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In the present age, GDP has become the most controversial metric. It has provoked a heated debate among economists, analysts and leaders. In light of this, growing numbers of people are wondering whether the progress has come to an end. Why is the economic growth not going up? Doesn’t a higher GDP increase well-being? Since World War II, economic performance and progress of a country have been measured by dollar value of a country’s economic output, expressed as gross domestic product (Fox, 2012). GDP represents the monetary value of all final goods and services produced in the economy (“Gross Domestic Product – GDP,” n. d. ).
Criticisms and complaints have been present for a long time, due to its discrete focus aimed at production, disregarding significant aspects such as prosperity, economic and societal developments (Ivković-Frajman, 2016). Despite the surge in its popularity and usage, GDP leaves much to be desired. In this paper, a detailed description will be outlined, evidencing the insufficient GDP capability of being a good measure of human welfare, whilst suggesting a way how it can be adjusted. The welfare level of an individual or a nation can be threatened by numerous noneconomic problems, among which environmental issues prevail. Global issues such as pollution, global warming, or reduced biodiversity have a negative impact on human prosperity (Jianping et al. , 2014). While they destroy our environment, they pose a serious threat to humans’ health, which consequently lead to well-being decline.
Nevertheless, GPA ignores these concerns and does not include them in the measurement. On the contrary, it focuses just on production measurement, taking into account solely the economic based transactions (Ivković-Frajman, 2016). Therefore, GPA concept is not capable of capturing the major global problems, which face mankind with complex challenges. On the other hand, another shortcoming of GDP is failure to account for productive non-market activities (Freiling, 2012). For instance, volunteering is an important social activity, but it is not something that is paid for or provided on the market. As such, it is not included in GDP. Although such social activities are understated, they are highly valuable for the increase of social welfare. However, no matter how productive non-market activities can be, GDP omits them invariably (Ivković, 2016). Hence, GDP is insufficiently capable of measuring socially highly valuable activities. Notwithstanding, an adjustment is feasible. As noted by Pooran Desai, a paradigm shift is necessary, corresponding to revolutionary science concept of Thomas Kuhn (Willigenburg, 2012). Every product or service transacted in our economy must be adjusted according to quality, based on their contribution to social and environmental good. For this reason, good transactions will be rewarded, inducing our brains to do good (Desai, 2018). From a philosophy of science perspective, it can be explained by causality principle, considering “stimulation of brain to do good” as beneficial outcome “Y”, caused by “rewarding” as “X” value (Ghoshal, 2005). If people get rewarded, their brain get stimulated to do good, otherwise their behavior will not change.
Thus, from sum of all quality adjusted transactions, we will obtain “Quality Adjusted GDP”, which according to Desai (2018) will link our money with a global indicator of real progress. In conclusion, GDP has to measure more than just goods’ production. Since it fails to capture major global issues that threaten human well-being, socially valuable activities, and what we truly value, adjustment is needed. “Rewarding good” is a feasible method through which, not only our buying behavior will improve, but also damages that we have caused to environment and society will start to recover. Hence, country’s prosperity will increase, leading to a happier future.
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