Diesel

NIVESHAK 21
one which is more significant. Robert Kennedy
also is critical to the negative effects of GDP
like producing arms and ammunition leading to
increase in the GDP. Also in 2009, former French
president Nicholas Sarkozy, while addressing
French national statistics agency requested that
the agency give greater consideration to factors
such as quality of life and the environment.
The recent criticism of GDP is mostly
due to the fact that the effects of the industrial
revolution are fading after 200 years in
advanced economies. The Asian tiger economies
post decolonization is also experiencing this
phenomenon. However the emerging nations
especially BRICS have yet to realize the fruits
of a developed economy and hence place more
importance on economic output rather than
on wellbeing. Whether GDP is an appropriate
measure can only the decided on per capita
income levels and purchasing power parity (PPP)
of the economy. However if different nations
try and use different statistics for measuring
growth, it might be difficult to comparatively
analyse the global scenario which would create
confusion.
The solution to this is the inclusion of aspects
from Kuznets theory to present day GDP so as to
measure the wellbeing of people such as gains
to well-being stemming from innovation, new
medicines, and better smartphones which helps
increase standard of living of people.
Modifications and improvements in GDP
measurement:
The debate whether income inequality and
government spending on arms and ammunition
should be incorporated in GDP has been there
for a long time even after World War II after
which the people felt the government spending
on weapons as a wasteful expenditure. There
have been attempts made to factor in economic
inequality and environmental damage inside
GDP measurement. In research paper published
in LSE Growth Commission by Nicholas Oulton,
attempts have been made to factor in economic
inequality by Atkinson’s index of inequality
(1970)
E: Parameter measuring “inequality aversion” if
E=0 then society cares nothing for inequality
To factor in economic welfare the paper suggests
concept of Weitzman’s Net National Product
(Weitzman, 1976 and 2003). It is defined as
consumption plus net investment. It’s given by
Where C: Volume of Consumption
Pi: Price of the ith investment good
Pc: Price of consumption
I: Gross investment
D: Depreciation
Such measures are considered by leading
policy makers as important as they not only
factor in important things in the economy apart
from economic output but also are worldwide
accepted. But difficulties in tinkering with the
present framework of GDP makes it difficult
to incorporate these measures. Also some
other economic indicators like HDI (Human
Development Index), Gini coefficient for
measuring economic inequality gives a fair idea
about the overall economic progress and its
sustainability. But certainly an all-encompassing
criteria to measure growth needs to be created.
Article Cover FinGyaan of the Story Month
where
yi: Income of the ith person (or household)
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