Happiness and Well-being: Defining a New Economic Paradigm” at UN Headquarters in New York on the 2sd, April, 2012. These words remind us of the fact that not just economic well-being but social well-being (as much as enviromental well-being) is also an essential factor in rating a nation’s happiness, as well as that of a man. Therefore, the important thing to do now is to find a way to measure social well–being, and should that be Gross Domestic Product (as some country has done)? However, in actual fact, there are people who believe that GDP is inadequate and it should be replaced by the Human Development Index (HDI). We find this opinion very convincing. The United States Institue of Peace (USIP) defined “social well-being” as “an end state in which basic human needs are met and people are able to coexist peacefully in communities with opportunities for advancement.” But what is an “end state”? And we can base on which factors to evaluate it? To answer these questions, the USIP also pointed out the 4 neccesery conditions to achive this “end state”, which were: Access To and Delivery of Basic Needs Services,......

Words: 1767 - Pages: 8

Premium Essay


...Welfare The welfare of the people in America is put in the hands of the political leaders and public administrators of the government. These political leaders and public administrators are put into office to facilitate bills and propose solutions that will be in the best interest of the public’s welfare. When the topic of welfare is discussed the first though that comes to mind, is giving poor and needy people money to help them get out of a financial bind and temporary unemployment. While this is a true statement, the welfare of all citizens is a concern dealt with by our government. The welfare of the middle and upper class is not as prevalent because the fact that people receive financial support for free overshadows the fact that there are other policies to assist all people in America. There are several preconceived notions about the welfare program in America that leave the subject open for discussion. If one were to look at the various blogs on the subject of Welfare, the understanding of the general public will be determined. Many people argue that African Americans utilize the welfare program more than any other race. They assume that all people on welfare are scamming the government for free housing and free money for groceries. The majority believe that tax payers are losing out on this program because they are supporting the poverty stricken in our country with tax dollars that they do not have to pay. Welfare is felt to be a reason that the government raises......

Words: 1984 - Pages: 8

Free Essay

Alternate Measure for Economic Performance

...Business Sustainability Alternate measure for Economic Performance Jayant Kumar Preface An indicator is something that helps one to understand inclusive position, the path and how far one is from the point they want to be. A good indicator gives the alert about the problem before it gets too bad and helps to recognize things to do in-order to fix it. Indicators of sustainable community point to areas where the links between the economy, environment and society are weak. It allows one to identify the problematic area and helps the ways to fix restore it. GDP and profit currently dominate society’s discussions of economic performance. They shape the way people think about the economy and business, affecting their behavior and the actual outcomes of economic activity. So what is economic success? Going beyond GDP and profit will explore what we mean by economic success, the role that GDP and profit play in this, and the potential for broader measures of economic success to help us balance our economic priorities, our social goals, and the constraints imposed on us by the natural environment we live in. 1 Current measure of Performance Right measurement is a powerful instrument for social progress; wrong or imprecise measurement a source of hazard and even havoc. Two main measure of economic success are currently are GDP at the national level and profit at the Organizational level. GDP is the value added measure that is broader than Profit. GDP and profit are......

Words: 1200 - Pages: 5

Premium Essay

The Advent of Social Progress Index to Measure Competitiveness

...GADREY Enrico GIOVANNINI Roger GUESNERIE James J. HECKMAN Geoffrey HEAL Claude HENRY Daniel KAHNEMAN Alan B. KRUEGER Andrew J. OSWALD Robert D. PUTNAM Nick STERN Cass SUNSTEIN Philippe WEIL University of Delhi StanfordUniversity Warden of Nuffield College School of Economics, Insee, Princeton University UNPD Université Paris 5 University of Massachussets Université Lille OECD Collège de France Chicago University Columbia University Sciences-Po/Columbia University Princeton University Princeton University University of Warwick Harvard University London School of Economics University of Chicago Sciences Po Rapporteurs Jean-Etienne CHAPRON General Rapporteur Didier BLANCHET Jacques LE CACHEUX Marco MIRA D’ERCOLE Pierre-Alain PIONNIER Laurence RIOUX Paul SCHREYER Xavier TIMBEAU Vincent MARCUS INSEE INSEE OFCE OCDE INSEE INSEE/CREST OCDE OFCE INSEE Table of contents EXECUTIVE SUMMARY I. SHORT NARRATIVE ON THE CONTENT OF THE REPORT Chapter 1: Classical GDP Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Chapter 2: Quality of Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Chapter 3: Sustainable Development and Environment . . . . . . . . . . . . . . . . . . . . . 61 II. SUBSTANTIAL ARGUMENTS PRESENTED IN THE REPORT Chapter 1: Classical GDP Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Chapter 2: Quality of Life . . . . . . . .......

