Date of Award
MA - Economics
Jan Kregel, Ph.D.
The most widely used measurement of economies around the world is the gross domestic product (GDP). There has been much study and reasoning that has gone into the conceptual and statistical bases of this indicator and there are even international standards for how it should be calculated. The monetary valuation of goods and services has fabricated a relatively manageable way for us to sum up quantities of different nature and for calculating the economic progress of a nation. The GDP indicator is seen as being another way for measuring money in order to present economic performances and living standards, giving it an extremely important role in our societies. The GDP indicator is supposed to capture all final goods and services which are collectively consumed by households, firms, and a government within an economy. Therefore, this GDP indicator is observed by many as a way to capture all economic activity into a single number that gives an idea of how an economy is doing in a particular moment, and it is often treated as if it were also a measure of how well-off society is. But commingling the notion of economic progress with societal well-being can be misleading and can cause inappropriate and sometimes flawed policy decisions to be enacted. It is known that GDP does not measure every aspect of an economy. This is because GDP focuses mainly on the measurements of market production. An economy’s well-being is more complicated than simply measuring the monetary valuation of goods and services. Society is more complex and multi-dimensional. Meaning that there are aspects in our society that cannot be measured by merely placing prices on them. In that, there are goods and services which are not or cannot be measured in prices, or the consumption of various products and services can have effects on society in ways that differ from their consumption value. In addition to these issues, there are also the environmental aspects of production and consumption which are not captured in the GDP indicator or prices.
The GDP indicator possesses deficiencies that limit it from being an indicator of well-being. In order to measure the well-being of the economy, there need to be multi-dimensional indicators that go beyond what GDP is providing. GDP should be one of the indicators for the measurement of well-being, but it should not be the sole or principal indicator. There need to be indicators that can measure the quality of health, education, infrastructure, civil society, equality, governance, environment, etc. along with GDP. This paper will briefly analyze GDP and various indicators that have been utilized to measure well-being around the world and attempt to recognize any possible application of well-being measurement within the national context.
Nguyen, Thien Jason MA, "Measuring the Well-Being of Economies Beyond Gross Domestic Product" (2021). Theses - Graduate Programs in Economic Theory and Policy. 35.