Analysis of GDP and Its Limitations
Analysis of GDP and Its Limitations
Introduction
Predominantly, economic well-being has great connections with social well-being (Easterlin, 2001). As such, most of the public policies that are intended to improve the social welfare are usually directed towards variables that indicate economic welfare. However, not all aspects of social well-being have direct linkage with economic wellness. Thus, economic progress in a country does not entirely translate to social happiness among citizens since some economic growth policies involve trade-offs between social risk and income growth (Bok, 2009).
In essence, economic well-being entails a measure of economic wellness of citizens in a country while social well-being indicates the social happiness which is associated with economic, psychological, and spiritual status if individuals in the society. Gross domestic product (GDP) entails the gross income earned by people in a country. Essentially, GDP is the primary indicator of the economic well-being of a nation (Coyle, 2014). This paper will analyze the GDP and its limitations. Also, the paper will consider the relationship between economic and social well-being and describe the degree of alignment of Saint Leo core values with economic growth and productivity.
Description of what GDP measures and some of its limitations
The gross domestic product indicates the productive capacity of a country. Essentially, GDP is a measure of the aggregate output of a country which can be calculated using various methods such as expenditure and income (Coyle, 2014). Thus, GDP entails the monetary measurement of the total output in a country. Several aspects of a nation can be measured using the value of GDP some of these aspects are described below.
Primarily, gross domestic product measures the standards of living of citizens in a country (Coyle, 2014). The total value of GDP represents the economic welfare of a nation. When the value of GDP is divided by the total population, it gives the income per capita which indicates the economic well-being of each citizen in the country (Coyle, 2014). Income per head determines the purchasing power of an individual which in turn measures the individual’s living standards. The aggregation of the living standards of all citizens indicates the standards of living of the entire economy (Coyle, 2014). However, various limitations are associated with the measurement of living standards using the GDP.
The national income of a country does not reflect the actual income per head since the total income is not distributed equally among the citizens (Coyle, 2014). Thus, GDP is not an ideal measure of the economic welfare of the citizens. Bok (2009) postulated that at low levels of economic development, income growth tends to improve health as well as the economic well-being of citizens. However, as development reach some thresholds, the social and economic well-being of people deteriorates due to increased income inequality. Additionally, the value of GDP can be used to measure the size on an economy since it indicates the economic productivity of human as well as natural resources in a country (Coyle, 2014).
GDP can be used as a measure of social justice (Diener & Seligman, 2004). The income per capita indicates what each citizen could get if the total income of a country is divided equally among the entire population. However, the distribution of wealth produces greater inequalities, resulting in the formation of social and income classes in the society (Diener & Seligman, 2004). Thus, a high value of GDP does not reflect people’s happiness. Therefore, governments should consider other factors that promote the psychological, social, and spiritual growth of citizens and incorporate them into the national policies.
The Economic welfare of individuals reflects their social well-being to a large extent (Easterlin, 2001). Improvements in economic wellness result in social satisfaction and happiness in the society. Many factors that promote economic well-being such as employment and higher income lead to improvement in social wellness (Easterlin, 2001). The sense of respect promotes social welfare of the society. Thus, Saint Leo University’s core values promote social satisfaction by inculcating respect among learners. However, there are various instances where economic and social well-being lacks connections. Some of these instances relate to social cohesion and employment quality. Poor quality jobs do not promote social empowerment and cohesion, although they have positive impacts on economic well-being (Diener & Seligman, 2004). Studies have shown that positive correlation exists between economic and social wellness (Easterlin, 2001). Individuals with high income tend to be more socially satisfied than those with low income. The income levels of people determine their social status. Thus, income reflects the level of social satisfaction and happiness.
Economic productivity relies heavily on productivity of citizens, which is determined by various factors such as level of education and technical skills. Excellence in education, as well as technical and life skills, is one of the core values of Saint Leo University (Saint Leo, 2016). Additionally, the core values of Saint Leo University promote quality leadership, personal development, and responsible stewardship, which are essential for economic growth and productivity. Personal development contributes to community development, resulting in national development at large. Respect promotes national cohesion which contributes to political stability that is necessary for economic growth. Therefore, there is a high level of alignment of Saint Leo’s core values with economic growth and productivity.
Conclusion
Undoubtedly, a positive relationship exists between social and economic well-being. The value of GDP is used to measure economic and social wellness. However, GDP value is not the only factor that should be considered when determining the welfare of the society since it does not fully reflect the level of social satisfaction and happiness. Therefore, other factors that promote the psychological and spiritual growth of citizens should be incorporated in the public policies. The core values of Saint Leo University indeed promote economic productivity by nurturing skills and qualities that are fundamental to economic growth. Therefore, learning institutions should align their core values and missions with key determinants of economic productivity.
References
Bok, D. (2009). The Politics of Happiness What Government Can Learn from the New Research on Well-Being. Princeton University Press.
Coyle, D. (2014). GDP: A brief but affectionate history. United States: Princeton University Press.
Diener, E., & Seligman, M. E. (2004). Beyond money toward an economy of well-being. Psychological science in the public interest, 5(1), 1-31.
Easterlin, R. A. (2001). Income and happiness: Towards a unified theory. The economic journal, 111(473), 465-484.
Saint Leo University Core Values (2016) Retrieved May 17, 2016, from http://www.saintleo.edu/
