What GDP doesn't measure and why this should change

Non-market gains - like volunteer work and being healthier through exercise - should be added to more accurately track the welfare of Singaporeans.

Published Tue, Aug 4, 2020 · 09:50 PM

Singapore

GROSS Domestic Product - or GDP in short - has been a mainstay measure of our economic progress over decades. Nations clamour, excessively so, for GDP rankings as it signifies not only a country's good "grades" on their economy report card but also their standing in the international community. Countries often tout these GDP figures as indications of progress and well-being, and countries with high GDP are labelled as "developed".

But does a high GDP reflect well-being and happiness of society? Does economic growth enrich society?

A quick answer to this is both a yes and a no.

WHAT DOES GDP MEASURE?

There is little doubt that we need economic growth for increases in incomes so as to provide a certain level of living and hopefully over time it is linked to increases in welfare. GDP measures a form of hedonic happiness in the sense that it aggregates the market value of all goods and services produced in an economy. As long as the good or service has a market price, it will be included in the calculation of the GDP. Thus, haircuts, car sales, dresses, teachers, and the like are all counted in GDP. But activities like housework,…