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RUNNING HEAD ECONOMICS
Economics Foundation
Name of the writer
Name of the institution
Economics Foundation
Article The Trouble with GDP
The article chosen is a research study about the economic field conducted for the purpose to put a reflection on the issue or trouble with the Gross Domestic Product. Mainly the article states that the Gross domestic product (GDP) is increasingly a poor measure of prosperity. It is not even a reliable gauge of production. In the mid of nineties, an economist at Yale University William Nordhaus looked at two different approaches or methods that are used for measuring the price of light over the last couple of centuries. It can be done by the process of adding the change in prices over a particular period that the citizens of a region or country bring in to make an item such as a light. But it is a fact that the price of light got increased with time for more than three to five times from 1800 to 1992 while the involvement of innovation also made the light more efficient than it was (The Economist, 2016). Hence if measurements are done on these bases by the cost-conscious concept, then it may lead to plummeted for more than a hundredfold for the physicist. Hence the concept of GDP may come to have an issue when analyzed from such a perspective.
Apart from this, Mr. Nordhaus also stated that any real reckoning of the real incomes and revenues must account for the massive variances in the amount of quantity and of the commodities we use up to an extent. In the case of example of light, the process of measuring the amount or rate of inflation based on costs of items that are used in the manufacturing of the light and on the basis of quantity-adjusted measure of light itself will lead to bring variance up to 3.6 percent in a single year (Coetzee, 2018).
Charles Bean says that when the concept of Gross Domestic Product is taken and considered as the amount of financial value added by an individual to him or her economy, adjusted for inflation, then this is pretty simple and straightforward. While the concept of GDP takes up a high-level complexity when it comes to the details and elaboration because there is a number of factors and thing to consider and taken into the process of measurement when measuring GDP.
Similarly, in the process of measuring GDP, the value of the commodity produced is required to be added with the number of net inputs used across a wider range of commercial and business lines by incrementing each one as per their significance in the economy. It means that both input and output material should be measured to get the GSP figure. In todays service-based economy and the world, the trickiness becomes more highly critical. It is not so or it is not the issue that such calculations are difficult to do but the concern is about things that may get worse (The Economist, 2016). Hence and that is why the new lighting products show up the stats in the case when individuals start buying things in sufficient amount or volume.
The modern concept of GDP is as the sum or private utilization, investment, and spending of the government while the government spending is treated as the cost to the private sector in this modern concept and that is why the GDP may fall when this spending level goes up. On the other side, the GDP gets concerned with supply management during wars. While the effect of ideas of Keynes and their influence became a measure for production, not welfare where a measure is created when the survival was at the stake took less importance and notice of matters and items such as amount of assets depreciation, individuals achievements, and environmental patterns, etc. (Brynjolfsson, and McAfee, 2011) While measuring economic welfare also counted for some spending of state while environmental concerns should be involved as well. As that is why it is almost clear that Kennedy was right.
Further, the concept of finance is another activity that includes payments for service directly such as banks incomes, etc. and that is why the fault with GDP comes to see sometimes. Despite this, a change in the price also impacts the sales and purchase of a product which must be considered all the time. While in the case of ignoring this case, the concept of price becomes wrong. While these adjustments can be found tough to be done for services than the visible commodities as Boskin states that new products are a newer headache. But to value free digital services, the two possible approaches given by Sir Charles can be crucial almost all the time as they estimate spend time on the internet and rising traffic.
These matters do not invalidate the concept and use of GDP but set a direction for the changes in technologies and their varying impact with time when measuring GDP. Similarly, the revolution in different sectors also has a huge role in the process and measurement. Hence Sir Charles says that The problem is that, as things stand, GDP risks serving all its purposes ever-less well. (The Economist, 2016). Hence and to conclude, the challenge accounts for the massive changes in the range and quality of goods and services we use. But that finds approaches to more approachable and readily compare hand-held e-mail with the fax machine, self-driving car with a jalopy, vinyl records with music-streaming services and custom-made prosthesis with health-service crutches
Article When GDP Wont Do A New Method for Measuring Digitals Value
This article is the study aimed to figure out a new method or approach to measure the value of digital in case the Gross Domestic Product does not do.
A large number of measures of the economic performance and position to inform policies and decisions of the government body can be found based on the GDP. But a huge issue exists and raises that GDP does not count and captures the amount and shares of service and one of the keys and complex solutions that categorizes the new economies. A number of issues have raised in todays internet-based economies because measuring the value of online resources such as articles and apps etc becomes a critical challenge (Wladawsky-Berger, 2019). While it cannot be denied that GDP ignores these factors and items up to an extent while these should be accounted as we develop more digital goods when spending time on online platforms and the internet.
No doubt that there is a number of major and minor problems when it comes to measurement and keeping our statistics and this is one of the critical and major problems in todays advanced and internet-based world and economies.
The marginal cost of delivering digital goods through the source called the internet is the very first and initial problems and that is pretty close to Zero. It is also a fact that the online information gets updated almost every minute while the cost of it is much lower when it comes to its comparison with the physical counterpart (Gantz, Reinsel, 2012).
Another challenge is how the value of goods can be measured that value is basically zero. For the purpose to do so, the researchers Mr. Brynjolfsson, Avinash Collis and Felix Eggers came with the introduction of a novel method for this particular measurement. In principle, the measurement of consumer surplus gives a direct measure of the value of digital goods. In this research study, the author worked and use all of the three large-scale and mainly used online surveys that cover around 65,000 people for the purpose to measure consumers willingness to accept monetary compensation for losing access to various kinds of digital goods for a certain time period (Wladawsky-Berger, 2019).
Hence, the importance of online search engine and email is huge as they add a lot to the jobs and the results state that the digital economy contributes more consumers value than the realized when we look at the last 15 years when the presence of digital services was not so huge and strong (Wladawsky-Berger, 2019).
References
Brynjolfsson, and McAfee, 2011.Race against the Machine How the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy. Brynjolfsson and McAfee.
Coetzee, 2018. Slide-in GDP growth the sign of an economy in trouble. Farmers Weekly,2018(18037), pp.25-25.
Gantz, Reinsel, 2012. The Digital Universe in 2020 Big data, bigger digital shadows, and biggest growth in the Far East.IDC iView IDC Analyze the future,2007(2012), 1-16.
The Economist, 2016. The Trouble with GDP. Available at HYPERLINK https//www.economist.com/briefing/2016/04/30/the-trouble-with-gdp https//www.economist.com/briefing/2016/04/30/the-trouble-with-gdp (Accessed 1 February 2020).
Wladawsky-Berger, 2019.When GDP Wont Do A New Method for Measuring Digitals Value,WSJ. Available at HYPERLINK https//blogs.wsj.com/cio/2019/05/24/when-gdp-wont-do-a-new-method-for-measuring-digitals-value/ https//blogs.wsj.com/cio/2019/05/24/when-gdp-wont-do-a-new-method-for-measuring-digitals-value/ (Accessed 1 February 2020).
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