Posted on : September 7, 2016
Views : 106
Category : Economics
Economic historian Dirk Philipsen says that GDP has been seen as the universal yardstick of progress and the highest goal of politics. But he argues that the world can no longer afford GDP rule, and it’s time now for a different measure. Today, increasing GDP is the highest goal of politics. But a finite planet cannot sustain blind and indefinite expansion. If we consider future generations equal to our own, replacing the GDP regime is the ethical imperative of our times.
  • Gross Domestic Product (GDP)
William Petty came up with a basic concept of gross domestic product (GDP) to defend landlords against unfair taxation during warfare between the Dutch and the English between 1652 and 1674. GDP is a measure of the size of an economy. It is defined as “an aggregate measure of production equal to the sum of the gross values added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)”. GDP estimates are commonly used to measure the economic performance of a whole country or region, but can also measure the relative contribution of an industry sector. This is possible because GDP is a measure of ‘value added’ rather than sales; it adds each firm’s value added (the value of its output minus the value of goods that are used up in producing it). The more familiar use of GDP estimates is to calculate the growth of the economy from year to year (and recently from quarter to quarter). The pattern of GDP growth is held to indicate the success or failure of economic policy and to determine whether an economy is ‘in recession’.
  • Determining GDP
GDP can be determined in three ways, all of which should, in principle, give the same result. They are the production (or output or value added) approach, the income approach, or the expenditure approach. The most direct of the three is the production approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people’s total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors (“producers,” colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers’ incomes. source: wikipedia.org