In Economics, the most important thing is to know the difference between GDP and GDP per capita – Economy

If you need to know one thing about economics, know the difference between GDP and GDP per capita. GDP measures economic activity, depending on the size of the population and its productivity.

Populous countries have a high GDP, which does not mean that their citizens live well. What matters is GDP divided by population, GDP per capita. He who directly and indirectly determines human development.

Low GDP countries can have high GDP per capita: GDP is small, but population is even more. And then the GDP per person is high.

That’s why you’d rather live in Iceland than in India or Indonesia. India has the 3rd GDP in the world, Indonesia the 7th, but still a consequence of having a lot of people (respectively, 2nd and 4th largest populations). GDP per person? 128th and 101st. HDI? 131st and 107th. Iceland, with only the 148th GDP in the world, is at the top of GDP per person and HDI. Few people.

Governor Flávio Dino, of Maranhão, left office last week. When he applied 8 years ago, he set as an informal goal to raise the state’s HDI in ten positions: from the worst in Brazil (26th) to 16th position in 4 years. Because that was the place in the GDP ranking. If Maranhão was the 16th “richest” state, it should have the same position in human development. There would be a gap between the two classifications, which would be explained by bad policy and income concentration.

A modernizing voice in PCdoB, he gave unquestionable priority to education and even launched a program literally called “Mais IDH”. But Maranhão continued in the same position in the HDI, after 8 years.

What went wrong? Anything. Let’s say the objective was a mistake. Maranhão is populous (12th in the country), hence its GDP is relatively higher than that of other states (16th in 2014). Per person, GDP per capita is the 27th in the country – almost the same place in the Human Development Index. There was no moat. The HDI takes this type of average into account, not total GDP.

An aggregate number was looked at as a target for a number per inhabitant. It is not surprising that management progress has not been reflected in the established objective.

We could make the same comparison as before with Brazil and Belgium. There are those who think that in Brazil people live badly just because of inequality, after all, the GDP is one of the largest on the planet. But the GDP is high (8th) in part because the population is large (6th). GDP per head does not amount to much (85th). The wrong reading generates unreasonable proposals at the national level. The devil with GDP is that it has a denominator.

* DOCTOR IN ECONOMICS

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