Short educational video (Let's Chat) explaining three alternative measures to GDP: real GDP per capita, the Genuine Progress Indicator (GPI), and the Measure of Australia’s Progress (MAP). It defines each measure, explains how each adjusts or complements GDP (e.g., per-person averaging for GDP per capita; environmental, leisure, inequality and unpaid work adjustments in GPI; MAP as a multi-category dashboard covering individuals, economy, environment and social cohesion), and notes key limitations (subjectivity, data quality, lack of single summary statistic).
Chapters
All right. Hello, hello everyone and welcome to the third video in our series about the goal of strong and sustainable economic growth. Today we're going to be talking about alternative measures of economic growth. We're going to mainly focus on one, which is the key one that you should know, and then look at two other ones that kind of, they were in a previous study design. They're not really touched on specifically now, but they're still good to know in terms of how they address the limitations of gross domestic product as a measure of gdp. So let's get straight into them now with real GDP per capita. So this is relatively simple, but this is a really good thing to know about. Really good thing to be able to describe real GDP per capita is when they take real gdp, the figure for real GDP and divide it per person in the economy to try and gain a better measure of material living standards or average income earned within the economy. One of the limitations of real GDP is that if the population grows, GDP will grow because you have more people, they're going to buy more goods and services. More goods and services are going to be produced, you're going to have a higher level of gdp. People might not actually be better off. Overall living standards could be worse if population increased by 10% but production only increased by 3%, well 3% within the goal. But we might not have enough goods and services to go around. Therefore there could be a lot of other issues that come up from it. So this helps address that by giving us the average value of production per person in that economy to give us a better indication of if we are actually producing more or less. So real GDP per capita really helps categorize if material living standards are improving based on the GDP statistics. It still has all the other limitations that apply to real gdp. So things like it doesn't include non market activity and things like that, but it is a really good indicator of if material living standards are getting better overall. Next up we've got the Genuine Progress Indicator or gpi. So this makes adjustments to the GDP figure to reflect positive and negative changes to society's welfare of certain types of spending. So this is a really interesting figure because one of the biggest issues of our GDP stats is they don't take into account like environmental damage or, or things that negatively impact our non material living standards. So the GPI takes away some numerical value for environmental damage. If there has been reduced leisure time due to increased work hours, it takes some value away. If there's inequality in income distribution, it takes away some value and then it adds onto the GDP stats for ongoing contribution provided by durable items. So if you got a fridge, washing machine, etc. That you've bought that is still lasting and giving you benefit within your homes, they will add on value for that each year because that's durability that is helping you out. Something you bought and contributed to GDP years ago is still contributing. They also add on contributions from housework, parenting and voluntary work. They give a value to these forms of non marketed production because they are actually contributing to the economy even if it's not in a financial way. Some limitations is that the items adjusted are subjective, so a team just decides what should and shouldn't be added. And the accuracy of the data used to make adjustments can be questionable because they're making it based on their own judgments. The next alternative measure is the measure of Australia's progress, which is shortened to the map. It's not a single measure but rather a collection of measures. It has four main categories. So there's individuals, which looks at our health, education, work, culture and leisure. Looks at the economy and economic resources. So income, housing, productivity, inflation, the environment, landscape, air and oceans and living together. So it looks at family, crime rates, communication changes, transport, etc. And so with all of these, all it's doing is it's comparing them to see if they're getting better or worse. And it shows you, as you can see on the side in this very low res image, it gives you kind of an indication of if they are improving or getting worse. So you can see how a country is progressing. If you're getting worse in certain areas that might give a country a good indication of what changes they need to be made to make positive changes into the future. But some of the limitations of this is that it's not a single statistic. Some of the measures are subjective and there's inadequate statistical data to make really strong judgments based on this. That's why we don't use some of these as the main statistic and we still use GDP or real GDP most often. But it's really good to know that some of these exist to address some of those limitations of gdp to see that we are improving non materially as well as materially. So that's it for this video. It's a relatively short one. It's not things that you're going to be specifically asked about or you could be asked about GDP per capita, but the other two alternative measures you're never going to get a specific question about but, but they could be good to use in an answer about things that could be used to improve our economic growth or how we measure economic growth in future. VCAR can be tricky at times, so it's nice to be a little bit ahead of the curve. Other than that, thank you for watching. If you have any questions about these at all, feel free to leave a comment below or send me a message, send me a chat, send me an email. More than happy to help you. If there's anything that could be more useful for you, let me know. Other than that, next time we'll be talking about recent ad factors and how they've impacted economic growth. It's been great to have you here. Have a great day. Goodbye.
