blem Set Assignment #1 Due Thursday, 6/14/18 at Start of Class EC2. In 1972 the
ID: 1155028 • Letter: B
Question
blem Set Assignment #1 Due Thursday, 6/14/18 at Start of Class EC2. In 1972 the small kingdom of Bhutan, in Asia, developed a measure of output that included Happiness." In class we also saw that former Senator Robert F. Kennedy criticized GDP for its inability to take into account the quality of life of a nation's citizens. In 2013, President Obama has appointed you to look into developing a new measure of the nation's overall economic well-being called the Gross Domestic Happiness Indicator (GDHI). What would you include in this new measure and how will you incorporate existing measures of GDP into the GDHI? (S Points)Explanation / Answer
ans...
The Gross Domestic Product (GDP) is a quantitative measure of the level of national income in an economy that an indicator of economic growth, but not of economic development. The GDP only gives a measure of how much economic activity has increased or reduced in an economy, but says nothing about the quality of that economic activity. Development on the other hand is a holistic approach that requires more detailing and delving into the quality of life rather than just looking at how much income of a person has increased or reduces.
For example, if every person’s income has doubled, but the income is being spent by visiting doctors due to constant suffering from pollution, then there is only economic growth in the economy, but not economic development.
Keeping in mind the goal of development and aiming to measure the nation’s overall economic well-being, the following indicators components can be included in the new indicator called Gross Domestic Happiness Indicator (GDHI):
Standard of living: An overall increase in the standard of living helps a person to be happier than before. This standard of living can be measured through a person’s ownership of assets, housing and property and per capita income. This per capita income can already be measured by the GDP per capita, thus, the existing methods of measuring via the regular income and expenditure methods or value added method can be incorporated here. It is important to remember that while economic development is a holistic approach, the happiness index will not increase unless GDP or income increases. Thus, the already prevailing methods of GDP calculation are vital to the formation of the GDHI.
Psychological happiness: While a good standard of living is a necessity for happiness to prevail, it doesn’t necessarily mean that every person with a good standard of living is happy and psychologically well. How satisfied a person is with life in America and what are the range and frequency of positive to negative emotions are all part of the GDHI that were not captured in the GDP.
Health of an individual: Good health of citizens is an asset for the country as it increases the productivity of workers. How healthy a person is not only depends on his/her physical status of health, but also the mental health status, all of which should be accounted for in the GDHI. Additionally, it should be noted whether a person is disabled or not, so that appropriate measures can be taken in order to improve the lives of all citizens to a commendable extent.
Use of Time: How much time is being devoted to work and how much to leisure should feature in the GDHI. A person will not be happy if he/she has to work so much that he/she has no time left for leisure or rest. Even if income rises in those cases and the GDP rises, the GDHI will fall.
Level of Education: Keeping a tab on the literacy rate of the economy is of utmost importance in today’s world. Moreover, the number of years of schooling and the knowledge gathered is also a measure of happiness indicator. This is because, a person who is very poor and cannot afford a square meal, will not want to send his/her child to school but will put him/her to work instead in hope of some extra cash. The fact that children do in fact go to school and both the enrolment ratio in schools and colleges are high for boys and girls alike shows that the economy is indeed doing quite well in the GDHI area.
Cultural Diversity: Not every American citizen is of American origin. A happy and inclusive economy which scores high on the GDHI index is one that encourages a warm coexistence of different cultures. How many people speak in their native language, how many people take part in their own cultural practices and even better, how many people take part in loved ones’ cultural practices that are different from their own, really shows that the economy is doing well when it comes to Gross Domestic ‘Happiness’ Index.
How content are people will the government: The whole point of a democratic government is that echoes the messages of being “Of the People, For the People and By the people”. When a leader is elected with a lot of hope, citizens have the right to express how content/discontent they are due to the current government. Additionally, the happiness index will be high if the fundamental rights of the citizens are protected and everyone’s political participation in the form of both opinion and candidature is respected.
Community Strength: How much time, effort and also money one donates to the community is also a measure of happiness index. If one is not happy with the community one lives in, then he/she will avoid participation in that community in any form. The relationship with the community, the relationship with family and also the safety of the neighbourhood are important components that judge the GDHI. In a rich community that is prone to robbery, the GDP will be high but the GDHI will be low.
Environmental Diversity: One’s happiness is reflected in one’s attitude towards the environment. If a person is responsible toward the environment then the GDHI scores are high. If on the other hand as incomes are rising, there is urbanization to an extent which gives rise to encroachment and destroys natural habitat, then the GDHI will score low.
Thus, in addition to the already existing measures of GDP that help to measure the standard of living, the above components need to be included while calculating the GDHI to measure how ‘happy’ the citizens of America are and how developed the nation actually is.
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