Question

Identify and discuss at least two environmental factors you think should be included in the measure of GDP and explain why. (don’t discuss political, social, cultural, educational, and economic issues)

Answer 1

ANSWER:

GDP is an indicator of a society’s standard of living, however gives a rough indicator as it does not directly account for leisure, environmental quality, levels of education and health, activities conducted outside the market, increases in variety, increases in technology, changes in inequality of income, or the negative or positive value that society may place on some types of output. Moreover it makes no provision for factors like the depletion of mines and forests; or air pollution from factories.

The environmental indicators measure factors such as the pollution cost, climate change cost, and net changes cost in natural resources. Increased pollution certainly decreases the quality of life. However pollution added to air and water quality are not bought and sold in markets, thus GDP does not reflect this downside of its economic growth. Moreover finite (non-renewable) natural resources also are overlooked in calculations of GDP. If more oil will be extracted today, there will be less oil availability in future, however this fact is ignored in GDP. In my opinion these environmental degradation and resource depletion must be included in the measure of GDP because it affects the way we evaluate the net income and well-being.