Net Economic Welfare

Net Economic Welfare (NEW):

Samuelson has coined the notion of Net Economic Welfare. “According to Samuelson, “Net Economic Welfare (i.e., NEW) is an adjusted measure of net national output which comprises only consumption and investment items which contribute directly to the economic welfare”.

Since we become rich, usually, we prefer leisure to income. Whenever we allocate more time for leisure, gross national product (i.e., GNP) might come down. However welfare goes up. Therefore whenever we estimate GNP, we should include satisfaction, derived from leisure by providing it a value in Net Economic Welfare.

Women do a lot of work at home and it is not taken into account while computing GNP. However we should comprise that while estimating GNP. Only then, we will get an accurate picture of NEW.

In any society, there will be several illegal activities. (Example, drug trade). We must not comprise it in NEW. They are “social bads”

There are some underground activities. Those who earn enormous incomes (Example lawyers, accountants, & actors) might not report real income for tax purposes.

This unaccounted money (i.e., black money) should somehow be involved in GNP estimates. Or else, we will acquire a lower figure for GNP.

During the procedure of economic growth, there will be ecological pollution. To acquire NEW, we must deduct the cost of pollution from G.N.P.

The idea of Net Economic Welfare has become very significant in the study of National Income.


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