Traditionally, the way we measure economic success is by economic growth via metrics such as GDP. Classical economics propagated the theory of effective markets and underlined performance/output. This led to the use the macroeconomic term Gross Domestic Product (GDP) for measuring economic growth of countries. GDP is the aggregate monetary value of the goods and services produced in a country in a year.
GDP, AN INCREASINGLY POOR MEASURE OF PROSPERITY
GDP is like a speedometer: it tells you whether your economy is going faster or slower. As in cars, a speedometer is useful but doesn’t tell you everything you want to know. For example, it won’t tell you whether you are overheating, or about to run out of fuel. Above all, the speedometer doesn’t tell you whether or not you’re going in the right direction. If you suggest to a car driver that you might be on the wrong road, and the response is “then we must go faster”, you might think that’s pretty stupid. Yet this is what happens whenever complaints about the state of the economy elicit a commitment to boost growth.
“AT PRESENT, WE ARE STEALING THE FUTURE, SELLING IT IN THE PRESENT, AND CALLING IT GDP.” — PAUL HAWKEN
Economic growth as measured by gross domestic product doesn't really tell us much about citizens' general well-being. It is, of course, entirely possible for an economy to go faster and faster without getting closer to providing people a healthy and happy life. However, GDP was intended to be a measure of economic growth. GDP was never planned to be a measure of overall social well-being. This western economic theory makes the statement that economic growth will enhance social well-being. Research has indicated that in most cases this statement is true. However, GDP is seen to be an imperfect measure, as it does not account for the environmental and social degradations that often accompany economic development. While economic growth is important to a point, wealth and growth don’t equate to personal satisfaction and happiness. That’s why traditional metrics of economic progress aren’t the most effective means to measure overall progress.
GDP IS FUZZY MATH
Anything we spend money on adds to the GDP – including cleaning up oil spills, treating cancer, and building jails. At the same time, some undeniably valuable things – taking care of a sick parent, volunteering at a charity are worth nothing since no one pays for them. Imagine if a corporation used Gross Domestic Product (GDP) accounting to do its books: it would be adding all its income and expenses together to get a final number. Nobody would think that’s a very good indication of how well that business was doing. Herman Daly, a former senior economist at the World Bank, said that, “the current national accounting system treats the earth as a business in liquidation.” He also noted that we are now in a period of “uneconomic growth”; where GDP is growing but societal welfare is not.
In the past several decades, Gross Domestic Product of the countries has increased significantly. During that same time, some other important figures have also increased: the number of threatened species, the amount of greenhouse gas emissions, the rates of diabetes and heart disease. The paradox of growing material prosperity coexisting with diminishing personal satisfaction has spurred a number of efforts to develop measurements of economic success that are more holistic than GDP.
GDP IGNORES INTERCONNECTIONS
The fundamental weakness of GDP is that it ignores interconnections. It only covers a single metric: economic growth. It’s reductive. We have long been led to believe that GDP growth is ultimately the measure of a country’s progress, creating jobs, investment and production of goods and services. However, our focus on spending our way to happiness is not borne out either by people’s experience or by the statistical evidence. The idea of putting happiness at the heart of our economy is not new, but is not the focus of mainstream policy or culture in economic domain. This calls for a new policy direction that puts wellbeing at the core of economy and society.
GDP ONLY MEASURES PRODUCTIVE ECONOMY
GDP is considered as a proxy for progress or prosperity. As a tool, it only measures part of productive economy: GDP falls when a man marries his maid. Indeed, if they don’t increase the economy, GDP discounts social and environmentally desirable activities, such as household work. GDP does not account for any work done outside of the monetary system. These means that much of the work done by women world- wide goes unrecognized in the economy and therefore is unimportant when it comes to making policy about their lives. Any work it takes to raise a family or maintain a healthy home goes unaccounted for. Is this work not productive also?
GDP GIVES A FALSE SENSE OF PROSPERITY
In his Italian bestseller, Manifesto for Happiness, University of Siena economist Stefano Bartolini compares happiness data around the world and concludes that America is “the example not to follow.” Bartolini says Americans are caught in a vicious cycle. Our consumption habits demand more debt and longer work hours, reducing our social connections, a central foundation of happiness. To compensate for the feelings of loneliness, we then buy more stuff, seeking friendship through products. This consumption treadmill is reflected in faster economic growth than in Europe, but it exacerbates Americans’ social disconnection and the deterioration of our environmental commons.
Bartolini argues that the US’s rapid economic growth is more a matter of the inefficiency of the American economy in meeting our actual needs than it is an indicator of dynamism. In short, GDP obscures more than it reveals. The numbers give us a sense that we are wealthy; in fact, we are impoverished when it comes to the things we value most.
Robert F. Kennedy once said that a country’s GDP measures “everything except that which makes life worthwhile”. The only way to dethrone GDP from its current role, is to start measuring all those things that do “make life worthwhile”.
GOOD FOR THE ECONOMY DOES NOT ALWAYS MEAN GOOD FOR THE PEOPLE.
A nation surely gains momentum due to rise in GDP but what about people living in that nation? let me make it clear that the Gross domestic product measures every single thing except the health of children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything, in short, except that which makes life worthwhile.
ALTERNATE MEASURES OF WELL BEING
As we have found that GDP has failed to measure on whether it has benefited the people or not as its only focus has been on the economy. GDP also fails to measure things like quality improvement, this is due to the fact GDP can only measure the price as value, but not the quality of goods being produced. The good news is that there are several alternatives to GDP being actively developed, discussed, and used.
Michael Porter, a Harvard economist, led the launch of the Social Progress Index (SPI), a new tool to measure how societies are doing in comparison to one another and on a range of non-economic measures.