Words: 147885 - Pages: 592

Premium Essay

Is Gdp Is a Deficient Measure of an Economy's Welfare

...GDP is the market value of final goods and services produced in an economy over a certain period. National Income Accounting was developed in the 1930’s to be a simple and understandable way to aggregate all monetary activity in an economy to measure the effects of the Great Depression. Economic welfare (well-being) however is not solely about how much money there is in an economy. Constanza (2009) in his article defined economic well-being as “the degree to which society’s goals (to sustainably provide basic human needs for food, shelter, freedom, opportunities, etc) are met”. In the long term as well as the short. GDP encompasses all economic activity, from which we gain important values such as economic growth and GDP per capita. Nearly every country in the world collects this data and macroeconomists and Governments use this data in their analysis and decision making on policy. Growth is high up on the list of priorities for most economies as it usually indicates increasing GDP per capita as well as an expanding economy. This is beneficial in providing more goods to the economy for investment, increasing material standards of living and also to provide more jobs and wealth. The principle of National Income Accounting is that Production = Income = Expenditure, so the value for GDP also gives economists values for this data as well. All this makes the figure of GDP very useful to economists. The data shows the UK since 1955 has increased its GDP (not adjusted for......

Words: 1254 - Pages: 6

Free Essay

Welfare Rights may be subject to a two year newly arrived resident’s waiting period for the following payments and concession cards: • Newstart Allowance • Austudy • Sickness Allowance • Pensioner Education Supplement • Youth Allowance • Mobility Allowance • Carer Payment • Commonwealth Seniors Health Card • Special Benefit • Health Care Card If you arrived in Australia or were granted permanent residence (whichever is the later) before 4 March 1997, you will not have to serve a two year waiting period. If you are an Australian citizen or you arrived in Australia before 4 March 1997 (or before 1 February 2000 if you are a New Zealand citizen - see below), and Centrelink decides that you have a newly arrived resident’s waiting period, contact a Welfare Rights Centre/Advocate for advice. □ Who is exempt from the newly arrived resident's two year waiting period? The newly arrived resident's waiting period may not apply to you if you: • hold or previously held a permanent refugee visa or a specified subclass of special humanitarian visa; • are a “family member”* of a holder or former holder of a permanent refugee visa or a specified subclass of special humanitarian visa; • were a “family member”* of a former holder of a permanent refugee visa or a specified subclass of special humanitarian visa at the time the former refugee or humanitarian migrant arrived in Australia; • are an Australian citizen; • are a “family member”* of an Australian citizen or of a permanent......

Words: 2410 - Pages: 10

Premium Essay

Civil Rights

...Civil rights Movement Truman Harry Truman is not a name usually associated with America's Civil Rights movement if only because the main 'points' happened after his presidency - Montgomery, Little Rock, Birmingham, the careers of Martin Luther Kingand Stokely Carmichael. However, some very important civil rights issues were covered in his presidency. Truman’s ancestors had owned slaves. His first recollection of African Americans was a household servants within his family - and he did not come from a prosperous family. While he was dating his future wife Bess, she claimed that he told her that he felt that one person was as good as any other as long as they were not black. He also criticised the Chinese in America, the Jews - to whom he referred to as "Kikes" and the Italians in America who he called "wops". Hence, Truman’s background produced what one would have expected and the young Truman would have had the same views as most other youths in Independence. When he got involved in politics at an early age, he did what any aspiring politician did in the South, he paid $10 to join the KKK. Public office changed Truman. Why? Did he feel that America could not claim to be the democratic  capital of the world while African Americans were treated thus? Or were his motives political? The African American population was big enough to have some political clout. Was he out to fish for their votes with his adoption of the civil rights cause? Truman and civil rights......

