Gross Domestic Product

Why the Gross Domestic Product is Interesting

The Gross Domestic Product (GDP) is interesting because the data used to calculate the GDP does not measure the countries welfare. Researching the history and purpose might provide some clear insight to the use of the GDP.

Explanation of The Gross Domestic Product

In 2009, Satterlee defined Gross Domestic Product (GDP) as “the total market value of all the goods and services produced within the borders of a nation during a specified period.” It is calculated by adding (Exports minus Imports), Government Spending, Business Investment, and Personal Consumption Expenditures (Amadeo, 2013). The United States developed the GDP during the 1930’s to help overcome the Great Depression. It was then used to help plan the United States’ participation in World War Two to determine how long its resources would last to sustain the war effort. It was also used to determine utilization of the economy and convert areas underutilized to all-out munitions programs. (Schmit, 2009)

The Gross Domestic Problem

Stephan Schmidt’s article The Gross Domestic Problem is an interview with Lorenzo Fioramonti who teaches at the University of Pretoria. The article describes Professor Fioramonti’s perspective on the Gross Domestic Product. Professor Fioramonti states that many economists have tried to replace the GDP. He talks about how the GDP is a measure of economic output, a market measure related to price, then discusses things that are not included in the calculation of the GDP. He argues that the important elements such as services rendered within the household, the informal economy and voluntary activities are not used in the GDP calculation. He then goes on to say that all of these activities strengthen social cohesion and make economic growth possible. The Professor also discusses how the GDP does not measure the depletion of natural resources or environmental degradation. Such things as cooking and growing food, passing...