Wednesday, August 10, 2011

After GDP—Happiness?


Proposals for a broader-based economic metric date back at least to 1972, when economists William Nordhaus and James Tobin suggested the Measure of Economic Welfare (MEW)—which Herman Daly, John Cobb, and Clifford Cobb refined in 1989 as the Index of Sustainable Economic Welfare (ISEW). The aim of these early alternative indicators was to deduct defense spending and the costs of environmental degradation from GDP, and add the unpaid services of domestic labor.

In 1995 the think tank Redefining Progress took MEW and ISEW a step further with its Genuine Progress Indicator (GPI), which adjusts not only for environmental damage and resource depletion, but also for income distribution, volunteering, crime, changes in leisure time, and the lifespan of consumer durables and public infrastructures. GPI gained more traction than either MEW or ISEW, and is now used by the scientific community and many governmental organizations globally (for example, the state of Maryland is now using GPI for planning and assessment).

Coincidentally, 1972—the year MEW was proposed—also marked the date when the tiny Himalayan kingdom of Bhutan started moving to build an economy based on what King Jigme Singye Wangchuck called “Gross National Happiness.” Seeking to preserve traditional Buddhist values in an increasingly globalized world, this tiny country set out to develop a survey instrument to measure its people’s general sense of well-being.

Until recently the subject of happiness was avoided by social scientists, who lacked good ways to measure it; however, “happiness economists” inspired by Bhutan’s experiment have found ways to combine subjective surveys with objective data on lifespan, income, and education, making a national happiness index a practical option.

Though Bhutan’s economy is still based on subsistence agriculture and has a relatively low GDP, the Bhutanese people rank among the top 20 happiest in the world. This contrasts with the US, which delivers much less happiness per unit of GDP. In his book The Politics of Happiness, former Harvard University president Derek Bok traced the history of the relationship between economic growth and happiness in America. During the past 35 years, per capita income has grown almost 60 percent, the average new home has become 50 percent larger, the number of cars has ballooned by 120 million, and the proportion of families owning personal computers has gone from zero to 80 percent. But the percentage of Americans describing themselves as either “very happy” or “pretty happy” has remained virtually constant, having peaked in the 1950s. Our economic treadmill is continually speeding up due to GDP growth and we have to push ourselves ever harder to keep up, yet we’re no happier as a result.

The thinking behind Gross National Happiness is catching on. Harvard Medical School has released a series of happiness studies, while British Prime Minister David Cameron has announced the UK’s intention to begin tracking well-being along with GDP. Sustainable Seattle has launched a Happiness Initiative and intends to conduct a city-wide well-being survey. Thailand has instituted a happiness index and releases monthly GNH data. Britain’s New Economics Foundation publishes a “Happy Planet Index,” which “shows that it’s possible for a nation to have high well-being with a low ecological footprint.” And a new documentary film called “The Economics of Happiness” argues that GNH is best served by localizing economics, politics, and culture.

Whatever index is settled upon to replace GDP, it will be more complicated than the current one-dimensional metric. But simplicity isn’t always an advantage, and the additional effort required to track factors like collective psychological well-being, quality of governance, and environmental integrity may be well spent. - Richard Heinberg
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