Happiness Is The Ultimate Economic Indicator

Increased economic growth doesn’t necessarily lead to more fulfillment. So why do we consider GDP to be the most important factor? In an excerpt from The End of Growth: Adapting to Our New Economic Reality, Richard Heinberg argues it’s time to start paying more attention to national happiness instead.

One factor that is increasingly being cited as an important economic indicator is happiness. After all, what good is increased production and consumption if the result isn’t increased human satisfaction? Until fairly recently, the subject of happiness was mostly avoided by economists for lack of good ways to measure it; however, in recent years, "happiness economists" have found ways to combine subjective surveys with objective data (on lifespan, income, and education) to yield data with consistent patterns, making a national happiness index a practical reality.

In The Politics of Happiness: What Government Can Learn from the New Research on Well-Being, former Harvard University president Derek Bok traces 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. The economic treadmill is continually speeding up due to growth and we have to push ourselves ever harder to keep up, yet we’re no happier as a result.

Ironically, perhaps, this realization dawned first not in America, but in the tiny Himalayan kingdom of Bhutan. In 1972, shortly after ascending to the throne at the age of 16, Bhutan’s King Jigme Singye Wangchuck used the phrase "Gross National Happiness" to signal his commitment to building an economy that would serve his country’s Buddhist-influenced culture. Though this was a somewhat offhand remark, it was taken seriously and continues to reverberate. Soon the Centre for Bhutan Studies, under the leadership of Karma Ura, set out to develop a survey instrument to measure the Bhutanese people’s general sense of well-being.

Ura collaborated with Canadian health epidemiologist Michael Pennock to develop Gross National Happiness (GNH) measures across nine domains: time use, living standards, good governance, psychological well-being, community vitality, culture, health, education, ecology.

Bhutan’s efforts to boost GNH have led to the banning of plastic bags and re-introduction of meditation into schools, as well as a "go-slow" approach toward the standard development path of big loans and costly infrastructure projects.

The country’s path-breaking effort to make growth humanly meaningful has drawn considerable attention elsewhere: 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 is launching a Happiness Initiative and intends to conduct a city-wide well-being survey. And Thailand, following the military coup of 2006, instituted a happiness index and now releases monthly GNH data.

Michael Pennock now uses what he calls a "de-Bhutanized" version of GNH in his work in Victoria, British Columbia. Meanwhile, Ura and Pennock have collaborated further to develop policy assessment tools to forecast the potential implications of projects or programs for national happiness.

Britain’s New Economics Foundation publishes a "Happy Planet Index," which "shows that it is 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.

No doubt, whatever index is generally settled upon to replace GDP, it will be more complicated. 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 would be well spent even if it succeeded only in shining a spotlight of public awareness and concern in these areas. But at this moment in history, as GDP growth becomes an unachievable goal, it is especially important that societies re-examine their aims and measures. If we aim for what is no longer possible, we will achieve only delusion and frustration. But if we aim for genuinely worthwhile goals that can be attained, then even if we have less energy at our command and fewer material goods available, we might nevertheless still increase our satisfaction in life.

Policy makers take note: Governments that choose to measure happiness and that aim to increase it in ways that don’t involve increased consumption can still show success, while those that stick to GDP growth as their primary measure of national well-being will be forced to find increasingly inventive ways to explain their failure to very unhappy voters.

Excerpted with permission from The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg.

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  • Dsantana

    Happiness predates property or money, so it is really kind of logical that the first is not and cannot be a consequence of the last two.

  • DrRichardCole

    While this report makes me, indeed, happy, I am not surprised. Years ago, as a health care executive at Blue Cross Blue Shield of Michigan, we engaged Gallup to look at our employee satisfaction. "Engagement" was a buzzword at that time. I recall that the report we received from Gallup could have just as easily been described as "employee happiness."  Our company data tracked very closely with reports from hundreds of Gallup clients. It demonstrated that employee satisfaction, or happiness if you will, drives customer satisfaction.  And a happy customer generates more profit for a company than an unhappy one. This, in turn, creates a more prosperous environment for the workers and their bosses, thereby revealing, in action, the Happiness Paradigm we should have seen all along

  • Joel Cacek

    This is what I've observed over the paste 61 years.  Being happy is not related to how much money a person accumulates or how financially poor a person is.  I've met more happy poor people than happy rich people in fact.  Being free, contented, and secure has a lot to do with being happy and likewise being a slave to possessions, always wanting more, and worrying about the future leads to a rotten state of mind, some call this being hopeless.  My father overcame his hopelessness by partying at the bars and consuming alcohol.  He was a great man but he was not happy unless he was doing something kind for someone else.  My mom worked hard and tried to find happiness by forcing her desires upon others and by serving others.  She was happy at times and she was extremely discontented at times.  She was on a roller coaster of emotions.  She at least helped me to see what produces happiness at times as did my father at times.  They both were happy when they were being kind to someone else.  Jesus Christ teaches us this in the Bible.  It is to bad that the Bible can't be taught in our public schools today.  There are way to many lies being spread about God today.  Most of the people do not know and have not read the Bible.  I've read it, studied it and believe it to be the one true source of hope, contentment, security, and therefor happiness.

  • George

    Great article, love it! What makes you happy is what you experience, not what you own... Experiences create memories whose value increase over time, while the lifetime value of a good decrease.  Thanks Richard! George (co-founder at Kicktable)

  • Gianni

    Let's say people in small village in Africa live happily but they need the electricity. When the electricity is installed in their village, they are even more happy. Otherwise, the country is very poor, but the needs of people are also very low. Is this country economically better than i.e. any country of the western world, where people claim to be less happy? I don't think so, it's because they have more "happy" and wealthy people to be compared with.

  • Guest

    It is interesting to see, that the American society slowly realizes the failure of the supercapitalism they have produced. The constant drive for freedom and individual wealth is a never ending story, when you reach one goal you want more and more and more. Finally, it left large portions of the society behind and created a frustrating income gap. 
    We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality in this amazing TED talk, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust. Watch: http://bit.ly/yBvSyx

  • Guest

    it’s not capitalism per se that’s the problem, but the dramatic shift away from a form of capitalism that benefited almost everyone to a form that only benefits a small handful.

    The Problem is that the system impedes democracy (http://bit.ly/AncoII) and leads to income inequality (http://bit.ly/x5qI9Y). You still think you are free or is it just that you don't see the bars of your prison cell?

  • Gianni

    1. There's no such thing as "supercapitalism". There's is only the free market and private owenership. Nobody ever seeked to make capitalism - there was no government that said: "Now, let's make the <<supercapitalism>>." Today's system is just a natural process of the free human action during past hundreds of years, it's completely legitimate and not forced by any of the authorities, governments or royal families. This is what we did because this is what we are. Dreaming about any other system is dreaming about any other human.

    2. I'd give you a chance to live in a communist system if you really hate capitalism so much. My country - Slovakia - spent 40 years in "rotten comunism" and i can only say that people like you do not appreciate the biggest gift we all have today - the liberty. It sounds very cheap, but it's true.
    Some things must be experienced to be able to understand them. Capitalism is a bad system, but so far, it's the best system invented. Why don't you try to go living in Belarus (it's not the official commusim but the system is very close to it), Kuba or North Korea? Why don't you send your children to go studying there? </supercapitalism>

  • $2353470

    Yes, lovely to talk about happiness, but the article poses a significant self-contradiction.  Why spend time developing, feeding, managing and publishing a metric on a phenomenon whose basic component, happiness, "has remained virtually constant, having peaked in the 1950s" ? There have certainly been plenty of positive and negative *stimuli* in the past 60 years out of happenstance, so (1) what will we learn from GDH, and (2) how will that inform or refine any behaviors - except providing the fodder for a few more pointless PhDs ?