Problem Set #5 - ECON 162b 90,91 Fall 2007 Allison Kim Due:...

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ECON 162b – 90,91 Allison Kim Fall 2007 Due: October 26 th , 2007 1. a. According to the website, GDP is not a good measure of economic welfare. GDP measures the quality of life inaccurately, and considers crime, divorce and social breakdown as an economic gain, because the social breakdowns result in monetary exchanges. GDP is also inaccurate because it doesn’t take increasing inequality, pollution, health issues and environmental problems into account; all of these factors influence the quality of life, and GDP doesn’t even consider these factors. It simply measures the quantity of certain factors that may influence the quality of life, but the quality of life must be measured both quantitatively and qualitatively. b. The Index of Sustainable Economic Welfare is an indicator of economic welfare that tries to measure the quality of life. It attempts to measure the economic activity that can deliver increases in the quality of life. It covers many areas that GDP has neglected to cover, including unpaid household labor, environmental damage and income inequalities. It is calculated by assigning financial costs to non-financial impacts, such as climate change, pollution, income inequality, domestic labor, health and even ozone depletion. By assigning these factors certain costs, it can subtract the negative costs from what would have been considered the general quality of life. I
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This note was uploaded on 04/13/2008 for the course ECON 162B taught by Professor Christianson during the Fall '08 term at Binghamton University.

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Problem Set #5 - ECON 162b 90,91 Fall 2007 Allison Kim Due:...

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