Gross Domestic Product and the Welfare of Society

Paper Summary:

The paper shows that there are some important limitations of the real GDP concept as an indicator of improvements in the welfare of a society. The paper shows that the limitations of real GDP can be explored in three ways: (1) non-market productive activities are left out; (2) real GDP is not a welfare measure; and (3) inequality exists in the distribution of income.

From the Paper:

"Real GDP (Gross Domestic Product) is a measure of the value of all the goods and services newly produced in a country during some period of time, adjusted for inflation. Real GDP has been increasing in Australia since the 1990s. According to Taylor, Moosa & Cowling (100) in Macroeconomics, improvements in the welfare of individuals in any society cannot occur without such increases in real GDP. However, real GDP was never intended for this role. It is merely a gross tally of goods and services bought and sold, with no distinctions between transactions that add to welfare, and those that diminish it. Instead of separating costs from benefits, and productive activities from destructive ones, real GDP assumes that every monetary transaction adds to welfare. Real GDP is the most comprehensive measure of a nation's economic activity."

More papers on Gross Domestic Product and the Welfare of Society:

• Comparison Essay # 70812 : "Gross Domestic Product"
• Essay # 85906 : "Gross Domestic Product"
• Research Paper # 64349 : "The Freedom of Expression and the Misconceptions of Society"

APA Citation:

MLA Citation: