Economics Essay Example | Topics and Well Written Essays - 1250 words - 13

Economics - Essay Example The problem with GDP is that the metric was originally designed to recognized economic activity and it was never meant to be utilized as a standard to determine the well being of a society. This paper analyses gross domestic product in order to determine its functionality and ways to improve the metric so it can become a more suitable indicator of social progress and well being. Gross domestic product is an economic metric that is recognized by the entire international community. Since its utilization started centuries ago there is a tremendous amount of historical data about the GDP of different nations. The problem with the utilization of this metric for the purposes of measuring well-being is that the variables included in the formula to calculate gross domestic product have to do primarily with spending of either the public or private sector. The amount of money spend within a microeconomic system is not really a good determinant of the well being of a society. Well-being refers to the quality of life of a society which includes aspects such as freedom, happiness, environmental health, abundance of natural resources, and innovation (Wordiq, 2009). People expect from its governmental institution for them to be aware of the actual needs in order to improve their well being. In order for that to Gross domestic product is not a good indicator to determine well being. In order to improve the representation of the metric without changing its integrity economist often prefer to display the total in terms of per capita denominations. Gross domestic product per capita can be better to compare the wealth within a specific country. We must recognize that wealth is important, but not the only factor that determines well-being. In recent years statisticians have gone a step further in order to improve GDP. They created an alternate economic metric called GPI which utilizes GDP as the basis from which other