Explain two reasons why measuring GDP is not a good to measure welfare
1) Incomplete picture of economic well-being: GDP only measures the total value of goods and services produced in an economy, without taking into account important factors such as income distribution, inequality, environmental impact, and non-market activities. It does not capture the quality of life, social progress, or the well-being of individuals. For example, a country with high GDP growth might still have significant poverty rates, unemployment, or inadequate access to basic services like healthcare or education. Thus, relying solely on GDP as a measure of welfare can lead to an incomplete understanding of the overall well-being of a population.
2) Neglect of non-economic aspects: GDP primarily focuses on economic activities, disregarding important non-economic factors that contribute to welfare, such as health, education, happiness, social cohesion, and cultural values. These aspects are crucial components of a society's well-being, but they are often overlooked when measuring GDP. For instance, a society with high GDP but rampant pollution and environmental degradation would have negative consequences on the well-being of its people in the long run. Additionally, GDP does not reflect subjective well-being or people's own perceptions of their quality of life, which can be influenced by various non-economic factors.
In conclusion, GDP alone is not a comprehensive or accurate measure of welfare since it fails to consider important non-market activities, income distribution, inequality, environmental sustainability, and subjective well-being. It should be complemented with other indicators and measures to provide a more holistic understanding of welfare and guide policymaking effectively.