Economic welfare refers to the level of prosperity as well as quality of living standards in an economy. Generally, Economic welfare is calculated in terms of Real Income, real Gross Domestic Product (GDP). When Real Output as well as real incomes increases, it suggests that people are wealthier and hence there is a raise in economic welfare. Nevertheless, economic welfare is concerned with more than just the peoples’ levels of income. For instance, people’s living standards are also influenced by factors such as pollution and levels of congestion. These quality of life factors are vital when determining economic welfare.
The economy is about how wealth is produced, circulated as well as utilized. It concerns the ways in which a country makes, distributes and uses the physical, material commodities of life. It is also about how the income or proceeds from these activities are disseminated between those that contribute toward them, that is, the capitalist businesses, workers, the state as well as the entire of society. Each and every individual influences the economy in some way and we are all influenced by it.
Nearly all economists traditionally make use of a simple economic measure, the Gross Domestic Product (GDP), to define prosperity. Gross Domestic Product is the most well-known and extensively used measure of national progress whether measured on a per-capita basis or in total for a country. Gross Domestic Product captures the value of all goods in the economy-whether utilized by households, governments, or businesses--and as such, it is a very useful single measurement of the welfare of a country.
However, problems with the Gross Domestic Product measurement exist. Some goods and services have no prices, for instance or family care services or government-provided free health care, therefore statisticians have to assign prices to get a more comprehensive Gross Domestic Product e measure. However, imputation is not reliable, given that the necessarily subjective evaluations are done by remote statisticians and not by consumers consuming the services. In addition, discrepancies crop up when the assigned values of these services differ cross-nationally. Another limitation of the Gross Domestic Product measurement entails accounting for quality improvements where no change in price has taken place.
First:
In order to properly address this post, I will begin by defining economic welfare, which is a new concept for me. This is defined as the “level of prosperity and living standards of either an individual or a group of persons” (1). Through reading the chapter and viewing the Power Point slides, I learned the GDP doesn’t measure things such as leisure time, crime rates, or pollution. GDP only calculates the amount of goods and services people have, which leads to an imbalance in personal well-being and, I believe, overall economic prosperity. For me, this imbalance has the potential to greatly affect our economic welfare. Working full-time to develop a career and balancing family life increases individual stress. Ultimately, this leads to less time enjoying life but more money spent on doctors and medical bills, which may increase GDP. The loss of personal enjoyment, however, is not considered in the calculation.
Reading Anne Marie Slaughter’s article “Why Women Still Can’t Have It All” really resonated with me, specifically because my mother underwent similar circumstances, choosing a position that would enable her to be more proactive raising my sister and myself. She states: “The best hope for improving the lot of all womenis to close the leadership gap”. This makes sense to me; having more women represented in higher corporate positions would make it easier to restructure work hours and include more leisure time or flexible schedules. This could increase well-being while also increasing productivity, making GDP higher.
In the video from The Economist, John Parkers story about the mangrove swamps and the shrimp farms really resonated to me. The people were willing to destroy the mangroves in order to gain income from the shrimp, but risked rebuilding their cities because the mangroves protected the landscape from extreme floods. I find this interesting because, while people would experience discomfort at being displaced by the floods, rebuilding the infrastructure might increase GDP because it would provide jobs, require goods to be purchased, and possible increase a change in the way the shrimp farms conducted business. I think it’s really important to keep consider the ramifications of our choices, both for social well-being and financial well-being, and how they could impact future generations.
http://en.wikipedia.org/wiki/Economic_welfare
Second:
Economic Welfare is everybody's goal in life. I am taking this class and writing this post in pursuit of economic welfare. What it means to me and to normal citizens is living a productive life with financial stability and time for leisure. However, how we define economic welfare, GDP, is falling short. GDP measures how much we are producing; how big the economy is. So a country like China who has a very large economy has a high GDP, so it is considered to have high economic welfare. As a result, people are investing in the Chinese market and believe the future is in China. But GDP is simply a measurement of how big the economy is, not how well it is being run. So though China has a high GDP this does not mean it is being run in the best way possible that promotes welfare. The measurement of economic welfare needs to be re-evaluated from the size of the economy to the efficiency. Bigger is not necessarily better. If we continue to use GDP, countries will pursue increasing the size of their economy and ignoring things like environmental health.
In the article “Why Women Still Can’t Have It All”, the author writes about the reasons women cannot have the job of their dreams and have enough time for their family. She discusses how we have been told that women can have everything, a family that they can be there for and support and a demanding and rewarding job, but shows how this is a message of false hope and this really is not possible. The author tells her own experience of leaving her White House job to be with her family. If we were to use GDP as a measurement of welfare, the author would be better off keeping her job because she is producing more, but this is not the case because she left her job and as a result was happier. The reason GDP falls short is because it leaves out key components such as leisure time. Her prosperity increased by leaving her job even though how much she was "producing" decreased. If we were to use GDP as a measurement of welfare it would seem that the best thing for countries would be for all women to work demanding jobs with high rewards because this would increase the size of the economy, but this would not be a full picture of how well an economy is running because it neglects the impact this would have on the next generation.
The video "Happy Planet Index" discusses a new form of measurement of prosperity of countries. Instead of looking at the size of the economy to determine how well countries are being ran, the video suggests using a ratio of general happiness of the population to the effect the country has on the planet. High happiness ratings and low impact would indicate a well ran country instead of a high GDP which only examines economic turnover. I think this new Index is a great concept but is too idealistic. It sounds great, but would be near impossible to execute because of how subjective overall happiness is. I do think GDP needs to be re-evaluated as a measurement of economic welfare, but it still needs to consist of something more concrete than happiness.
Works Cited
Roger Bate. What Is Prosperity and How Do We Measure It? aei.org/article/society-and-culture.
October 27, 2009. Web 10 January 2014.
Suzanne York. Better Measures of Individual Prosperity. Howmany.org. Web 10 January 2014.
