why income is not only the criteria to evaluate the overall development? Explain in detail.
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Arguments against Per Capita Real Income:
The real per capita income, a measure of economic development has been severely criticized by Jacob Viner, Kuznet etc.
(a) According to Meier and Baldwin, “If an increase in per capita income were taken as the measure of development, we would be in the awkward position of having to say that a country had not developed if its real national income had risen, but population has also risen at the same time.”
If in a country an increase in national income is offset by the increase in population, then we would be bound to say that no economic development has taken place. Similarly, if national income in a country has not gone up but population has reduced due to epidemic or war, in that case we would be bound to conclude that economic development is taking place.
(b) When we divide national income by population, the problem of population in that case is ignored. It confines the scope of the study.
(c) In this measure, distributive aspect has been ignored. If national income goes up but there is unequal distribution of income among different sections of the society, in that case rise in national income will be meaningless.
(d) In the underdeveloped countries where per capita income is regarded as a measure of economic development, with the increase in per capita income of these countries, there is also increase in unemployment, poverty and income inequalities. This cannot be regarded as development.
(e) Economic growth is multi-dimensional concept which involves not only increase in money income but also improvement in social activities like education, public health, greater leisure etc. Such improvements cannot be measured by changes in per capita real income.
(f) The data of per capita national income are often inaccurate misleading and unreliable because of imperfections in national income data, and its computation. That way, per capita real income cannot be free from weaknesses. Despite these drawbacks in the measure of real per capita income, many countries have adopted this measure as an indicator of economic development.
Arguments in favour of per Capita Real Income:
The aim of economic development is to raise the living standard of the people and through this to raise consumption level. This can be, estimated through per capita income rather than national income. If national income of a country goes up but the per capita income is not increasing, that will not raise the living standard of the people. That way, per capita income is a better measure of economic development than the national income.
The increase in per capita income is a good measure of economic development. In the advanced countries, per capita income has been on continuous increases because the growth rate of national income is greater than the growth rate of population. This has raised the economic lot of the people. In underdeveloped countries, there is very less capacity to produce per head. So, as the capacity to produce goes up these economies proceed towards economic development.
Increase in per capita income can be better index of an increase in the welfare of the people. In advanced countries, national income has increased much faster than the growth rate of population. It means the per capita real income has been constantly increasing and this has led to the increase in welfare of the people. That way, per capita income
The real per capita income, a measure of economic development has been severely criticized by Jacob Viner, Kuznet etc.
(a) According to Meier and Baldwin, “If an increase in per capita income were taken as the measure of development, we would be in the awkward position of having to say that a country had not developed if its real national income had risen, but population has also risen at the same time.”
If in a country an increase in national income is offset by the increase in population, then we would be bound to say that no economic development has taken place. Similarly, if national income in a country has not gone up but population has reduced due to epidemic or war, in that case we would be bound to conclude that economic development is taking place.
(b) When we divide national income by population, the problem of population in that case is ignored. It confines the scope of the study.
(c) In this measure, distributive aspect has been ignored. If national income goes up but there is unequal distribution of income among different sections of the society, in that case rise in national income will be meaningless.
(d) In the underdeveloped countries where per capita income is regarded as a measure of economic development, with the increase in per capita income of these countries, there is also increase in unemployment, poverty and income inequalities. This cannot be regarded as development.
(e) Economic growth is multi-dimensional concept which involves not only increase in money income but also improvement in social activities like education, public health, greater leisure etc. Such improvements cannot be measured by changes in per capita real income.
(f) The data of per capita national income are often inaccurate misleading and unreliable because of imperfections in national income data, and its computation. That way, per capita real income cannot be free from weaknesses. Despite these drawbacks in the measure of real per capita income, many countries have adopted this measure as an indicator of economic development.
Arguments in favour of per Capita Real Income:
The aim of economic development is to raise the living standard of the people and through this to raise consumption level. This can be, estimated through per capita income rather than national income. If national income of a country goes up but the per capita income is not increasing, that will not raise the living standard of the people. That way, per capita income is a better measure of economic development than the national income.
The increase in per capita income is a good measure of economic development. In the advanced countries, per capita income has been on continuous increases because the growth rate of national income is greater than the growth rate of population. This has raised the economic lot of the people. In underdeveloped countries, there is very less capacity to produce per head. So, as the capacity to produce goes up these economies proceed towards economic development.
Increase in per capita income can be better index of an increase in the welfare of the people. In advanced countries, national income has increased much faster than the growth rate of population. It means the per capita real income has been constantly increasing and this has led to the increase in welfare of the people. That way, per capita income
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