GDP and Its Limitations
Growth domestic product (GDP) acts as an indicator of a society's standard of living. The statistics from the GPD are useful in measuring and comparing a nation's economic progress (Robert et al. 6). However, GDP does not directly account for environmental quality, activities conducted outside the market, level of health and education, increases in technology and the value a society places on outputs. Standards of living encompass many factors may that contribute to society's welfare and happiness and may be brought in, sold out or not sold at all. Therefore, GDP pose several limitations that are an impediment to a better society, despite it being widely used as a reflection of a nation's economic status and progress (Robert et al, 9)
GDP and Income Equality
GDP is not a plausible measure of the level of equality in a society as GPD per capita only measures the average. If GDP per capita rises by 10%, it means that the GDP for the whole society has risen by 10%, or a section within the society. In reality, the level of income would have risen more for some individuals, while for others the increase may be less, or even a decline. The emphasis on the maximization of per capita income does not account for equal distribution of economic benefits within a society (Robert et al, 11).
GDP and Socioeconomic Factors
The GDP statistics only assist the economists in calculating the per capita income but does not incorporate society's quality of life and income distribution. The GDP does not incorporate the production that is exchanged in the market which makes it ineffective in measuring economic well being of a society (Robert et al, 12). For instance, if you produce your own crops for subsistence, such production not factored in computing the GDP. GDP also does not account for the available technology within a society. Such technology may act as a factor of production in the overall GDP, but its effectiveness and efficiency within the society is not determined. In other areas such as spending on environmental protection, education, and healthcare, GDP only measures what is spent but does not include actual levels of health, learning and environmental cleanliness. For instance, GDP accounts for the cost involved in Medicare, education and buying pollution control equipment but not the quality (Robert et al, 7).
GDP as an Indicator of Material Improvement
GDP may not be a good precise measure of living standards within a society but it does measure production effectively and indicates whether the nation is materially better or worse in terms of incomes and jobs. A significant rise in GDP correlates with other elements within a society such as improved education, environmental protection and health. If the nation's leadership and management of resources are well coordinated, GDP should actually correlate with standards of living.
Work cited
.Robert, Costanza, et al. "Time to leave GDP behind." Nature505.7483 (2014).
