Reference no: EM133377126

Case Study: Is GDP Biased against WQmen? Although in the example in the book a house spouse is a man, the reality is that most house spouses are women. The fact that GDP doesn't include the work of house spouses ts seen, by some, as a type of discrimination against women who work without pay at home since their work is ·not counted as part of the domestic product. One answer for why It is not counted is that housework does not involve a market transaction and hence could not be measured: That makes some sense, but does not explain why the services that houses provide to homeowners are estimated and in• eluded in GDP. The answer is that it can be estimated, and my suspl• cion is that not including house spouses services in GDP does represent the latent discrimination against women that was built into the culture in the 1930s when national income accounting was first developed. That latent discrimination against women was so deep that it wasn't even noticed. Anyone who has seen the movie Rosie the · Riveter, which shows government programs to get women out of wartime employment and back Joto their rote in the home, we have a good sense of the cultural views of people in the mid--1900s and ea.rller. 111 thinking about whether GDP is biased against women, it is important to remember that the concepts we use are culturally determined and,· over time, as cultural views change, the concepts no longer match our changed views. There is no esca•ping the fact that language is value-loaded. But so, too, is· our attempt to point out the values In language. There are many other ways in which GDP reflects arbitrary choices and discrimination against groups; The major discussion of the fact that latent discrimination against women is embodied in GDP accounting itself reflects our current values, just as not including house spouses' work reflected earner values. Finally, let's consider the work of a house spouse. (See the box "Is GDP Biased Against Women?" for further discussion of this issue.) How much value does it add to economic activity in a year? Clearly, if the house spouse is any good at what he or she does, a lot of value is added. Taking care of the house and children is hard work. Estimates of the yearly value of a house spouse's services range from $35,000 to $130,000, and some estimate that including housework in the national accounts would raise GDP more than 50 percent. Even though much value is added and hence, in principle, house spouse services should be part of GDP, by convention a house spouse contributes nothing to GDP. GDP measures only market activities; since house spouses are not paid, their value added is not included in GDP. This leads to some problems in measurement. For example, suppose a woman divorces her house spouse and then hires him to continue cleaning her house for $20,000 per year. That $20,000 value-added, since it is now a market transaction, is included in GDP. The house spouse example shows one of the problems with GDP. It also has other problems, but these are best left for intermediate courses. What's important for an introductory economics student to remember is that numerous decisions about how to handle various types of transactions had to be made to get a workable measure. Some Complications The above presentation of aggregate accounting makes it look as if measuring aggregate output is quite simple-just measure consumption, investment, government spending, and net exports. Add them together and you have GDP. Conceptually, it is that simple, but, in practice, complicated conceptual decisions and accounting adjustments have to be made to ensure that all final production is included and that no double counting takes place. This leads to complicated accounting rules and alternative measures to account for different methods of measuring different concepts. Let me briefly introduce you to two of them.

Question: Mention half paragraph on what did or did not reflect the real world as you know it. The important part is to think critically about the material.