Check it out, it is an interesting topic because it view GDP in a different way that we "normally" do.
The author said Gross Domestic Product (GDP) ignores the value of natural ecosystems -- an essential component of wealth. Aquifers, ocean fisheries, tropical forests, estuaries and the atmosphere, should but are not used to estimate nations' wealth.
In this article, the author focus on "GDP", which should be viewed as "national wealth." In fact, GDP does not count the effect of production on environment or include natural capital. "Nature consists of degradable resources", it is neither fixed nor indestructible factor of production. The author suggest the international community needs to routinely estimate the comprehensive wealth of nations which includes natural capital.
Personally, I like this article because it mention about GDP with natural capital, a factor that we often neglect to account in GDP. Having it in GDP helps us know about not only the comprehensive production of countries but also the effect of production on environment.
I also came across this article and thought it was very interesting. A lot of people misinterpret what GDP actually measures, and it clearly is not a perfect indicator of an economy. I also would like to add that along with natural ecosystems, informal, or "underground" economies are left out of GDP, which play a big role in the economies of Latin America and many other developing countries.
ReplyDeleteIn this article, I do found some interesting ideas. However, after all, I believe, although misleading conclusion could be caused by the estimation of GPA, yet, it is also a misleading summing-up that GPA is a total misleading measure of wealth. Also, I think it might not be a very strong evidence of citing prior economists’ theory (like citing the theory of Adam Smith), since economics is evolving as well as the world is developing.
ReplyDeleteAlso, although GDP is not a perfect measure of wealth, it does reflect important information which helps economists understand the situation of a country’s economy. Further, as a matter of fact, there is not existing a perfect measure that can explain all issues related to a country’s wealth degree. This also explains why economists developed so many theories or economic tools to weigh the economy.
The article though provide concrete evidences about the misleading measure of economy's growth but I would like to add something to the discussion.
ReplyDeleteGDP growth in Bangldesh and China doesn't differ by a huge percentage as is doesn't between India and China. Does this mean that all three countries are growing at the same rate? Obviously not. China is growing rapidly. The scale which we use to measure quantities must be same for the whole world so that looking at the data we can say which economy is growing, which people are enjoying better standard of living.
This must be analogous to temperature scale for example. 40 F must feel the same cold everywhere around the world. A GDP growth of 6% must mean equal increase in country's well being.