Roadmap for Answer Writing:
- Introduction:
- Define GDP and its significance in measuring economic activity.
- Highlight GDP’s widespread use as a primary indicator for comparing well-being across countries.
- Advantages of GDP:
- Explain how GDP provides information on economic size and performance.
- Discuss how GDP growth is often linked to economic health and development.
- Limitations of Using GDP:
- Economic Inequality:
- Fact: GDP does not reveal economic inequality within countries.
- Source: World Inequality Report, 2022.
- Negative Externalities:
- Fact: GDP does not account for social and environmental costs of economic growth.
- Source: World Bank, Environmental and Social Framework.
- Unaccounted Unpaid Work:
- Fact: GDP overlooks unpaid work like caregiving and volunteering.
- Source: UNDP Human Development Report.
- Intangibles:
- Fact: GDP does not measure intangibles like leisure and quality of life.
- Source: OECD Better Life Index.
- Economic Inequality:
- Alternative Indices to GDP:
- Discuss alternative measures like the Human Development Index (HDI), Human Poverty Index (HPI), Gross National Happiness Index (GNH), and Green GDP.
- Explain how these indices address the limitations of GDP in measuring well-being.
- Conclusion:
- Summarize the limitations of using GDP as the primary indicator for comparing well-being among countries.
- Emphasize the importance of supplementing GDP with alternative indicators for a more comprehensive understanding of well-being.
Model Answer
Limitations of Using GDP as the Primary Indicator for Comparing Well-Being Among Countries
Economic Inequality
Negative Externalities
Unaccounted Unpaid Work
Intangibles
GDP, while informative about economic performance, inadequately represents the holistic well-being of populations. To mitigate these limitations, economists have proposed alternative indices such as the Human Development Index (HDI), Human Poverty Index (HPI), Gross National Happiness Index (GNH), and Green GDP. These measures offer a more comprehensive view of well-being and societal progress, aiding policymakers in making informed decisions.
By supplementing GDP with these alternative indicators, policymakers can better grasp the overall welfare and quality of life within a country, fostering more inclusive and holistic development strategies.
This discussion outlines the deficiencies of relying solely on GDP as a gauge of well-being among countries, integrating data from credible sources to provide a comprehensive perspective on the topic.