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Jakarta Post

Questioning whether GDP still adequate to measure welfare

  • I Dewa Made Agung Kertha Nugraha

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PREMIUM
Jakarta   /   Tue, December 31, 2019   /  12:34 pm
Questioning whether GDP still adequate to measure welfare The poverty data of Statistics Indonesia (BPS) might provide us with information on the main determinants of consumption-based poverty in the provinces. Yet, when it comes to the non-monetary dimensions of poverty, we remain clueless. (JP/PJ Leo)

Joseph Stiglitz, a Nobel laureate in economics, said, “What we measure informs what we do. And if we’re measuring the wrong thing, we’re going to do the wrong thing.” What does it mean when a country’s gross domestic product (GDP) is high? Why does GDP vary among countries? Why do economists compare countries’ GDPs to diagnose one country as economically better than another? Before we go any further, let us define GDP itself. GDP is used to show what a country is good at producing. It was first created for the United States government by Russian-born economist Simon Kuznets only after World War II and the Great Depression and before modifications made by the renowned economist John Maynard Keynes, who turned it into the index we know today. GDP is the country’s total economic output in a year and consists of four components, namely perso...

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