Can you think of any limitations of GDP/GNI? Is it an ideal measure of social development?/ Kim Seonghui

Q. Can you think of any limitations of GDP/GNI? Is it an ideal measure of social development?


A. First of all, Let's summarized the definitions of the two indicators. I found these in an economy article. GDP is income from within a country's borders. It's a combination of all the production that took place on land-based on the territory.
GNI refers to the income earned by the entire nation. The GNI is based on the people's standards and how much the country's people earned, whether at home or abroad. Therefore, it does not include income earned by foreigners or foreign companies in that country.
 
The limit of GDP includes income that foreigners or foreign companies have earned from entering our territory but is excluded if Korean people or companies have earned income from overseas. That is, it is a territorial-centered indicator. Today, there are many multinationals, and GDP does not include or include the income generated by these multinationals, making it difficult to measure how much a country has earned. On the other hand, the GNI is based on the people's standards, and how much the people of that country earned regardless of the location. Therefore, the income earned by foreigners or foreign companies in Korea is not included. Nevertheless, it is difficult to make clear measurements. For example, even income earned by Koreans living in other countries goes into GNI, but it is hard to see it as a complete indicator of the economy because the Koreans are not doing economic activities in Korea.
 
Both of these cannot be ideal indicators for measuring social development. First of all, two indicators are indicators of economic development. And We can't sure about economic development always means of social development. I think it is really difficult to measure social development objectively.

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