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GDP as a measure of the well being of an economy has been criticised as not being an accurate measure of the quality of an economy, as it excludes non-commericial interactions (such as housework or volunteer work) and includes negative events (such as graffiti and cleaning up after it) as economic activity.

However, at the same time, GDP is a good predictor of a society's wellbeing.

Some people have suggested instead of relying on GDP as the primary measure of an economy's performance, we should use something like the Genuine Progress Indicator (warning: PDF).

The question is, how much traction does this idea have, in economic circles?

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  • $\begingroup$ To clarify your question somewhat, I would suggest noting that GDP is not a measure of economic welfare, it's a measure of output. It can, as you note, be used as a proxy for welfare, but it was not designed as a "measure of the well being of an economy," it was designed simply to measure national output/income. $\endgroup$ – dismalscience Mar 23 '15 at 19:19
  • $\begingroup$ @dismalscience - Sure, but politicians/etc tend to say things like 'Look at the increase in GDP - we're obviously doing a good job'. $\endgroup$ – dwjohnston Mar 23 '15 at 21:05
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This question is somewhat subjective but I'll attempt to provide an answer.

Real GDP is a very useful concept in economics. It provides a very good indicator on the size of an economy. It does have its limitations, some of which you have described.

Many economists are interested in measuring populations in different ways. At the moment, social mobility and inequality are getting a lot of attention. In analysing these issues, there is not as much value in observing the real GDP figure. Further treatment needs to be done.

Essentially, on a macroeconomic scale, GDP is very useful. When the analysis looks at individuals and concepts like welfare, it takes a far less prominent role in the analysis and other indicators are more commonly used.

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Jamzy has a good answer to which I would add that other alternative indicators have also their limits and measurement challenges. Especially if you want to compare between countries, GDP figures may be the only available. They have been recorded for a long time also so you can look at the evolution.

The idea of alternatives indicator has not taken much traction because no other indicator is readily available.

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