''''Compare and contrast alternative indicators to Gross Domestic Product (GDP) to measure the well-being of society

so sánh sự giống và khác nhau giữa GDP và các chỉ số khác

FACULTY OF BUSINESS AND LAW ACADEMIC YEAR 2020/2021

COURSEWORK BRIEF STUDENT ID: 20055737

THE MODULE TITLE: Macroeconomics

THE MODULE ID: UMED8G-30-1

WORD COUNT: 1500 words

THE COURSEWORK QUESTION: 'Compare and contrast alternative indicators to Gross

Domestic Product (GDP) to measure the well-being of society.'

In recent years, thanks to the growth faster and faster in the financial world, GDP has

no longer the best way to measure well-being GDP only measures people’s income and expenses to calculate their happiness; however, it does not measure a person’s health, joyful playtime, or education quality (Kennedy R., 1968) In 2020, the world is witnessing one of the worst pandemics over the last century In either way, this catastrophic phenomenon causing gigantic misfortunes in human living standards affects all world inhabitants This paper reviews a different kind of measure of well-being, especially GPI and GNI, and shows the differences between the two measurements As the report is about alternative indicators, it mainly focused on why people replace GDP to assess society’s happiness

Moreover, this paper aims to determine which indicator is the best to define a nation’s well-being This essay examined the most useful way to assess the healthiness of humans Firstly, this report concentrated on how social welfare is limited, and after that, it mainly discusses the overview of GDP, GPI, and GNI Then, the paper would be complemented by collect and review the data of other studies to discuss the advantages and disadvantages of both indicators Moreover, this paper aims to find out the best measurement in the COVID-19 pandemic time

First of all, social welfare is a service provided by the government or private organizations to help poor, unemployed or older adults According to Wikipedia (2019), social welfare is a portion of the national income used to meet the demands of people in society for goods and services, in particular those of outside delivery workers Physical well-being refers to supporting people and families in need Depending on the nation, jurisdiction, the forms and amount of welfare provided to individuals and families varies

The calculation of an economy over a specific time frame is the Gross Domestic Product Economists intend to gauge the estimation of creation of those exercises that fall inside the limit of the public records framework Estimating GDP can be uncertainty and the problem, it can be challenging to measure in some areas According to Wikipedia (201 8), in

a period of market value, the GDP is defined individually as a monetary measure of all finished goods and services produced within a country’s borders in a year GDP was separated by economists into two categories: nominal GDP and real GDP The maximum quantity of final goods manufactured compounded by their current prices is nominal GDP According to Investopedia.com (2019), they also found out that nominal GDP, while it does not contain the expense of goods and services, is an evaluation of income production in the economy Nominal GDP is an economic assessment of the financial product that recalls existing spending and will raise the production figure By measuring the cumulative amount

of goods and services included in the nominal GDP, people appreciate the volume sold in the same year

On the other hand, real GDP is the total quantity of the final good at a constant price, net present value The inflation-adjusted calculation, moreover, is the value of interest and services generated by the economy in the base year Real GDP is a macroeconomic measurement that analyses the evaluation of the growth of the goods and services produced by the economy in a given period It calculates the total monetary yield of

a country, adjusted for changes in value The government uses nominal and real GDP as measurements to examine financial growth over the long haul

Nominal GDP refers to economic production that does not require a release modification Nominal GDP is often higher than real GDP since it is normally an optimistic statistic This kind of GDP can compare quarterly goods for the same year In the meantime,

the economists use real GDP when comparing the GDP for two or more years, since hitting various years focused only on volume while ignoring the impact of movement The year used to measure real GDP is referred to as the “base year” The “base year” is often thought

as a year, if all other years need to be changed as a year before GDP, as the price would be the same as the year when they are in the root year

Although GDP is widely used as an indicator of economic well-being and performance, it still has advantages and disadvantages GDP has always been a useful tool

to measure the prosperity of an economy It may have some downsides, but no one can deny the simplicity of GDP It can break down an economy into a single number to measure that economy

However, since it does not recognize the nature of products, GDP is not a flawless calculation Consumers may purchase items of differing quality at various prices; not all materials are the same As a result, over time, GDP will increase due to waste and inefficiency Another downside of GDP is that it does not include some volunteer works When people do free work, GDP does not take it into account When people work for paid employee or contractor, they volunteer, which can lower GDP Despite that, GDP is still a well-known measure of economic health

Moreover, GDP considers just announced utilization Black market products, for example, motion pictures, medications and work paid for in real money are not detailed In this market, it implies some possible mistakes An economy will prosper with unreported goods but have a low GDP, which means it would not represent true happiness; nevertheless, exposed satisfaction

