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In conventional capitalism, the quantity often cited as a measure of the economic health of a country is the gross domestic product (GDP), defined as the total market value of all goods and services produced in a country in a given calendar year. Another closely related indicator is the gross national product (GNP), which is calculated as the GDP plus what domestic companies earn from activities abroad, minus what foreign companies make from domestic activities in that country. In other words, GDP is the sum of all goods and services produced by labor and property located in a country irrespective of who supplies them, whereas GNP is the sum of all goods and services supplied to a country’s residents, irrespective of where they are physically produced.

Some economists (commonly referred to as ecological economists) object to the GDP and GNP as true indicators of wealth, because they limit wealth to only the portion of market activities where income is generated. Functions such as charity and housework are not accounted for, whereas the costs of cleaning the environment and health care are included. Furthermore, there is no distinction between desirable and undesirable outcomes, i.e. they measure only money spent, not the value received. One million dollars spent on health care research will contribute as much to GDP and GNP as one million dollars used on building a refinery in a residential community.

A better measure of human welfare may be the net national welfare (NNW), defined as the total annual output of both market and non-market goods and services, minus the cost of externalities, minus the cost of depreciation of natural and human-made capitals used up in production.


(1) Toossi Reza, "Energy and the Environment:Sources, technologies, and impacts", Verve Publishers, 2005

Further Reading

Colander, D. C., Economics, 3rd E., Irwin-McGraw-Hill, 1998.

Bosselman, F., Energy, Economics and the Environment, Second Edition, Foundation Press, 2005.

Energy Economics, Science Direct Elsevier Publishing Company. Publishes research papers concerned with the economic and econometric modeling and analysis of energy systems and issues.

External Links

United States Association for Energy Economics (http://www.usaee.org).

International Monetary Fund (http://www.imf.org).

The World Bank (http://www.worldbank.com).