Econ 1023 Assignment 2 (5%) Due: Oct 22, 2019 Your Uncle Be

Econ 1023 Assignment 2 (5%) Due: Oct. 22, 2019 Your uncle believes that “money is everything

Your uncle believes that “money is everything”. At the family Christmas dinner, he argues that Canada should increase its production, trade, and income, and it should surpass other rich countries in increasing its GDP. You have taken a macroeconomic course at St. Thomas University, and you have learned the counterarguments to your uncle’s point of view.

Briefly, but fully and convincingly, explain the counter arguments to your uncle’s view on GDP growth. Make sure to include the shortcomings of GDP in your answer. (Answer in one to two double-spaced pages).

Paper For Above instruction

Gross Domestic Product (GDP) is often regarded as a primary measure of a country’s economic performance, capturing the total value of goods and services produced within a nation's borders. While high GDP figures can suggest economic strength, relying solely on GDP growth as an indicator of societal well-being and prosperity is flawed. Counter to your uncle’s view that increasing GDP and income should be the main focus, many economists argue that this approach neglects crucial social, environmental, and ethical considerations.

One of the primary shortcomings of GDP is its inability to measure the distribution of wealth within a country. A rising GDP could be accompanied by increasing income inequality, where the benefits of growth are concentrated among the wealthy, leaving the majority of the population behind. For instance, in countries like the United States, despite substantial GDP growth over the past decades, income inequality has widened, and many middle and lower-income individuals have seen little improvement in their standard of living (Piketty, 2014). Therefore, an increase in GDP does not necessarily translate to enhanced general well-being or reduced poverty.

Furthermore, GDP does not account for environmental degradation or resource depletion. Economic activities that boost GDP, such as exploiting natural resources or increasing industrial output, can lead to adverse environmental impacts like pollution, deforestation, and climate change, which threaten long-term sustainability (Costanza et al., 2014). A country prioritizing GDP growth without regard for environmental health risks undermining its future economic prospects and the health of its citizens.

Another critical limitation of GDP is its omission of social and health indicators that contribute to human well-being. For example, metrics such as life expectancy, education levels, and access to healthcare are vital for assessing societal progress but are not captured by GDP figures. Countries with high GDP may still experience high crime rates, inadequate healthcare, or low life satisfaction among their populations (Stiglitz, Sen, & Fitoussi, 2010). Therefore, GDP growth does not necessarily equate to a higher quality of life.

Moreover, an exclusive focus on increasing GDP can incentivize short-term economic activities that may be detrimental in the long run. Policies aimed solely at boosting production and consumption may ignore environmental sustainability, social equity, and cultural preservation. For example, rapid industrialization may generate significant GDP growth but at the expense of community displacement or loss of ecological diversity.

In conclusion, while GDP is a useful indicator of economic activity, it is an incomplete measure of societal progress. True prosperity involves balancing economic growth with environmental sustainability, social equity, and overall human well-being. Therefore, economic policies should incorporate a broader range of indicators to foster a more holistic approach to development, beyond mere increases in GDP and income.

References

• Costanza, R., d'Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., ... & van den Belt, M. (2014). Changes in the global ecosystem and their impacts on human well-being. Ecological Economics, 78, 3-5.
• Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
• Stiglitz, J. E., Sen, A., & Fitoussi, J. P. (2010). Report by the Commission on the Measurement of Economic Performance and Social Progress.