wk 8: national welfare + prosperity P1+2+3

GDP

• measure of the size of an economy—economic activity within a country

• modern GDP developed by Simon Kuznets 1934

• GDP = consumption + investment + govt spending + (export - import)

• consumption: household expenditure on final g/s

• investments: business and private investment on final goods

• govt spending: on final g/s

• export - imports: net export

  • based on final sales price of all g/s

hurricane Katrina

• 125 billion dollars of damage

• GDP actually went up faster than expected during this quarter

• big natural disasters are better for GDP bc clean up/recovery efforts are included

  • does not increase social welfare, sets back to og spot

GDP contributors that do not increase welfare (challenges)

• clean up of natural disasters

• pollution clean up

• crime (security services, locks)

• war (all war expenses)

• disease (medical expenses)

not included in GDP

• everything outside of the realm of monetized exchanges

  • household work

  • volunteer and unpaid labor

  • non recorded cash transactions

  • public goods (e.g. taking a hike)

• ignores degradation of natural capital

  • costs associated with externalities (e.g. pollution)

  • depletion of exhaustible resources

human development index

• used by UN development program

• emphasizes that ppl and their capabilities should be the ultimate criteria for assessing the development of a country

• 3 developmental objectives:

  1. long healthy life (life expectancy at birth)

  2. being knowledgable (mean of years of schooling for adults 25 yoa, expected years of schooling of children entering school age

  3. decent standard of living (gross national income per capital at purchasing power parity)

country classifications

• HDI of 0.7-0.8 are high-very high

• HDI of 0.5-under 0.5 is medium to low

• highlights that economic prosperity alone is not sufficient

• countries need to adopt policies that use economic prosperity for the benefit of its citizens

• limitations:

  • provides only limited perspective on human welfare (does not include inequality, poverty, human security/safety, empowerment)

  • does not include environmental components

genuine progress indicator

• fuller account of nation’s welfare

• integrating environmental and social aspects (plus economic)

• distinguishes btw human activities that contribute or harm overall health and well-being

• 26 individual indicators in 3 domains

GPI table - contributions and deductions to welfare

	economic indicators	social indicators	enviro. indicators
contributors	- weighted personal consumption - benefit from consumer durables (cars, washing machines are high investment upfront) - net capital investments	- household work + parenting - volunteering - higher education -use of hwy and streets
deductions	- purchase of consumer durables - underemployment - net foreign borrowing	- crime - household pollution abatement - loss of leisure time - commuting - car accidents	- water, air noise, pollution - loss of primary funds and damage from log roads, wetlands, farmlands - co2 emission damage - ozone depletion

• value of activities contributing to welfare (top left)

• cost of activities detracting from welfare (bottom left)

• cost of long term destruction of natural capital (bottom right)

GDP v GPI

• while we have continued to increase our consumption, overall welfare remained the same

• benefit from increased consumption is offset from increased social and environmental cost

• we are living more on credit

GDP v GPI → threshold theory

• more economic growth leads to a decrease in quality of life

  • due to social and environmental costs

US development: contributions + detractors

• decreasing relevance of non-market time spent on volunteering activities, parenting and higher education

• growing relevance of cost association with depletion of and damage to natural capital

gross national happiness

• every human being aspires for happiness

• a country’s development should also be measured by its citizens happiness

• challenge is figure out how to balance economic development, emotional and spiritual wellbeing