Words: 11349 - Pages: 46

Premium Essay

Gdp of a Country

...Study Questions 1 (GDP) Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Gross domestic product is a measure of the total value of all A) consumer income in an economy over a period of time. B) capital accumulation in an economy over a period of time. C) sales in an economy over a period of time. D) final goods and services produced in an economy over a period of time. 1) 2) If Nike, an American corporation, produces sneakers in Thailand this would A) add to neither U.S. GDP nor Thailand's GDP. B) add to Thailand's GDP but not to U.S. GDP. C) count as part of U.S. GDP since it is a U.S. corporation. D) count for both Thailand's GDP and U.S. GDP. 2) 3) In 2009, Ozzie purchased a 1999 Ford Escort from his neighbor for his son, purchased a 1999 "one owner" Camry from Larchmont Toyota for his wife, bought a 2009 new Ford for himself, and sold his 1993 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2009? A) only the purchase of the Ford B) the purchase of the Ford and the Caravan C) all four transactions D) all three purchases but not the sale 3) 4) Intermediate goods are excluded from GDP because A) they represent goods that have never been purchased so they cannot be counted. B) their inclusion would understate GDP C) their inclusion would involve double counting. D) the premise of the......

Words: 2227 - Pages: 9

Premium Essay

Measure of Economic Welfare (Mew):

...MEASURE OF ECONOMIC WELFARE (MEW): HISTORICAL DEVELOPMENT OF MEW: In 1960’s, there started a widespread interrogation on the standard of living, traditional ethics and customs, and the ‘consumption oriented society’ in particular. In this general phase of rebellion allied with ancient and eroded institutions, morals and customs, and economic growth as evaluated by GDP became the center of objection and denial. Some critics claimed that economic growth may no longer be considered necessary as it does not enhance welfare. In response to these opinions, in 1972 William Nordhaus and James Tobin formulated Measure of Economic Welfare (MEW). Their main objective was not to form a welfare measure but an instrument to examine the extent of correlation between economic progress and well-being. According to the originators of this measure, GDP is a measure of production only and does not account for consumption. The ultimate target of economic affairs is consumption. So this measure has been formulated to crack down the inconsistencies associated with GDP and welfare. COMPOSITION OF MEW: Initially, the creators of MEW had to reorganize the components of GNP as outlays on consumption, investment and intermediates and its only consumption that boosts and influences welfare. Since the amount of output devoted in the renovation and replacement of capital goods do not adds up to the welfare, so it is subtracted from GNP giving NNP. Moreover, there are a lot of long-lasting goods, which...

Words: 821 - Pages: 4

Premium Essay

Flaws of Gdp

...Flaws of GDP As a measure of economic development, GDP is a useful but fundamentally flawed statistic. Some examples of the deficiencies of GDP as a measure of economic development are detailed below. Imputations When computing GDP, goods and services sold in the marketplace are valued at market prices. However, some goods are not sold in the marketplace, and these do not have market prices. Thus the value of these items has to be estimated, or imputed. This is especially true of housing. When people rent housing, their rent is counted as part of GDP, as it is both income (for the landlord) and expenditure (on the part of the tenant). For people who live in their own homes, an estimated market value for the rent that would be paid for the property if they were renting it is computed and a part of GDP. However, there are limits to imputations. Whilst the value of housing services are imputed, the value of other durable goods, e.g. the cost, or ‘rent paid’ towards running cars, fridges and other durable goods are not accounted for in GDP. Additionally, if outputs are produced which do not make it to the marketplace, such as meals cooked at home, these are not included in GDP either. The fact that these items are not included means that GDP may understate economic well-being. For example, a meal produced at home is no different from meals cooked in a restaurant, but the latter is included in GDP whilst the former is not. Therefore GDP is deficient at showing the...

Words: 724 - Pages: 3

Premium Essay

U.S. Military Spending and Its Impact on the Economy’s Gdp

...U.S. Military Spending and its impact on the Economy’s GDP Matthew Magana Abstract This paper examines whether increases in military spending have a positive or negative impact on the U.S. Gross Domestic Product (GDP). The paper focuses on the three North American economies: Canada, Mexico and the United States as models to develop a case. It will also illustrate the utilization of multiple economic tools to produce variable outcomes to analyze the full spectrum of economics. It will also discuss the multiple statistical models such as Granger causality and Vector autoregression and the asymmetric results produced. Increased U.S. Military Spending and its impact on the Economy Given the long-accepted, theoretical direct relationship between investment and economic growth, if defense spending has a negative impact on investment, then it would seem reasonable that defense spending would have an adverse impact on economic growth. This was exactly the findings of two studies published in the seventies, zymanski (1973) and Lee (1973). Some studies attribute the negative effect of defense spending on economic growth to reduced investment. Another study argues that defense spending restricts export growth and economic growth because military expenditures compete for the same resources used in the production of exports. Which may also be a understood trade off for military spending vs. export and economic growth. However, other studies were unable to find any......

Words: 1973 - Pages: 8

Annie Wersching | Headsets | I Still See You