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Summary of the Article

question 54

Multiple Choice

Summary of the article:
Grossly distorted picture
It’s high time that economists looked at more than just GDP
Economist.com
From The Economist print edition
February 9, 2006
Although GDP per capita is the most commonly used measure of a country’s success, many economists
believe it does not give an accurate measure of a nation’s economic well-being. In its 2006 report Going for
Growth, the Organisation for Economic Co-operation and Development (OECD) discusses some alternative
measures to GDP. Focusing on the growing gap between GDP per capita figures in the United States and
Europe, the OECD suggested different ways to measure the well-being of a nation, taking into consideration
factors ignored in GDP calculations. These factors include leisure time, income inequality and the quality of
the environment.
Leisure time can play an important role in determining an individual’s well-being. Although the United
States is one of the world’s wealthiest nations, its workers have longer work hours and less vacation time
than most other nations’ workers. Adjusting GDP for leisure time significantly narrows the per capita gap
between the United States and most European nations. In considering income inequality, the OECD has
attempted to adjust GDP based on income distribution. The adjustments depend on how much a nation’s
citizens care about inequality. The OECD found that in nations where people are concerned about income
inequality, the gap between the United States and most other wealthy nations is significantly reduced since
the distribution of income is more widely varied in the United States. In countries where income inequality is
not as important to people, the gap is much smaller. Environmental quality is also ignored in GDP
calculations. Many economists believe that GDP should be adjusted downward to account for pollution and
the use of non-renewable resources, but no measurement standard currently exists to adjust GDP for these
environmental issues.
The OECD concluded that GDP is not the best measure of well-being, and although it may be the best
available on a timely basis, other factors including those mentioned above need to be considered in addition
to GDP to give a more accurate picture of economic well-being and the disparity of well-being between
nations.
-According to the Application, the most commonly used measure of a nationʹs success is

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