Name the factors not counted in GDP that in your view most a

Name the factors not counted in GDP that, in your view, most affect human welfare or happiness. How do you imagine that modifying to account for these factors would raise or lower current U.S. GDP relative to earlier times or other countries? (Be specific in your references to time and country and provide reasons for your judgments).

Solution

Generally speaking, nations with higher GDP have more social amenities – quality health care, environmental awareness, unemployment assistance, etc. – than nations with lower GDP. However, high GDP is not in and of itself indicative of high social welfare. For example, it doesn’t take into account the distribution of income; some combination of GDP per capita, the GINI coefficient, median income, etc. would pick this up better. Furthermore, high GDP may be related to socially undesirable situations – wartime, reconstruction following natural disasters, relaxation of environmental or health and safety standards, etc. There are other considerations, as well; for example, from behavioral economics there is significant evidence that it isn’t total income that determines happiness, but rather relative income.