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DOES GNP MEAN GROSS NATIONAL PROBLEMS? Avecilla, Julienne Chong, Annie Michelle ECOMAN CASE BACKGROUND The case discusses different arguments on why GNP, as a measure of economic growth, is considered inaccurate. Cited in the case are the following arguments: The Role of Women Public Sector vs Private Sector Military Expenditure Exploitation of Irreplaceable Resources Environmental Considerations Remember: Gross National Product (GNP) is the measure of the output produced by factors of production owned by a country’s citizens regardless of where the output is produced. PROBLEM STATEMENT Given the limitations of GNP as a measure of economic growth, what other measures can be used to measure a country’s economic growth? GNP Used to determine a country’s economic status and rank in the overall global hierarchy of levels of national development (Hoogvelt, 1982:15) In the current age, it is the GNP measure that has dominated such ranking of nations into categories such as “least developed”, “developing”, “developed”, and so on (Haque, 2004) UNDERLYING ISSUES/ARGUMENTS Role of women Increased participation of women in the workforce has increased output in the private and public sectors of the economy and to that extent has increased the estimated growth in the real GNP and in per capital real income. The services that women now provide for industry and commerce continue to add to the value of GNP, the concomitant reduction of services they would otherwise have provided in their homes. LABOR FORCE PARTICIPATION RATE (WOMEN) Labor force participation rate is the proportion of the population ages 15 and older that is economically active: all people who supply labor for the production of goods and services during a specified period. UNDERLYING ISSUES Public sector versus private sector Second, since public goods tend to be overvalued as compared with those produced by the private sector, and since the output of the public sector over the last thirty years has grown appreciably as a component of GNP, it follows that the real growth of GNP over the period will be overestimated. UNDERLYING ISSUES Private sector output is measured by the PRICE people are prepared to pay for it. Public Sector output is measured by its COST. UNDERLYING ISSUES Military Expenditure Military expenditure is one of the largest items in public expenditure An increase in this category adds to the GNP but it cannot be consumed nor improve human-well being. UNDERLYING ISSUES 10 countries spending the most on the military 2013 (ascending order) Brazil - $36.2 billion India - $49.1 billion Germany - $49.3 billion United Kingdom - $56.2 billion Japan - $59.4 billion France - $62.3 billion Saudi Arabia - $62.8 billion Russia - $84.9 billion China - $171.4 billion United States - $618.7 billion UNDERLYING ISSUES Military Expenditure Economic orders have been established and maintained with aid of military force. However, it fails to directly raise individual welfare. So while military spending helps flourish the economy of a country because it allow other economic activities to progress (security), they are not valued for their own sake. Meaning that an increase in GNP because of military expenditures that does not mean that a nation is consuming and investing more. UNDERLYING ISSUES Exploitation of Irreplaceable Resources UNDERLYING ISSUES Environmental Considerations UNDERLYING ISSUES We can discuss here yung mga arguments sa case and defend each argument and add the following to explain each argument: Role of Economic Principles (Economic Framework) What are the relevant concepts, principles, models and theories to understand the issue? How can this framework help us better understand the issue? THOSE IN RED INDICATE THINGS INCLUDED SA REPORT GUIDELINES NI MA’AM … I THINK WE CAN INCLUDE THESE IN EACH OF THE ARGUMENTS/UNDERLYING ISSUES Importance of the Problem in Various Developing Countries Statistical summary showing the extent of the problem using various indicators Goals and Objectives Set out the likely goals and prioritize depending on value judgments Policy Alternatives Recommend policies and possible consequences ANSWERS TO QUESTIONS FOR ANALYTICAL THINKING: These statements imply a need for recording minuses as well as pluses to national accounts. What do you think should be taken off national accounts to arrive at a real measure of progress? Military Expenditures it depends on the country’s priorities If a country spends $500 Billion on military defence, the growth in GNP which is a contribution of this expenditure is not really reflective of a country’s economic growth ANSWERS TO QUESTIONS FOR ANALYTICAL THINKING: Professors Tobin and Nordhaus in a similar article in an American publication argue that there is also a need for adding activities that are not traditionally included in GNP figures. List the kind of things you think they may have in mind. http://www.nber.org/chapters/c7620.pdf Value of Leisure Time Value of Unpaid Work Deduct Value of Environmental Damage ANSWERS TO QUESTIONS FOR ANALYTICAL THINKING: In the mid-1970s the Economic Development Council of Washington, DC created an entirely new measure of wealth and health, namely the PQLI. The Physical Quality of Life Index bases its terms of reference on figures for life expectancy, literacy, and infant mortality. From these figures countries are rate on a scale of 1 to 100. Critically evaluate this index as a measure of welfare. ANSWERS TO QUESTIONS FOR ANALYTICAL THINKING: Suggest what you would like as a measure of welfare. GROSS NATIONAL PRODUCT http://www.investopedia.com/video/play/grossnational-product/ http://www.investopedia.com/articles/07/grossnational-product.asp Social and Cultural Issues of NIEO by Muzammel Huq http://www.abc.net.au/science/slab/trees/story.ht m http://profile.nus.edu.sg/fass/polhaque/gnpmyth.pdf https://www.greenleft.org.au/node/11174 http://worldlix.blogspot.com/2012/06/limitationsof-gnp.html GNP – Gawa ng Pilipino GDP – Gawa Dito sa Pilipinas https://zielonygrzyb.wordpress.com/2012/07/31/li mitations-of-gdp-as-welfare-indicator/ http://www.worldbank.org/depweb/beyond/global/ chapter2.html http://www.bbc.com/news/business-28322347 http://www.investopedia.com/exam-guide/cfalevel-1/macroeconomics/limitations-gdpalternative.asp http://www.nytimes.com/1991/04/05/weekinrevie w/ideas-trends-if-the-gnp-counted-houseworkwould-women-count-for-more.html TRENDS IN PHILIPPINE ECONOMY The economy grew 6.9% year-on-year in Q4 2014, bringing full year GDP growth to 6.1%.
