Question

Gross Domestic Product is often used as a measure of economic well-being. Do you think this is a good measure? Why or why not? What would you use as a measure instead or how would you revise the definition of GDP to make a better measure of well-being?

Answer 1

I dont think it is a very good measure of economic well being because it misses out on 2 important activities while calculating GDP.

First is value of household services provided in families and second is environmental well being or damage done.

There is no point increasing output if there is serious damage done to the environment during the production process.

This value of quality of environment needs to be calculated and incorporated well into the calculation of GDP to compute well being of society.

Thus, the GDP can be revised by incorporating value of household services along with environmental quality into calculation.