An alternative metric used to calculate the development of a nation’s economy is the Genuine Progress Indicator (GPI) There are some researches discuss the replacement between GDP and GPI This alternative indicator can also cover all the impact that GDP has However, GPI has it complemented by other figures that also show the cost of some adverse effects on economic activities such as crime cost, the ozone depletion cost, and another kind

of value The GPI measures the negative and positive impact of the environment and the social cost of production GPI data is developed based on green economics theory, considering the economic market as a part of the ecosystem

In COVID-19, there are several things that GPI can cover as the social distancing is happening to reduce the spread of this virus Before the COVID-19 happen, economy actions had some effect on the environment that caused it damaged very severely Furthermore, the GDP was “double counting” as the cost of economic activity and the value of cleaning up the damage was both counted in it At the same time, GPI can correct this fault by taking away the expense of natural harms going from the payment of contamination to the deficiency of standard assets brought about by other monetary action Hence, while GDP would fall when a stream neglects to be contaminated and, in this manner, nobody needs to clean that stream Through the decrease of more extensive contamination movement which

is occurring with diminished travel and financial action at present, GPI eliminates that twofold checking and pads that blow

The net amount of money gained by the families and organizations of the country is Gross National Income (GNI) It is used from year to year to measure and follow the abundance of a nation In addition to the pay it earns from overseas sources, the figure includes the overall national output of the country As a percentage of wealth, net public compensation Is an option for the net general product It calculates payment rather than yield The gross national income can be determined by adding pay from unfamiliar sources

to GDP A distinction between GNI and GDP can be seen in countries with a supportive foreign direct venture, foreign corporate presence, or global guide

Although GDP calculates the costs of final goods and services generated within the border, including national out-of-pockets, expenses and revenue, economists can determine GNI of a country on the basis of the amount of GDP and incomes, salaries and profits of national citizens obtained abroad and within the border It is also included the net royalties and grants receivable from overseas, according to the OECD (2020) As the COVID-19 is happening, GNI may have accurate data of social welfare In order to prevent the spread of the virus, social distancing makes the income of that nation reduce as labour are unemployed On the other hand, GDP is rise as the use of goods and services increase as the demand for people to rise

To sum up, GDP is an excellent alternative indicator that people can use it to measure social welfare However, GDP is not a perfect method to define the happiness of a country There are several other indicators which some research considered to replace GDP such as GPI and GNI From my point of view, GDP should be replaced by GPI as there are several countries use it instead of using GDP Also, genuine progress indicator can cover a lot of factors that GDP cannot

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https://www.investopedia.com/terms/r/realgdp.asp (Accessed: 25 November 2020)

2 Chappelow, J (2019) 'Nominal Gross Domestic Product', https://www.investopedia.com/

https://www.investopedia.com/terms/n/nominalgdp.asp (Accessed: 25 November 2020)

3 Willard, B (2011) '5 Reasons Why a GPI Should Replace the GDP | Sustainability

https://sustainabilityadvantage.com/2011/03/08/5-reasons-why-a-gpi-should-replace-the-gdp/ (Accessed: 25 November 2020)

4 (PDF) GDP: The GDP contrasted by Genuine Progress Indicators (no date) Available at:

https://www.researchgate.net/publication/328583503_GDP_The_GDP_contrasted_by_G enuine_Progress_Indicators (Accessed: 25 November 2020)

5 Holland, J (2005) 'Genuine Progress Indicator ( GPI )', pp 1–2 Available at: https://www.investopedia.com/terms/g/gpi.asp (Accessed: 25 November 2020)

6 The search for an alternative to GDP to measure a nation's progress – the New Zealand experience (no date) Available at:

https://theconversation.com/the-search-for-an-alternative-to-gdp-to-measure-a-nations-progress-the-new-zealand-experience-118169 (Accessed: 25 November 2020)

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https://gnhusa.org/serious-about-happiness/what-counts-during-covid-19/ (Accessed: 25 November 2020)

8 Boarini, R., Johansson, A and Mira D'ercole, M (2006) Alternative Measures of Well-Being Available at: http://www.oecd.org/els/workingpapers (Accessed: 25 November

2020)

9 Impact of COVID-19 on primary GDP aggregates, including employment - Statistics

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Impact_of_COVID-19_on_main_GDP_aggregates_including_employment (Accessed: 27 November 2020)

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https://www.investopedia.com/terms/r/realgdp.asp (Accessed: 27 November 2020)

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wiki/Phúc_lợi_xã_hội (Accessed: 27 November 2020)

12 Grover, S (2019) What Are the Advantages & Disadvantages of the GDP in Macroeconomics?, Bizfluent Available at:

https://bizfluent.com/info-8467424-advantages-disadvantages-gdp-macroeconomics.html (Accessed: 27 November 2020)

13 Gross National Income (GNI) Definition (no date) Available at: https://www.investopedia.com/terms/g/gross-national-income-gni.asp (Accessed: 27 November 2020)