Identify three criticisms of GDP as a measure of economic activity. Do you agree with these criticisms? Why or why not?
Criticism of the GDP:
1. Everything that can be sold and has an aggregate monetary value will increase the GDP and growth, which not necessarily means sustainable development and increased individual and collective well-being. [
The GDP positively records all forms of evil and destruction, such as increase in the number of accidents, progression of illnesses stemming from food insecurity,
pollution… (which, to be offset, requires defensive expenditures) the same way it accounts for common well-being resources (education and participation in cultural and leisure activities in a society where people are healthy, for instance).
In other words, the two societies would have the same increase in the GDP, once the GDP computes all resources as increase in GDP, regardless of their purpose. It would be necessary to suppress the GDP increase of the first hypothetical society to better assess the actual creation of wealth (the one that contributes to well-being). The same idea can be applied to expenses on repairing environmental damage caused by human activities: pollution, depletion of natural resources, which lead to decreased well-being.
2. Well-being losses caused by economic growth are not measured anywhere. Despite having no commercial value, they may have a huge value for our well-being and that of future generations.
The destruction, for instance, of the Amazon Forest is an activity that makes the world GDP increase (value of the timber harvested and the tractor to cut it down, etc.). The resulting loss of natural capital, its effects on the climate, biodiversity, and the long-term needs of future generations are not measured anywhere. In other words, the GDP does not deduct the losses of natural capital, but makes additions to account for its organized destruction.
Besides these examples in which well-being losses are not recorded, there are others in which gains – or essential contributions to well-being – are disregarded, including the following:
3. Many activities and resources that contribute to the well-being are unaccounted for, simply because they are not commercial or because they have no direct monetary production costs. ]
There are no new answers.