Introduction and Thesis
The use of GDP as a measure if well-being remains one of the most equivocal topics of all times. In fact, this topic has generated varied interpretations across various settings all over the globe. Nonetheless, it is essential to note that even prominent economists such as Dr David Gruen, have reiterated the fact that GDP was not primarily intended for use in assessing well-being. As such, the persistent use of GDP to assess well-being is flawed and should be dealt away with. In a nutshell, GDP is not a correct measure of well-being as it does not directly belong to the necessary factors of well-being and well-being can be measured by environmental quality, Life satisfaction and security.
Why GDP does not measure well-being
There are various reasons that depict the fact that GDP does not measure well-being. Above all, GDP does not measure well-being because of the primary fact that GDP has and continues to rise because of health issues, particularly poor health. There are two main factors that have precipitated the rise in GDP as a result of poor health. The first factor aligns with the fact that the cost of treatment has risen significantly. This is attributed to the fact that access to medical insurance remains a “pipe dream” for different populations. Medical insurance covers are expensive and cannot be afforded by the poor populations. On a similar note, health care bills have increased because of the fact that chronic illnesses such as cancer and diabetes have been on the rise. As such, the length of hospitalization for patients diagnosed with such conditions is usually long; hence, increasing the health care bills incurred by such patients (Diop et al., 2012). The second reason that has elicited a rise in GDP as a result of poor health is the fact that poor behavioural habits such as alcohol consumption and smoking are still rampant. These behaviours increase the incidence of diseases, which lead to poor individual health. The second reason that justifies the fact that GDP is not an appropriate measure of well-being is the fact that there exists a wider range of economic activities that have a detrimental effect on well-being. To be precise, rise in the rate of inflation affects individual well-being because it hinders access to basic commodities, especially food, and clothing. As the rate of inflation rises, the price of basic commodities rises in a similar magnitude (Schumpeter, 2011). This jeopardizes access to the basic commodities, which have a negative effect on well-being. In addition, the occurrence of unpredictable natural calamities such as floods, tsunamis and earthquakes impacts negatively on individual well-being, and GDP does not factor in such issues.
How well-being can be measured
Diop, N., Marotta, D., De, M. J., & World Bank. (2012). Natural resource abundance, growth and diversification in MENA: The effects of natural resources and the role of policies. Washington, DC: World Bank.
Rodrik, D. (2007). One economics, many recipes: Globalization, institutions, and economic growth. Princeton: Princeton University Press.
Schumpeter, J. A. (2011). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. New York: Oxford University Press.