The world is many different things,” he said, “And trying to weave that all into one indicator would be a mistake - Amartya sen
As countries try to set policies to improve well-being they have to get away from using just GDP as the de facto predictor. "We can expand our vision of 'development' as more than just improving GDP.
Prof William Reville : Gross national product (GNP) is the index commonly quoted to indicate the economic well-being of a nation. But, if we wish to indicate the overall wellbeing of the country, a much better index would be gross national happiness (GNH).
HAPPINESS IS CATCHING
Since Bhutan’s pioneering effort to better measure well-being, the idea has spread around the world. In the United States, efforts to measure sustainability more holistically began in 1991, when Sustainable Seattle developed the world’s first regional indicators of well-being. Today, more than 350 community organizations in the United States alone have developed some kind of well-being or sustainability indicators. Local governments in Brazil, Canada, Australia, and the United Kingdom are also beginning to measure happiness.
GROSS NATIONAl HAPPINESS
GNH is a shared national objective, implies excellence in education and healthcare, robust economic opportunity, protection and celebration of cultural and environmental resources, and good governance. GNH is thus a holistic, sustainable and inclusive approach to human growth and societal progress. The reason for the overwhelming support and sympathy that the Gross National Health (GNH )concept is receiving worldwide is that the citizens everywhere are dissatisfied with the way societies are progressing currently in the world. They are increasingly concerned with their quality of life where GDP is the sole yardstick used for measuring social progress prompted by globalization. Now people are demanding for more sustainable and complete approach to development taking into account dimensions such as social, environment and culture into policy framework. In contrast, GNH has become a more complete indicator as it draws upon a broader set of social, environmental and health measurement.
Gross National Happiness Framework initially developed in Bhutan is now having influence all over the globe. The ‘Framework’ is based on the 4 pillars of preservation of the environment, preservation and promotion of culture; sustainable and equitable socio-economic development; and good governance. The 4 pillars are further refined into 9 domains and a weighted index of 33 indicators. It is also about a shift of consciousness. this renewed focus on the primary importance of psychological health and social well-being will shift the trajectory of our economies towards greater prosperity and wealth beyond material growth. This shift in focus from material growth to equality and well- being goes to the heart of the concept of Gross National Happiness (GNH). GNH is more than a concept, it is a living experiment in an alternative development path.
GNH AIMS TO EVALUATE SUSTAINABILITY, WELLBEING AND QUALITY OF LIFE
Happiness simply means as feeling good and enjoying life. We all want to be happy and we devoutly wish happiness for our children. But how do we achieve happiness? The most common fallacy in this regard is that lots of money brings happiness. Surveys have shown that happiness has not increased since the 1950s, despite the fact that, in real terms, average salaries have more than doubled, we have more cars, bigger houses, a shorter working week, more holidays, more food, more clothes, more central heating and better health. Money correlates with happiness only when you have very little money. It is not possible to be happy if you live in grinding poverty and your happiness will rise steeply as you acquire sufficient money to satisfy the basic necessities. But the surprising thing is that, as many studies have shown, once average income exceeds what is required to cover the basics, further pay rises bring no greater happiness. And even if there is a link between economic growth and happiness, would we really be happy deep down if we knew that our current happiness may be at the expense of the happiness of our descendants? What, more importantly, would we be happy to do about that?
HAPPINESS RESIDES NOT IN POSSESSIONS, AND NOT IN GOLD, HAPPINESS DWELLS IN THE SOUL HAPPINESS DWELLS IN THE SOUL
Happiness is not to be found by directly pursuing it as an end in itself
- rather it is the byproduct of the satisfaction you feel from consciously living a productive life, i.e deciding to achieve something, setting goals and working towards them. We all have much more money now than we had in the past. This is good, but, in itself, will not make us any happier. In fact, money can be quite dangerous if spent largely in the pursuit of pleasure. We have been very successful in improving the economy and we should be proud of this, but it is now time to devote energy to improving quality of life in other respects. Our happiness resides largely in these latter dimensions and we can rest assured that efforts spent in this regard will be well rewarded.
The path to becoming a happy country might well involve greater focus on maintaining or promoting healthy natural and social systems, and less on simply producing more 'stuff. One of the GNH creators Lyonpo Jigmi Thinley states: “We have to think of human well-being in boarder terms. Material well-being is only one component. That does not ensure that you are at peace with your environment and in harmony with each other.” GNH, which preferences the goal of happiness over the goal of wealth, serves as a counterweight to the ubiquitous Western-driven focus on the economic indicators of Gross National Product or Gross Domestic Product.
Open Happiness.” That tagline – the centerpiece of Coca-Cola’s advertising campaign – sounds like the perfect encapsulation of our culture’s definition of bliss. The idea of happiness on offer (or on sale) couldn’t be simpler: Consumption equals contentment. Pop open a soda and all will be well. If only it were that easy. It’s not, of course. Since antiquity, humans have struggled to define the good life. What makes us happy? How do we find personal fulfillment? What does progress look like?
Our obsession with growth means nothing if we aren’t happier as a result of this relentless pursuit. It is time to ask ourselves and our governments what really makes us happy, how we can find lasting fulfillment, and what genuine, sustainable progress looks like. Can we engage citizens and policy makers to answer these questions and do something about them? Our future depends on the answer.
Dealton, A. (2008): Income, Health and Well-Being around the World: Evidence from the Gallup World Poll. Journal of Economic Perspectives 22, 2, 53-72.
Delhey, J., Kroll, CH. (2012): A “Happiness Test” for the New Measures of National Well-Being: How Much Better than GDP are they? WZB Discussion Paper SPI 2012
Easterlin, R. A., Angelescu, L. (2012): Modern Economic Growth and Quality of
Life: Cross-Sectional and Time Series Evidence.
European Commission (2009): More than GDP. Measuring Progress in a Changing World.
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