What are the limitations of using GDP as a measure of economic well-being?

What are the limitations of using GDP as a measure of economic well-being?

There are several limitations of using GDP as a measure of economic well-being. Firstly, GDP only measures the value of goods and services produced within a country's borders, ignoring factors such as income distribution, quality of life, and environmental sustainability. This means that GDP may not accurately reflect the overall well-being of a population.

Secondly, GDP does not account for non-market activities, such as unpaid household work or volunteer work, which can contribute significantly to a nation's well-being but are not included in GDP calculations.

Thirdly, GDP does not consider the underground economy or illegal activities, which can distort the true economic picture of a country.

Additionally, GDP does not take into account the depletion of natural resources or the negative externalities associated with economic activities, such as pollution or environmental degradation.

Lastly, GDP growth alone does not necessarily indicate an improvement in living standards, as it does not consider factors such as income inequality or changes in the cost of living.

Overall, while GDP is a useful measure for assessing economic production and growth, it has limitations in capturing the full extent of economic well-being and should be complemented with other indicators to provide a more comprehensive assessment.