Do read this article about using GDP as a measure. Is it a good indication of our well being or prove to worsen? Thanks Dominic 09A12 for this article!
GDP may be a useful and convenient indicator of economic growth.However, it does contain certain limitations. For instance, Bhutan's GDP per capita is $5312 while China's GDP per capita is $6100, which is rather comparable to that of Bhutan. However, China's economic growth is much more recognised in the world. The low value of its GDP per capita may partly due to its large population base. This in turn makes GDP per capita a misleading indicator in measuring economic growth.
GDP should also not be used to measure happiness or welfare level in society. Taking Bhutan as the example again, whose GDP per capita is $5312 while US'S GDP per capita is as high as $47440. However, that does not mean that US citizens are 10 times happier or enjoying more welfare than the people in Bhutan. Indeed, people may even choose to stay in Bhutan due to the less stressful environment and also the low pollution level. -Liu Shuang
I agree with Liu Shuang that GDP is unable to measure a society's well-being.
While economic growth is important when we discuss living standards, so is well-being. Personally, I think they are very much linked -generally citizens in countries with higher GDP per capita would likely be happier. If we examine the Satisfaction with Life Index (http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index), we see that the happiest countries tend to be richer, while the least happy tend to be very poor. Of course, this is just a subjective index, and its very hard to determine a 'correct' way to measure happiness.
Perhaps in the future, we might have a way to value and determine well-being as accurately as we do economic growth.
I have found some alternative means to measure welfare. :) • Human Development Index (HDI) • Measure of Economic Welfare (MEW) • Index of Sustainable Economic Welfare (ISEW)
THIS IS WRITEEN BY KEN (BLOGGER HATES HIM SO HE CAN'T POST)
Despite all the criticism to GDP per Capita as an indicator of society's well-being, i believe that GDP per capita still provides us with a clear indication of society's development, at least at the initial stage of development of the society. All societies start out as a nascent economy, slowly progressing to newly industrialised and finally developed economy, along with the developing economy comes economic activities which can be measured through GDP per capita, therefore at the primitive stage of development of an economy, GDP per capita shows us how fast that particular economy is growing. As the economy matures, and become developed, other indicators such as life expectancy, literacy rate contribute to another indicator known as Human Development Index (HDI), however, GDP per capita continues to play a part in the computation of HDI. My point is : despite the flaws of gdp as a stand alone indicator, it is still important, as in contributes to a more holistic indicator HDI, which measures society welfare (: Rebuttals: While a rising GDP may not mean that working Americans are getting happier, or perhaps becoming even sadder due to the stress they face, but "a rising tide lifts all boats", a rising GDP means that taxes collected can go to help the poorer americans, thus improving the life of the americans that need it most (:
Valid comments about using GDP and in fact I agre with Liu Shuang that GDP figures tend to be more crucial for countries at a developing stage due to the poverty cycle and once countries are able to stabilise the figures, non monetary indicators comes into place to assess standard of living. Do also take note the way and components of calculating GDP as part of evaluation.
I think majority of the countries use GDP to measure the growth rate since it is the least time-consuming and the cheapest method.
In fact, the UN has created a better index, the HDI(Human development index), to more comprehensively measure the SOL. there are a lot more methods to measure the development of a country. Perhaps most countries stick to GDP as their population understands it better.
I agree with the comments above, but I feel it is too emotional. everything has its advantages and disadvantages, we have to admit:)
Haha, this discussion is quite interesting. Macro econ deals mainly with the overall economic performance of nations. GDP, as a useful macro economic tool, serves to reflect the total economic activities of a country. We have to admit that it indeed provide us with a general view of a country's environment in a relatively fast and cheap way. For instance, during the recession, the negative GDP growth rate in countries like the US actually shows us that the market there became less lively.
GDP is good tool when it is used in a correct place, just like a meter ruler may be used to measure the length of a table, but not the radius of a ping pang ball.Thinking in this way, I think using GDP to measure happiness, or even living standard, might not be appropriate. For instance, China has sustained an awesome GDP growth, even in times of recession. However, does people's living standard improved? Not obvious. In fact, unemployment in Guangdong surged a lot and spread to the rest of the country. A lot of the GDP is counted when funds are used to build things like WIND POWER Station; we may derive happiness from cheering at such investments, but what do people really benefit? Not even a lower electricity charge. But, from a bird's view, the overall productivity did improve, and is reflected in GDP.
