GDP as a measure of development Essay Example | Topics and Well Written Essays - 2000 words

piggish domestic product as a neb of development - Essay ExampleTodaro and Smith elaborates that gross domestic product is the total final output of goods and services produced by the bucolics economy, within a orbits territorial dominion, by residents and non-residents, regardless of its allocation between domestic and foreign claims (815). gross domestic product is different from the gross national product or gross national product in this sense while the GNP refers to the final cheer of goods and services produced by citizens of a country, the gross domestic product refers to the final value of goods and services produced by a territory or the country. Thus, the GDP complicates all outputs of goods and services in the territory of the country, whether that output were from aliens or citizens. In contrast, the GNP covers totally the output of goods and services of citizens whether that output was produced inside or outside the territory of a country. The term final goods a nd services are meant to emphasize that the concept of the GDP seeks to avoid double counting of goods and services. For example, if a certain input is part of a certain output, the value of the input is not counted plainly only the value of the final output. The GDP count only the output currently produced (Dornbusch, 36). Thus, for example, the value excludes older houses but includes new house construction (Dornbusch, 36). Dornbusch et al. noted the following difficulties of GDP assessment (36-38) 1. GDP is unable to measure some of a territorys outputs because they are not traded in the market. 2. GDP does not calculate anything for environmental pollution. Goods and services may have been produced but at high costs to the environment of the nation. 3. GDP does not factor the quality of goods or the improvements in the quality of goods. Baumol and Binder defined GDP as a measure of the size of the economy or the total amount it produces in a year and noted the following limi tations of GDP as a measure (23, 90-91) 1. GDP is not a measure of a countrys well-being but, at the same time, it was never intended to be one. 2. entirely market activity is included in the GDP and this explains why African countries can survive on $ 5 per week. 3. International comparisons can be misleading if we use GDP because we are not compare the same economic activities many things that are counted in the GDP of the rich countries are not counted in the GDP of the poor countries. 4. GDP places no value on leisure. Baumol and Binder argued that as a country gets richer, its citizens acquire more leisure time and the value of the leisure goes up. 5. GDP can also hyperbolise how a country is well-off because even the bads are counted in GDP accounting. According to Baumol and Binder, even cataclysm can bloat the GDP as houses or properties are reconstructed once a raw(a) or man-made disaster strikes similar to the 9/11. Hall and Lieberman enumerated the following problems with regard to measuring the GDP (539-540) 1. GDP statistics can be inaccurate, especially among developing countries. 2. numerous countries, especially developing economies have an ohmic resistance economy. The underground economy includes hidden economic activity. The hidden economic activity can also include illegal economic activities, especially those involved in drugs, prostitution, many gambling activities, and those that seek to avoid taxes. 3. Many countries, especially the developing economies, have large areas where food is grown and consumed by farmers and many goods do not enter the market. 4. Household activities are also not included in GDP accounting. Parenting is not counted in the GDP unlike daycare programs. Takeouts are counted in the GDP but not homecooked food. Therapy is counted in the GDP but not talking to a friend. For Scott and Miles, there are at least two issues in using GDP as a measure. The first