Does gdp provides a good measure of living standard?

Does GDP provides a good measure of living standard?

GDP or Gross Domestic Product is one of the first statistic measures we, as economists, learn to calculate and use in order to know how wellan economy (or in more general terms a country) is. In fact, according to classic economists, GDP- total market value of all final goods and services produced in a country in a given year- seems morethan enough to measure the value of an economy and its nation.

However this last statement is nowadays considered not entirely true, as it is somehow obvious that men do not live by GDP alone. Howwell off people is, also called the standard of living, usually refers to the level of comfort available to an individual, group or nation. It is impossible then, that exclusively the value of goodsand services available in an economy can measure this. Specially because there are many variables, not taken into account when calculating GDP, which make some countries better off.

This isexactly what “Measuring what matters”, an article dated on September 19th 2009 in “The Economist”, is trying to explain. According to this article, in recent years, there have been many economists tryingto figure out new measures that actually take into account all this variables. Such is the case of Nicolas Sarkozy and the commission he appointed to work on this field. Investigations made by thiscommission lead to some interesting conclusions:

The first important aspect that affects GDP as a measuring instrument is the fact that it bases the value of production entirely in prices. This notonly means that it overstates the value of production when not taking into account the depreciation of capital goods, but also, it seems as if everything in the entire world has a price, which isclearly not true! Environment, services such as health and education, even the black market, are valuable in an economy and are not part of GDP, but are nonetheless measured in household’s income or...