Welfare and the GNP

Abstract

For several years, the concept of gross national product (or gross domestic product, or national income), as measured by existing national and international conventions, has come under attack (indeed it has never been free from criticism). In a somewhat melodramatic form, the current attack has been described as ‘dethroning the GNP’. The concept of material product used in the Soviet Union and other ‘centrally planned’ countries is open to the same — even stronger — criticisms. The essential reason for these criticisms is that the conventional concepts fail to measure the ‘welfare’ of the population concerned — or changes in it. The conventional measurements ignore many activities which can be said to be ‘welfare-producing’ and include many activities which produce no welfare, or even detract from welfare. The criticisms come from many sources: from the development economists who find the comparisons of GNP per head between rich and poor countries misleading indicators of relative ‘welfare’ — and growth rates of GNP as either overstating or understating real economic and social progress; from those who feel that the emphasis on macro-economic aggregates distracts attention from the problems of distribution of income and wealth; from the social philosophers who dislike the materialistic connotations of GNP; from critics who feel that the GNP ignores the disamenities involved in much economic activity….