Happiness, not growth

Strategic Perspective
By René B. Azurin

Posted on December 01, 2011

An interesting experiment is now going on in the Himalayas. The tiny country of Bhutan has, after many years of study, discarded the metric of Gross National (or Domestic) Product as its measure of development and begun using a new one it calls Gross National Happiness. After a pilot test in 2007 to refine the indicators and tools to be used, Bhutan conducted its first nationwide survey in 2010 to establish baselines along the areas that make up the multidimensional metric. One could say that Buddhist Bhutan may be showing the world The Way.

The impetus for this experiment is, of course, the realization that GNP or (the preferred) GDP is grossly inadequate as a measure of progress toward the well-being of a country’s citizens. The thing is, economic policy makers have long been aware of the shortcomings of GDP as a measure of development but insist on using it simply (I think) because they have already learned how to calculate it and are too lazy to come up with something better.

In truth, it is an illogical metric. Think about it. GDP is the just the sum of all the monetary transactions -- it does not include non-monetary ones like those arising from the work of family members on the family farm -- in goods and services that take place within a country’s borders. It thus includes transactions that add to well-being, as well as those that subtract from it. It adds up the revenues of storeowners to the purchases of criminals who spend money they stole from the storeowners. It includes the cost of making products that pollute a river, but ignores the cost of leaving the river polluted. It adds the expenditures made to repair the damage created by a typhoon Ondoy, but does not deduct the value of the structures and farms destroyed by the typhoon.

In short, GDP cannot discriminate between positive and negative contributions to well-being. All are mixed together in this mixed-up statistic. How then, pray tell, can this measure tell us anything significant about the increasing (or decreasing) the welfare of a country’s citizens?

Furthermore, an increase in GDP reveals nothing about income inequality, about whether the gap between the society’s rich and poor has widened or narrowed.

In Bhutan’s formulation, happiness essentially consists of attaining satisfaction with certain things that are meaningful in an individual’s life. Through much study and consultation, researchers at the Centre for Bhutan Studies found nine areas to be key, namely: psychological well-being, health, time use, education, culture, good governance, ecology, community vitality, and living standards. The concept sounds wonderful but, concededly, it may be difficult to put into practice because some of these factors are not easy to define or straightforward to measure.

In Bhutan’s implementation, the metric is constructed from 33 statistical indicators -- both objective and subjective -- with varying weights. The indicators selected are interesting in themselves and include: satisfaction with livelihood, satisfaction with quality of life, time spent in work and non-work, stress level, alcohol consumption, health status, difficulty in accessing health services, satisfaction with medical treatment, mean number of healthy days, mean household income, number of people reporting food insecurity, literacy rate, educational attainment, knowledge of Bhutanese traditions, number of days spent in cultural activities, participation in community activities, perception of safety from harm, specific environmental practices observed, knowledge and understanding of the Constitution, and perception of number of people involved in corruption in both government and private sectors. The principal evaluation device used in Bhutan for the subjective factors is a detailed, academically designed questionnaire, administered by trained interviewers in face-to-face interviews.

Bhutan is leading the way but others, happily, are following. Some developed countries have now also initiated moves to develop a proper well-being index, not only to monitor the welfare of their own citizens but also so that they will have a better way (than GDP) of judging how multilateral development aid is actually helping improve welfare in developing countries.

In Canada, for example, an independent group based at the University of Waterloo stresses “the need for a more holistic and transparent way to measure societal progress -- one that accounts for more than just economic indicators such as the Gross Domestic Product and takes into account the full range of social, health, environmental and economic concerns of citizens.” Using a set of indicators in eight interlinked categories -- democratic engagement, community vitality, education, environment, healthy populations, leisure and culture, living standards, and time use -- much like in Bhutan, the group has started monitoring the well-being of Canadians according to what it calls the “Canadian Index of Well-being.”

In the UK, Prime Minister David Cameron has asked the UK’s Office of National Statistics to come up with a well-being index that will measure well-being as well as economic growth. Announced Cameron, “[W]e will start measuring our progress as a country not just by how our economy is growing, but by how our lives are improving; not just by our standard of living, but by our quality of life.” This, he said, will allow the country to “reevaluate our priorities.”

In France, President Nicolas Sarkozy created in 2008 a commission of experts to study the issue amid “broader concerns about the relevance of these [GDP] figures as measures of societal well-being” and to propose “measures of economic, environmental, and social sustainability.”

Indeed, those responsible for managing the economies of the world all need to reevaluate their priorities. The single-minded drive to increase consumption year after year after year has turned us into overly materialistic and foolish creatures who think nothing about wreaking havoc on our habitat and using up our planet’s finite resources until nothing is left for the generations that come after.

Whatever the difficulties, the multi-factor, multi-goal approach that Bhutan has started seems the development management path to take. With the global economic meltdown forcing consumers all over the world to cut back on overall consumption, now may be just the right time to introduce a new development orientation and a happier set of values.