Right now, current technology only allows us to quantify the economic growth of one's country, and the GDP index merely serves as one of the many yardsticks by which countries gauge themselves by. No one method can give a flawless rating of countries, and there are different key indicators across different indexes. For example, even if a country has a very high GDP per capita, but it ranks at the bottom of the Corruption Perceptions Index assessed by Transparency International, what does it say about the country?
There is no all-encompassing index that can quantify the different aspects of life in a society. Similar to our PBL, it is difficult to assign a value to certain events which may be intangible.
As far as it goes, GDP remains a statistically accurate way of gauging a country's economic growth, though it should be taken with a pinch of salt, as what Liu Shuang mentioned, the comparison between China and US can lead to many misleading perceptions being formed.
There's this saying that you shouldn't compete against others, but against your own self. I suppose that this is very relevant to the concept of the GDP, since some countries like Somalia seem completely devoid of chances to compete with global powerhouses like US and China can instead shift their perception and try to outdo themselves instead.
GDP is not a good measure of the country's welfare and happiness for sure. It is very hard to gauge the welfare of the society in term of GDP.In the process of pursuing economic growth, workers may forgo their leisure time to work more to increase output level and the consumers may not enjoy more consumption. Moreover, the calculating of GDP is rather inaccurate and there are many innate measurement problems. Although Human Development Index (HDI) and Measurable Economic Welfare seem to be alternative ways to measure the standard of living in the society, it is rather difficult to compute, as Desiree mentioned, it is hard to quantify every aspect of life (such as adult literacy). HDI and MEW are also flawed in terms of measurement and interpretation. Thus, GDP is just one of the ways of representing standard of living of the society and economic growth. We need to look at different measures together, instead of using merely one method to evaluate the welfare of the society.
GDP may be a useful and convenient indicator of economic growth.However, it does contain certain limitations. For instance, Bhutan's GDP per capita is $5312 while China's GDP per capita is $6100, which is rather comparable to that of Bhutan. However, China's economic growth is much more recognised in the world. The low value of its GDP per capita may partly due to its large population base. This in turn makes GDP per capita a misleading indicator in measuring economic growth.
ReplyDeleteGDP should also not be used to measure happiness or welfare level in society. Taking Bhutan as the example again, whose GDP per capita is $5312 while US'S GDP per capita is as high as $47440. However, that does not mean that US citizens are 10 times happier or enjoying more welfare than the people in Bhutan. Indeed, people may even choose to stay in Bhutan due to the less stressful environment and also the low pollution level.
-Liu Shuang
Lucas 09S52:
ReplyDeleteI agree with Liu Shuang that GDP is unable to measure a society's well-being.
While economic growth is important when we discuss living standards, so is well-being. Personally, I think they are very much linked -generally citizens in countries with higher GDP per capita would likely be happier. If we examine the Satisfaction with Life Index (http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index), we see that the happiest countries tend to be richer, while the least happy tend to be very poor. Of course, this is just a subjective index, and its very hard to determine a 'correct' way to measure happiness.
Perhaps in the future, we might have a way to value and determine well-being as accurately as we do economic growth.
