GDP can't buy you happiness--so should economists start tracking GNH?

10/16/2009 8:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Would we all be happier if economists measured happiness?

I spent a lot of time thinking about that on a camping trip this weekend. (Hey, it was really cold and I had trouble sleeping.)

My friend Pamela had set my thoughts down this track by saying “You know, I don’t need all the stuff I have” as we watched the sun sink behind the Pennsylvania mountains.

It’s the kind of thing you say routinely on your first day out of the city standing around the campfire. After a few days, in my experience, the remark is likely to be met by protest ‘What about hot showers?” What about coffee without bugs in it?”

But this time, on this camping trip during the Great Recession, the sentence hung there. Gathering meaning (but unfortunately not giving off any heat) in the cold October air. (Have I mentioned that it was cold?) . Many of us have thought long and hard, probably in the deep of the night, about what we could do without—if we had to. I know I have.

And we’ve thought about the flip side of that: What of what we own, of what we spend money on, is worthwhile and makes us happy? More than occasionally these days I feel that some of the consuming I do is just habit. I can count on the fingers of one hand the things that I own that in and of themselves give me pleasure. The best of the rest gets some important job done. Much of the rest is, well,  just clutter.

From a purely economic point of view my dissatisfaction with what I own and my occasional dismay at how much I consume are relevant only if they lead me to shop less. Then, my lack of satisfaction can lead to a slowing economy and, at the worst, to a falling GDP.

GDP, gross domestic product, famously doesn’t care about how happy we are with the results of our economic activity.

Hurricanes, a frequent bringer of misery, provide a boost to GDP as the devastated survivors buy things, boosting the economy, to replace all that they’ve lost. Spending to treat preventable disease adds to GDP while preventing the disease in the first place with simple changes in life style doesn’t.

When we hang on the most recent quarterly report on national GDP, we feel better if the government announces “GDP climbed at an annual rate of 2% in the last quarter” and we feel if not depressed at least ill at ease if the report is “GDP contracted by 2% in the most recent quarter.”

Our sense of well-being is connected to these reports on the economy.

And, perhaps more importantly, in our politics and economics we treat increasing GDP as an important goal. Indeed we often treat increasing GDP as if it were the only goal.

There’s an assumption deeply imbedded in classical economics that increasing GDP is the same as increasing the quality of our lives. Mainstream economics doesn’t exactly ignore “happiness” but it treats it as if it meant the same as “utility.” What’s “utility?” Here’s a pretty standard economic definition: The ability of a good or service to satisfy one or more needs or wants of a consumer.

That definition isn’t very satisfactory in our contemporary consumer society where a significant number of our wants as consumers are generated by advertising and marketing, which itself is designed to constantly make us feel dissatisfied with the goods and services we have.

Once upon a time, way back in the eighteenth and nineteen centuries, the idea of utility was a way to escape subjective judgments. Giving more food to a man without adequate food was a clear case of increasing utility. Giving an inner London slum dweller a house with light and air and a modicum of sanitation increased utility.

And, of course they’d be satisfied by those goods and services.

In that day and time it made sense to see the goal of an economy as maximizing utility for the greatest number of people.

Today in a world quite starkly divided between people who have all their real needs and wants satisfied—me and many of my friends—and people who are still struggling to survive, the concept of utility is riddled with subjectivity.

In today’s world what exactly is “satisfaction”?

In 1972 King Jigme Singye Wangchuck, then the ruler of Bhutan decided that his country needed something more than GDP. His goal was to build an economy for the people of his tiny Himalayan country that would increase their material well-being and preserve the traditional values that to him made Bhutan a special place.

The total result would be to increase the happiness of Bhutan. And to measure that process he introduced something he called—and as far as I can figure out, the king coined the term—Gross National Happiness.

From the get-go you can see that GNH has truckloads of subjective assumptions in it. More than enough to fill in every mountain valley in Bhutan. The king had decided that parts of traditional life were worth keeping because they would make people happy. So, for example, traditional Bhutanese robes are required dress in all government buildings. At least 60% of the country will remain in forests. Public smoking is banned.

(To his great credit, the king also decided that more democracy would add to his people’s happiness. So in 2006 he stepped aside in favor of his son who would preside over a new constitutional monarchy.)

I think the worst you can say about the king’s 1972 effort is that it is no more subjective than a system of GDP that says all economic activity is good.

But Bhutan has gotten increasingly serious about its system of GNH over the years. From a fuzzy feel-good collection of values, it is evolving into a serious index with real measurements of happiness.

The Center for Bhutan Studies has developed a GNH index based on surveys of more than 1,000 households. The survey includes almost 300 questions like How stressed are you? Have you ever thought of suicide? (You can see the center’s survey and some results at http://www.grossnationalhappiness.com/gnhIndex/resultGNHIndex.aspx)

To those of us reared on GDP and the myth that Western methods tap into a superior objectivity, the center’s web page with its religious drawings and overtly subjective survey questions might seem naïve. But there’s a significant body of Western academic research that agrees with Bhutan’s approach. Keeping diaries, for example, that record memory of the previous day can actually produce a valid measure of happiness.  Such “objective” data as national mental health (use of antidepressants, for example) and physical wellness (incidence of severe illness) turn out to correlate extremely closely with happiness. Work on a psychological state called subjective well-being has produced data robust enough to compare nations to one another.

Adrian White of the University of Leicester produced the first global ranking of happiness (although he called it “subjective well-being”) in 2006. And even though it’s a first run it feels curiously right.

The top 10 of the 178 countries ranked is dominated Nordic social democracies with Denmark as #1, Iceland #4 (2006 remember before the country’s banking system melted like a snowball in a geyser) Finland #6, and Sweden #7. (What’s the matter with Norway? It came in at #19.)

The United States is a very decent 23. That’s significantly behind Canada at #10, but way ahead of the United Kingdom at #41, France at #62, and Japan at #90. The bottom of list is made up of countries that ought to be at the bottom of the list the Democratic Republic of the Congo (#176), Zimbabwe (#177), and Burundi (#178).

And Bhutan? It came in at #8. It’s the only top 20 country in happiness with very low GDP. Something very interesting is going on in Bhutan. (To see White’s full 2006 list follow this link http://www.eurekalert.org/pub_releases/2006-07/uol-uol072706.php )

Bhutan hasn’t exactly been howling in the wilderness. There have been global conferences on GNH. But it has taken the current economic and fiscal crisis to give this idea of an alternative to GDP traction among the leaders of the developed Western economies. This year French President Nicolas Sarkozy has proposed a happiness index. Then British Prime Minister Tony Blair established an unofficial Department of Happiness.

Good gestures. But from Bhutan comes a reminder that while tracking happiness is a useful counterbalance to GDP, the point of the index is to pinpoint problems so that countries can do something about them.

Recent surveys show an alarming rise in the number of people in Bhutan who have considered suicide (about 5%) and, although figures are hard to come by and may be misleading, it looks like suicide itself is on the increase.

This has prompted soul-searching as the country’s first democratically elected Prime Minister Jigme Thinley tries to figure out why Bhutan isn’t as happy a place as it could be.

A national government wrestling with the happiness of its people and using happiness to direct national priorities? That effort in itself demonstrates the power of Gross National Happiness.

I would like to think Washington is watching what’s going on in Bhutan.

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