Economics Explained Why GDP Is Overrated & Nobody Should Care About It!
Oct 21, 2020
This podcast explores the limitations of GDP as a measure of economic prosperity and discusses potential alternative indicators. It discusses the challenges in calculating GDP, including the exclusion of the informal economy. Additionally, it delves into the shortcomings of GDP as an indicator of economic growth, and advocates for considering factors beyond economic output in measuring living standards.
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GDP: Not the Whole Story
- GDP measures an economy's productive output but doesn't tell the full story of wealth or wellbeing.
- It's like a car's tachometer showing engine revs without indicating if the car is moving or has wheels.
GDP Calculation Limits
- GDP is calculated by adding consumer spending, government spending, investment, and net exports.
- Its simplicity leads to errors, like counting intermediate goods or ignoring informal economies.
GDP Ignores Informal Economy
- Informal and illegal economic activities, which encompass over 60% of the global workforce, are often missing from GDP.
- This omission skews economic metrics, especially in developing countries with large informal sectors.