Download limitations of gdp

LIMITATIONS OF GDP
1. ONLY MEASURES MARKET ACTIVITY
Baking a cake at home is non-market, as are raising your
own kids, or painting your house
2. DISASTER REPAIRS COUNT AS GDP
House burns down, hired workers, rebuild it, this is added
to GDP. While Hurricane Katrina was technically good
for GDP, it’s bad for society as a whole
3. ECOLOGICAL COSTS ARE IGNORED
No cost to the lost shade of a tree, but tree’s lumber value
will be in GDP. Strip mining has no negative costs
according to GDP
(micro economics calls them
externalities)
4. UNPLEASANT COSTS ARE COUNTED
Divorce, funeral, illness, security equipment, again are all
considered to be “positive contributions” to GDP.
5. MONETARY VALUE CHANGES
Inflation changes the value of the U.S. dollar which
unaccounted for will throw off assumptions of previous
years’ GDP values. This is fixed by finding real values as
opposed to nominal ones.