Standard of Living - Limitations of GDP as a measure of Wellbeing
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Last updated 20 Nov 2023
This short video looks at some of the limitations of GDP when measuring changes in economic well-being.
GDP, or gross domestic product, is often used as a measure of a country's economic health and prosperity, but it has its limitations when it comes to measuring well-being. Some of the criticisms of using GDP as a measure of well-being include:
- It fails to account for non-market activities like volunteering, caregiving, and household work, which are important to people's well-being.
- It ignores distributional issues, like income inequality and poverty, which can have a significant impact on well-being.
- It doesn't account for environmental degradation and other negative externalities that can reduce well-being.
- It doesn't capture subjective well-being measures like happiness, life satisfaction, or mental health.
While GDP can provide a snapshot of economic activity, it doesn't fully capture the quality of life of a population or the sustainability of economic growth.