Economist Debate: Finding ways to improve humanity\'s living standards is the po
ID: 1231561 • Letter: E
Question
Economist Debate:Finding ways to improve humanity's living standards is the point of economics. Having a good measure of living standards, you may think, is therefore pretty fundamental to the discipline. For decades economists have turned to gross domestic product (GDP) when they want an estimate of how well off people are. By how much are Americans better off than Indians, or than their parents' generation? Chances are the answer will start with GDP.
GDP is really a measure of an economy's output, valued at market prices (to the extent that you have them). As societies produce more, and therefore earn more, their material well-being rises. So it is no surprise that so many economists and official statisticians broadly accept GDP as a measure of living standard s.
Do you think GDP is the best measure of living standard? Why? Why not? Briefly discuss.
Explanation / Answer
No. Gross Domestic Product (GDP) is not a best measure of the standard of living of people. It measures only the final products in the market. It does not consider the distribution of the wealth/money/goods among the people. So if we have 50 extremely rich people and 100 poor people, the GDP is obviously higher than the income the poor people have (could be way more higher). Hence GDP is not a realistic indicator of growth/development etc. But it works well to estimate the rough growth of the market in a nation. GDP is really a measure of an economy's output, valued at market prices. As societies produce more and earn more, their material well-being rises. So it is no surprise that so many economist broadly accept GDP as a measure of living standards. Well, there are so many available indicators other than GDP which consider these other factors. For example, there is the Human Development Index (HDI), used by the UN's Development Programme, which considers life expectancy and literacy as well as standard of living as determined by GDP. And the Genuine Progress Indicator, which incorporates aspects of social welfare such as income equity, pollution, and access to health care. Finally, the thing is we can use any of the indicators above based on what you are expecting to calculate. If you just want how well a country is, in wealth, then GDP is fine. But if you want to know how well the country is in wealth as well as others (say, poverty, literacy, pollution, corruption rate etc.), you can use the other indicators. It depends on what we are expecting.
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