Is GDP a Good Measure of Economic Well-Being?
The GDP (gross domestic product) is not considered to be a good measure of economic well-being by many because it only measures the sales and income from economic purchases rather than looking at any moral implications. An example might be an increase in gun sales, which raises the GDP and would be considered positive; however, that raise in gun sales might have been due to sales among the criminally-minded.
These kinds of moral implications are not measured in the GDP. Furthermore, the GDP does not measure the kind of wealth found among the citizens. A third-world country could see a rise in its GDP over a period of years without the quality of life improving for any of its citizens. In this case, the GDP would not be a true indicator of economic well-being. The GDP does not make it possible to see where wealth is distributed either, so it is impossible to know whether or not there are large gaps in income between classes of people.
The GDP has always been based on market transactions alone, so actions that might be ultimately harmful to society can be seen as positive in the GDP if it raises the amount of money that is coming through the markets. This also makes it impossible for the GDP to distinguish real wealth from phantom wealth.