Measurable Economic Welfare

Measurable Economic Welfare

Measurable Economic Welfare (MEW) was developed by William Nordhaus and James Tobin in 1972 to overcome some limitations of the Gross Domestic Product (GDP). MEW makes some changes to the GDP in order to ensure it reflects economic welfare. Factors that can increase citizens’ welfare/well-being are added to the GDP while factors that can reduce welfare are subtracted. The factors that can improve the well-being of the citizens which are ignored by the GDP include leisure time, underground economy output and unpaid work. Factors that are deducted because they reduce well-being include environmental damage.

MEW = GDP + Leisure + Unpaid work – Environmental damage