Introduction

Gross domestic product (GDP) per capita and related aggregate income measures are widely used to assess the economic performance of countries. Economic growth that measures the rate of change in per capita real GDP has become a standard economic indicator. Despite the popularity of economic growth as a measure of success, there is increasing recognition that it is an inadequate measure of a population's well-being. Higher economic growth does not necessarily mean a higher level of well-being.

GDP, as conventionally measured, excludes many factors that contribute to well-being while incorporating other factors that have an adverse effect on it. For example, GDP does not include nonmarket production in the economy. The contribution made by housewives to output can be quite substantial, but is not included in measuring GDP. As growth leads to increased air and water pollution, people spend more money protecting themselves from these ill effects. These expenditures are included in GDP, but they do not add to well-being. Instead, pollution contributes to people's ill-being.

Economic growth is important for well-being. It provides people with a greater command over goods and services, which translates into greater utility. Economic growth gives people more choices. However, these do not necessarily or automatically translate to well-being.

Furthermore, the benefits of economic growth are seldom shared equally. Some people may enjoy a large share of benefits, while many others may be completely bypassed by growth. Thus, economic growth does not necessarily imply a higher level of well-being for everyone in the society.