Critical Thinking Essay: Consider the definition of Gross Domestic Product. GDP

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Critical Thinking Essay:
Consider the definition of Gross Domestic Product. GDP is the market prices of all final goods
and services produced in a country in a given year, adjusted for inflation. This important
measure has a history (see Coyle 2019) and some criticism. For example, GDP does not account
for household production, environmental degradation, infrastructure, quality of life, or human
capital.
Another discussion suggests that GDP does not property account for innovation. The TED talk
by Erik Brynjolfsson, economist at MIT, suggests that the internet has made available many
products for free, but are not accounted in GDP because there is no market price. He includes
such examples as music available on the internet. These “free goods” improve utility but are not
reflected in GDP, and so GDP understates innovation and productivity.
https://www.ted.com/talks/erik brynjolfsson the key to growth race with the machines?
language=en
Suggested Reference:
Coyle, Diane.
“Measuring Progress.” Journal of Economic Literature, 2019, Vol. 57, No. 3, 659-
677.
Assignment:
1.
Listen to the TED talk by Brynjolfsson.
2. List the pros and cons of measuring economic output in a given year by market prices.
Consider potential inaccuracies in market prices such as monopoly, imperfect
information, and skewed income distribution, as well as the “goods” provided without
market price, such as household production, environmental quality and internet
The essay shall address the question of whether GDP is an appropriate measure of
economic “progress.” Discuss specific improvements and alternatives.

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