I have found some alternative means to measure welfare. :)
ReplyDelete• Human Development Index (HDI)
• Measure of Economic Welfare (MEW)
• Index of Sustainable Economic Welfare (ISEW)
THIS IS WRITEEN BY KEN (BLOGGER HATES HIM SO HE CAN'T POST)
ReplyDeleteDespite all the criticism to GDP per Capita as an indicator of society's well-being, i believe that GDP per capita still provides us with a clear indication of society's development, at least at the initial stage of development of the society. All societies start out as a nascent economy, slowly progressing to newly industrialised and finally developed economy, along with the developing economy comes economic activities which can be measured through GDP per capita, therefore at the primitive stage of development of an economy, GDP per capita shows us how fast that particular economy is growing. As the economy matures, and become developed, other indicators such as life expectancy, literacy rate contribute to another indicator known as Human Development Index (HDI), however, GDP per capita continues to play a part in the computation of HDI. My point is : despite the flaws of gdp as a stand alone indicator, it is still important, as in contributes to a more holistic indicator HDI, which measures society welfare (: Rebuttals: While a rising GDP may not mean that working Americans are getting happier, or perhaps becoming even sadder due to the stress they face, but "a rising tide lifts all boats", a rising GDP means that taxes collected can go to help the poorer americans, thus improving the life of the americans that need it most (:
Valid comments about using GDP and in fact I agre with Liu Shuang that GDP figures tend to be more crucial for countries at a developing stage due to the poverty cycle and once countries are able to stabilise the figures, non monetary indicators comes into place to assess standard of living. Do also take note the way and components of calculating GDP as part of evaluation.
ReplyDeleteI think majority of the countries use GDP to measure the growth rate since it is the least time-consuming and the cheapest method.
ReplyDeleteIn fact, the UN has created a better index, the HDI(Human development index), to more comprehensively measure the SOL. there are a lot more methods to measure the development of a country. Perhaps most countries stick to GDP as their population understands it better.
I agree with the comments above, but I feel it is too emotional. everything has its advantages and disadvantages, we have to admit:)
Haha, this discussion is quite interesting. Macro econ deals mainly with the overall economic performance of nations. GDP, as a useful macro economic tool, serves to reflect the total economic activities of a country. We have to admit that it indeed provide us with a general view of a country's environment in a relatively fast and cheap way. For instance, during the recession, the negative GDP growth rate in countries like the US actually shows us that the market there became less lively.
ReplyDeleteGDP is good tool when it is used in a correct place, just like a meter ruler may be used to measure the length of a table, but not the radius of a ping pang ball.Thinking in this way, I think using GDP to measure happiness, or even living standard, might not be appropriate. For instance, China has sustained an awesome GDP growth, even in times of recession. However, does people's living standard improved? Not obvious. In fact, unemployment in Guangdong surged a lot and spread to the rest of the country. A lot of the GDP is counted when funds are used to build things like WIND POWER Station; we may derive happiness from cheering at such investments, but what do people really benefit? Not even a lower electricity charge.
But, from a bird's view, the overall productivity did improve, and is reflected in GDP.
Right now, current technology only allows us to quantify the economic growth of one's country, and the GDP index merely serves as one of the many yardsticks by which countries gauge themselves by. No one method can give a flawless rating of countries, and there are different key indicators across different indexes. For example, even if a country has a very high GDP per capita, but it ranks at the bottom of the Corruption Perceptions Index assessed by Transparency International, what does it say about the country?
ReplyDeleteThere is no all-encompassing index that can quantify the different aspects of life in a society. Similar to our PBL, it is difficult to assign a value to certain events which may be intangible.
As far as it goes, GDP remains a statistically accurate way of gauging a country's economic growth, though it should be taken with a pinch of salt, as what Liu Shuang mentioned, the comparison between China and US can lead to many misleading perceptions being formed.
There's this saying that you shouldn't compete against others, but against your own self. I suppose that this is very relevant to the concept of the GDP, since some countries like Somalia seem completely devoid of chances to compete with global powerhouses like US and China can instead shift their perception and try to outdo themselves instead.
GDP is not a good measure of the country's welfare and happiness for sure. It is very hard to gauge the welfare of the society in term of GDP.In the process of pursuing economic growth, workers may forgo their leisure time to work more to increase output level and the consumers may not enjoy more consumption. Moreover, the calculating of GDP is rather inaccurate and there are many innate measurement problems.
ReplyDeleteAlthough Human Development Index (HDI) and Measurable Economic Welfare seem to be alternative ways to measure the standard of living in the society, it is rather difficult to compute, as Desiree mentioned, it is hard to quantify every aspect of life (such as adult literacy). HDI and MEW are also flawed in terms of measurement and interpretation. Thus, GDP is just one of the ways of representing standard of living of the society and economic growth. We need to look at different measures together, instead of using merely one method to evaluate the welfare of the society.