THE GROSS DOMESTIC PRODUCT AND.pdf - Wikiprogress

Its greatest value is that it allows policy-makers to ask questions about thequality of economic growth that cannot be answered by traditional economicmeasures such as GDP. Once these adjustments are made, the GPI‟s pictureof the U.S. economy over the past two decades is less than rosy; althoughU.S. GDP has increased substantially over this period, the GPI has charted a45% decline in the U.S. economy.Again, much of the criticism surrounding the GPI centres on how it handlesits component parts. To list only a few of its critiques, it excludes mostgovernment spending (not all of which is intermediate or defensive), nonrenewablemetallic and non-metallic minerals, and renewable resources suchas forestry and fishing, and it does not deal with human capital.Furthermore, many of the prices (e.g., the value of unused resources) areinherently subjective. For instance, it places an equal value onunemployment and underemployment. As well, its list of adjustments can beconsidered either too restrictive or not restrictive enough. Finally, itpossesses the above-stated problem of aggregating many diverse factors intoa monetary bottom line.Table 1: Summary of the valuation methods for each GPI component+/- GPI Contributions Calculation MethodPersonal Consumption Largest component of both GDP and GPIIncome Distribution Gini coefficient of distribution of incomeamong households used as index numberWeighted PersonalConsumptionConsumption divided by incomedistribution index+ Value of Housework and Estimated number of hours per year timesParentingfixed dollar amount+ Value of Volunteer Work Estimated number of hours per year timesfixed dollar amount+ Services of ConsumerDurablesStock of cars, furniture, etc. times fixedpercentage+ Services of Highways and Stock of highways times fixed percentageStreets- Cost of Crime Direct cost to households plus defensiveexpenditures to avoid crime- Cost of FamilyBreakdownDivorce costs (lawyers plus effect onchildren) plus imputed cost of TV watching- Loss of Leisure Time Difference between hours of leisure in 1969and in other years times $11.20 per hourtimes labour force- Cost ofUnderemploymentMembers of labour force working fewerhours than they want times the number of