Why GDP is not a good measure of welfare?

consider the definition of GDP: The gross domestic product is the market value of all the final goods produced in the entire country in the course of a year.It is inaccurate in two ways. First, because there is usually no market for the things that government produces (the U.S. Postal Service being one of the exceptions), government spending on goods and services is valued at cost rather than at market prices. Second, because many goods and services are not bought or sold, even though they would have a market value if they were, these goods and services are not counted in GDP.

Many government programs actually destroy value rather than create it. There would still be a major problem with GDP as a measure of wellbeing. That problem arises because GDP does not take into account the value of leisure.Ask yourself whether you would be better off if you could buy the same goods and services as before by working half as much. Here, real GDP understates well-being.

Focusing on GDP can lead us astray from sound economic reasoning. The first discussion was of the wisdom of Keynesian fiscal policy—having the federal government spend money to add to GDP.

If, instead of seeking GDP, we ask of each government policy, "What will it cost and how much value will it create?" we will come up with better policies. The concept of GDP, handled carefully, can be useful. But for many people, and even many good economists, GDP has been used to judge wellbeing even when using it that way leads to highly misleading conclusions.