National income as a Measure of Economics Welfare 

GNP is not satisfactory measures of economic welfare because the estimate of national income do not include certain services and production activity which effect welfare discuss below some of the factors which affect human welfare but or not included in the GNP estimates.

Quality of Life

GNP estimates do not include the quality of life which reflects the community welfare life is overcrowded cities is full of tension, road are overcrowded. There is a loss in time, environment become polluted. There are the problem of water, power housing, transportation, etc. Crime spread. Life become complex and the quality of life deteriorated consequently social welfare is reduced but all these stresses and strain of city life are not included in the national income estimates.

Nature of Production

GNP estimates do not reflect the capacity of different Goods to provide different levels of satisfaction to the community. The  same amount of money spent on a nuclear bomb or on building across a river added equally to the national income. But they provide different levels of satisfaction to the community. A Bomb does not increase welfare while a dam increase welfare.

Leisure 

One of the important thing that affects the welfare of society is Leisure. But it is not included in GNP.  For example longer working hours may make people unhappy because their Leisure is reduced. On the country shorter working hours per week mein increase leisure and make people unhappy more or less leisure enjoyed by the community such as such me affect the total output of the economy but the value of leisure is excluded from the national income estimates.

Externalities 

Similarly there are externalities which tend to increase or decrease welfare but they are not included in GNP estimates. An externalities is cost or benefit conferred upon second or third parties as a result of acts of individual production and consumption. But the cost benefit of an externality cannot be measured in money terms because it is not included in market activities. 

An example of an external benefit is the pleasure one man drive from the neighbour's fine garden.  An example of external cost is environmental pollution caused by industrial plants. The former tends to increase welfare and the letter trends to reduce it. Since externalities are untreated interdependence they are excluded from national income extimates. 

Standard of Living

National income also does not reflect standard of living of the community which determine its welfare. If more National expenditure is incurred on the production of r and armanent arms and ammunitions and on capital goods and less on producing consumption goods, this difference is not reflected in GNP estimate. but the reduction in the production of consumption goods and tends to decrease the welfare of the people, while the increase in the expenditure on armanents and capital goods does not increase welfare.