GDP is the sum of all income earned in a country during a year. Alternatively, it can be thought of as the value of all production in an economy during

GDP is the sum of all income earned in a country during a year. Alternatively, it can be thought of as the value of all production in an economy during a year. But do income and production measure happiness? The way we measure GDP can both overstate and understate people’s happiness and well-being. It understates economic activity and well-being when it doesn’t take into account production that is not exchanged in a market (grandma providing free baby-sitting) and leisure time. It overstates well-being when two otherwise identical activities are measured the same even though one produces more pollution.

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