1 May 2017

Developing a smile

Corneill writes:*

Once upon a time, in a land far, far away, Nobel Prize-winning economist Simon Kuznets created a report for Congress in the United States of America. The goal of this report was to quantify the existing productivity within the country, which would ultimately help with lifting the United States out of the Great Depression. Ironically enough, the work he produced has become the norm for these forms of calculations, and Kuznets’s creation of the gross domestic product (GDP) is currently one of the most popular methods for judging the ‘success’ of a country.

It is neither a secret nor a surprise that GDP is a poor indicator of both economic growth and development – even when adjusted for per capita values, purchasing power parity, and inflation. Nonetheless, there has not (yet) been a consensus in the academic field as to what exactly should replace GDP as a measure. Whilst the Human Development Index (HDI) is widely used, as it combines life expectancy, education and income into one comparable number, it is still not all encompassing. There have, however, been some countries which have considered other alternative measures, and are in fact beginning to use happiness or subjective wellbeing for the purpose of guiding economic policymaking. Theoretically, this is supposed to be a better measure than GDP, as happiness promises to capture the quality of life of an individual more accurately and hence, policies that are more effective and equitable should be able to be implemented.

One of the frontrunners in this field is the country of Bhutan. Since as early as 1971(!), GDP has not been the predominant measure of progress. Its replacement, the measure of gross national happiness (GNH), aims to collate the spiritual, physical, social and environmental health of its citizens and natural environment into a formal measure of prosperity. This approach has led to growing interest from other nation states today, as collapsing financial systems, rising inequality and wide-scale environmental problems seem to be becoming more prevalent.

However, there are a number of problems [pdf] with the concept of happiness that policymakers should be aware of before adopting it as a policy tool. As a term, happiness is often vague and multidimensional, which makes it difficult to define clearly and precisely. Moreover, even if it is defined, it is in essence a qualitative notion which is difficult to measure consistently and confidently. These two issues notwithstanding, designing and executing policies created on this notion of happiness raises ethical and political issues which cannot be fixed by refining the ‘science’ of the measurement.

Bottom Line: Even though there may be problems with happiness as a measure, it could be a step in the right direction. Perhaps this can be best summed up by Thakur Singh Powdyel, Bhutan's minister of education. "People always ask how can you possibly have a nation of happy people? But this is missing the point. GNH is an aspiration, a set of guiding principles through which we are navigating our path towards a sustainable and equitable society. We believe the world needs to do the same before it is too late."

* Please comment on these posts by students in my growth & development economics course. It really helps if you highlight unclear analysis, alternative perspectives, better data, etc.