economics presentation
TRANSCRIPT
Comparison between GDP and alternative economic indices
Presented by:Abdul ALRSHID
Daniel Alejandro RINCON BONILLAOmar HAMIE
Miguel Antonio CARO RINCONBertille LETIERCE
Soham BISWASKexin RAN
Content
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Content
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Gross Domestic Product (GDP)● GDP index: measure of countries overall
economic output.
● Definition: The monetary value of all finished goods and services produced within a country's borders in a specific time period.
● When Developed: GDP was developed as an indicator of market activity during the Great Depression and war-planning tool during the Second World War.
● Primary Objective: To stimulate industrial production.
● Creator: Simon Kuznets
How to calculate the GDP
GDP = C + G + I + NX
Content
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Alternative indices
❏ Gross National Happiness Index❏ Happy Planet Index❏ The Big Mac Index❏ Social Progress Index❏ Index of Sustainable Economic Welfare❏ Human Development Index
Gross National Happiness Index (GNH)
GNH: sum of economic output plus:
● Net environmental impacts● Spiritual and cultural growth of citizens● Mental and physical health● Strength of the corporate and political
systems
Happy Planet Index● Happy Planet Index (HPI): measure of
human well-being and environmental impact.
● Weighted to give progressively higher scores to nations with lower ecological footprints.
● Unlike GDP and HDI: considers environmental sustainability.
● Unlike GDP: a country’s ultimate aim is not wealth, but happiness and health.
HPI 2011Source: libertarian book club
The Big Mac Index
● Introduced in “The Economist” in September 1986 by Pam Woodall.
● To measure the Purchasing Power Parity (PPP) between 2 currencies.
Limitations:● Big Mac's price is decided by the McDonalds
corporation and can greatly affect the Big Mac index.
● Big Mac differs across the world in size, ingredients and availability.
Social Progress Index
● SPI: measures the extent to which countries provide for the social and environmental needs of their citizens.
● Based on three dimensions:
❏ Basic human needs (nutrition-medical care-water-air-sanitation-safety-shelter).
❏ Foundations of well being (ecosystem sustainability-health and wellness-access to knowledge-access to information and communications).
❏ Opportunity (personal rights-access to education-freedom and choice-equity and inclusion).
Index of Sustainable Economic Welfare (ISEW)
● ISEW index: Intended to replace the GDP and its extension of the Genuine Progress Indicator (GPI). Which includes social and environmental factors to the GDP.
● How to measure:
● When developed: Developed in USA in 1989 by Cobb and Daly.
● Primary objective: explain why an increase in production does not necessarily lead to an increase in welfare.
● Countries using it: USA, UK, Germany, Austria, British Columbia, Sweden, Chile and Finland.
Content
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Human Development Index (HDI)
● HDI: ranks countries' levels of social and economic development.
● When Developed: Created in 1990 and it was published by the United Nations Development programme (UNDP).
● Primary Objective: mainly used to rank countries into 4 human development groups, (low, medium, high or very high).
● Creators: Amartya Sen and Mahbub ul Haq
Source: human security index
How to calculate the HDINew method (2010) Based on three criteria:
● Life Expectancy Index
● Education Indexo Mean years of schoolingo Expected years of schooling
● Income Index
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Content
Ranking HDI vs GDPTop 15 Countries measured by HDI: Bottom 15 Countries measured by HDI:
Ranking GDP vs HDI Top 15 Countries measured by GDP: Bottom 15 Countries measured by GDP:
Advantages and Disadvantages GDP vs HDI
1. Definition of the GDP2. Alternative indices3. HDI4. Comparison between GDP and HDI5. Conclusion
Content
Conclusion
● Despite some special cases, GDP per capita (PPP) and the Human Development Index are closely correlated.
● We can argue that some countries learnt how to
transform the growth into human benefits, however the opposite can also be true.
● Unsure about the direction of causality.
Bibliography● Geniune Progress Indicator. Available in :
http://www.absoluteastronomy.com/topics/Genuine_Progress_Indicator● Human Development Indicators. United Nations Development Program.
Available in: http://hdr.undp.org/en/data/map● Social Progress Index. Wikiprogress. Available in:
http://www.wikiprogress.org/index.php/Social_Progress_Index● The Big Mac Index. The Economist. Available in:
http://www.economist.com/content/big-mac-index● Happy Planet index. Available in:
http://www.happyplanetindex.org/● Index of sustainable economic welfare. Available in:
http://www.ivm.vu.nl/en/Images/AT5_tcm53-161576.pdf