Wednesday, December 22, 2010

GDP verses GPI

The GDP ignores the fact that there are distinctions between transactions that add to well-being and those that diminish it.  Instead of it separating the cost from benefits, and the productive activities from the destructive ones, the GDP just assumes that monetary transaction all add to well-being.  However that is not true because not all the business lump together all the income and expenses, assets and liabilities.  Also on top of all of this the GDP does not recognize the fact that everything that happens outside the area of monetized barter, despite its significance to the well-being. Finally GDP treats the bad (Crime, Divorce and Natural Disasters as Economic Gain.) instead of focusing on the more important material such as non-market economy of household and community and takes not account of income distribution. 
                The GPI takes into account the 20 aspects of our lives that the GDP tends to leave out, it also adds in some additional figures that can represent the negative effects costs that relate to the economic activity.  This includes figures such as the cost of crime, cost of ozone depletion, and also the cost of resource depletion as well as other things. The GPI will take into consideration the positive and also negative results that may or may not benefit the people of the economic growth.  

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