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Economist20060902 - Measuring economies Grossly distorted...

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Imagestate Measuring economies Grossly distorted picture Feb 9th 2006 From The Economist print edition It's high time that economists looked at more than just GDP THERE has been much hullabaloo about corporate accounting scams in America, yet perhaps the biggest accounting oversight of all time remains hidden in governments' own national figures. GDP per head is the most commonly used measure of a country's success, yet it is badly flawed as a guide to a nation's economic well-being. A new study in the OECD'S 2006 Going for Growth report considers some alternatives. Economists spend much time discussing how to boost GDP growth. The OECD itself drew attention this week to the widening gap between America's and Europe's GDP per head. Yet a nation's well-being depends on many factors ignored by GDP, such as leisure time, income inequality and the quality of the environment. GDP was developed primarily as a planning tool to guide the huge production effort of the second world war. It was never intended to be the definitive yardstick of economic welfare. Would another indicator change the ranking of countries or their relative performance over time? GDP is not even the best gauge of the monetary aspects of living standards. It measures the value of goods and services produced by the residents of a country. But some of the income earned in Britain, say, is paid to non-residents, while residents receive income from abroad. Adding net
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