Gross National Happiness

Wealth is the ability to fully experience life.
Henry David Thoreau

“Being rich is having money; being wealthy is having time.”
Margaret Bonnano

“The problems that exist in the world today cannot be solved by the level of thinking that created them.”
Albert Einstein

Economists, especially development economists, almost always measure the level of well-being in a society by per capita income, noticing that this simple economic measure is highly correlated with most other indicators of development they can think of (life expectancy, child mortality, income equality, education levels, etc.).

However, whereas income per capita correlates highly with a large variety of social indicators of development, it does not seem to explain happiness, or subjective well-being, very well. According to Lears’ Quality of Life Index (1), for example, people in Nigeria on average feel happier than people in Austria, despite the fact that per capita incomes (adjusted for purchasing power) are about 29 times higher in Austria and child mortality about 40 times higher in Nigeria (2). Also, despite substantial economic growth in United States, Japan, and France during the post-war period (1946-1992), the level of happiness in all three countries has stayed approximately constant (3).

At the individual level there is also little correlation between subjective well-being (SWB) and objective measures of resources. For example, SWB correlates only 0.12 with income, 0.13 with physical attractiveness, 0.10 with physician-rated health, and 0.17 with intelligence (4) .

Why is happiness so difficult to tackle for economists? One reason is that it depends to a large extent on deep personality traits: A generally happy person is only shortly affected by even severe adverse events, such as a spinal cord injury, and a generally miserable person who wins the lottery won’t be happy for long. In addition, the human mind has an extraordinary power to adapt to changing circumstances and compensate for specific handicaps, which implies that people usually develop strategies based on the assets and advantages they have, and ignore strategies which would require assets that they don’t have. Finally, love, one of the main causes of happiness, is a complete mystery for economists.

But there are some straightforward contradictions between increasing income and increasing happiness that even economists should be able to understand. For example, maximizing income and consumption is often done at the expense of the environment, and contaminated water and filthy air has an adverse effect on our health and well-being. In addition, increasing your income will almost always require you to sacrifice time – the most binding constraint in the world. Everybody, rich or poor, only has 24 hours per day, and if you spend 12-16 hours per day working, you don’t have much time left being happy — unless you really love your work.

Job stress has been labeled the “20th Century Disease” by the United Nations and a “World Wide Epidemic” by the World Health Organization. It is estimated to cost the US industry more than $300 billion annually (about 30 times Bolivia’s total GDP) in accidents, absenteeism, employee turnover, diminished productivity and direct medical, legal, and insurance costs (5). Many of these costs increase GDP, by the way. It is not obvious that this should be a development ideal to inspire to.

People, tricked by TV series and the trillion dollar advertising industry, may spend too much time and money on material things that promise to make them happy, but in reality don’t. Poor people, who are not inundated with all that propaganda, may actually be making better choices than rich people in terms of their own happiness, but the development community is desperately trying to get them into the same rat race as the rest, so that they can increase their level of income and consumption.

But a new way of thinking is emerging among economists in a branch called Happiness Economics. Here researchers are attempting to measure and understand the determinants of happiness, with the intention of getting to the core of the welfare concept economists are always trying to maximize. Bhutan was the first (in 1972), and so far only, country in the World to introduce Gross National Happiness (GNH) instead of GDP and to use it as a unifying vision for its development plans and policy.

The Inter-American Development Bank is currently launching several projects on Quality of Life in Latin America and plans to organize a range of events around this topic on its 50th anniversary in 2009 (6). Hopefully this is just the kind of new thinking needed to solve todays problems of poverty and inequality.

Know of any other ways to measure “happiness” than per capita income? Leave a reply below.

(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail:

(1) Lears, J. F. (1996) ‘Quality of Life Index’, International Living 15, p. 1, pp. 9–18.
(2) Human Development 2005. United Nations.
(3) Veenhoven, R. (1993) Happiness in Nations: Subjective Appreciation of Life in
56 Nations 1946–1992 (RISBO, Rotterdam).
(4) Diener, E. & E. Suh (1997) ‘Measuring Quality of Life: Economic, Social and Subjective Indicators.’ Social Indicators Research 40: 189–216, 1997.
(5) .
(6) .


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