GDP is not an accurate tool to measure the well-being of a populace despite being used widely by countries. Dynan (2018), describes Gross Domestic Product (GDP) as the monetary market value of all the products and services produced by a respective country within a given period (normally, twelve months). It includes the value of total income as well as expenditure of the country’s workforce, therefore, divided by the population of the country; the GDP per person highlights the average earnings and spending of an individual. GDP indicates a country's ability to provide for its citizens a comfortable life; better healthcare, and advanced education opportunities. However, it does not indicate whether or not these services are actually provided and whether the population can afford them or not. Dynan (2018), further confirms that GDP does not include different aspects of life like entertainment and leisure, all of which significantly impact well-being. With regard to this, GDP is not an effective measure of a country's economic prosperity.
A good example is Norway which has relatively higher standards of living but a low GDP. Corrigan (2017), highlights too much government spending as the greatest barrier to the country's economic growth. While the government significantly spends on public amenities such as hospitals and schools, therefore, making the country able to offer high standards of living, the real GDP per person is significantly low and not able to match the standards of living. India and China have a high GDP given the value of products and services produced by the country’s workforce yearly. This value, however, does not reflect directly to the things that make life worthwhile such as: quality education and health care, rather on the country's ability to create and provide these things (Mankiw, 2014). As such, GDP is not necessarily an effective measure for economic prosperity.
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References
Corrigan G. (2017). Lessons from Norway, the world’s most inclusive economy. weforum.org Retrieved 13 April 2020, from https://www.weforum.org/agenda/2017/04/lessons-from-norway-the-world-s-most-inclusive-economy/
Dynan K. and Sheiner L. (2018). GDP as a measure of economic well-being. Hutchins center on fiscal and monetary policy at Brookings. Retrieved 13 April 2020, from https://www.brookings.edu/wp-content/uploads/2018/08/WP43-8.23.18.pdf
Mankiw N. G. (2014). Principles of Macroeconomics. Cengage Learning Inc., Florence US.
