Gross National Happiness?

Although it was never intended to be so, GDP has become the measure of the standard of living within a nation. It's time to start looking at other measures of progress.

March 19 th 2010

During the fourth quarter of 2009, after several quarters of decline or anemic increase, the U.S. economy grew by almost six percent. The Canadian economy, while somewhat less affected by the worldwide economic downturn, has also begun to see some positive growth. In both cases, economic growth is measured by the change in gross domestic product (GDP), controlling for the impact of inflation. Depending on which formulation is used, GDP measures either the output that is produced within a country or the income that its inhabitants receive.

The concept of GDP (then GNP) was first formulated by the economist Simon Kuznets during the Great Depression as a way to get accurate data about the performance of the economy. The measures that Kuznets developed were a very useful tool for what has become known as Keynesian economics (as well as for economics in general). At the time, however, Kuznets wrote that "the welfare of a nation can scarcely be inferred from a measure of national income."

Although it was never intended to be a measure of the standard of living within a nation, in many cases GDP (or GDP per capita) has come to function in this regard. In both their teaching and their rhetoric, economists have focused in on GDP as the key variable for our economy. In contrast to Kuznets's view, Greg Mankiw—Harvard economist, former chairman of the President's Council of Economics Advisors, and one of the leading economics textbook authors—states that "a large GDP does not ensure that all of a nation's citizens are happy, but it may be the best recipe for happiness that macroeconomists have to offer." Over time, economists have generally hesitated to judge individuals' preferences for the goods and services they purchase. Perhaps that is why they emphasize the concept of GDP, where all purchases, regardless of their intrinsic worth, are given equal weight in calculations of economic growth.

Despite this, economists have always been aware of the shortcomings of GDP. For example, if there is more crime and therefore more construction of prisons and greater purchases of home security systems, GDP rises. If people decide to take more leisure time or engage in more do-it-yourself activities, GDP decreases. In neither case does the change in GDP match up with the change in overall well-being. In addition, GDP tells us nothing about the distribution of income within a nation. In the past several decades, while GDP per capita has grown, the distribution of income within the United States has become more unequal, and most of the gains have accrued to the richest quarter of the population. In spite of these drawbacks, economists maintain a heavy focus on GDP. Mankiw asserts that "the most important macroeconomic variable is GDP."

Lately, however, many have started to see a disconnect between GDP and what our society should really be striving for. The financial crisis and worldwide economic downturn have generated many questions about our current economic system and its effectiveness in serving people. In a recent article, a writer for Time asked, "Is GDP an obsolete measure of progress?" A variety of alternative measures to GDP have been developed, including the Human Development Index, the Genuine Progress Indicator, and the Canadian Index of Wellbeing ("Measuring what matters—it's about our wellbeing, not just our economy"). Among others, there is also a measure entitled the Happy Planet Index, which despite its somewhat comical name has a statistical foundation that focuses on the relationship between environmental efficiency and human wellbeing.

Recently there has been a lot of attention given to a new measure of economic welfare entitled "gross national happiness." First coined by the former King of Bhutan in 1972, and currently championed by Nobel Prize laureates Amartya Sen and Joseph Stiglitz and French President Nicolas Sarkozy, this concept attempts to combine social, mental, political and other types of wellness measures (including economic) into a single measure. Sarkozy wants France to include happiness in its measures of economic progress and to make this a policy objective. In Bhutan, as a response to this idea, wrestling on television, plastic bags and tobacco are all banned, as these items are not seen to contribute to the country's gross national happiness.

This new trend is commendable in many ways. A singular focus on GDP can lead to a disproportionate emphasis on items that have value in the marketplace, and a lack of attention to those items that do not carry a price. However, what is the standard by which economic activity will be judged? Whether it increases GDP? Whether it increases happiness? How about this as a standard: does economic activity reflect good stewardship and promote justice—in other words, does it bring shalom?

Caution, however. While we may welcome a greater realization by governments and others of wider factors for our wellbeing than just narrow economic data, we must also be concerned about too much control. I believe there is good reason to be cautious about letting governmental bodies decide what makes us happy or what constitutes wellness or wellbeing. It is unclear what their standards will be, or how much influence we will have over them. In many cases, governments and NGOs try to move Christian action and conviction out of the marketplace and the public square. For example, under some health care proposals circulating in the United States, Catholic hospitals could be required to perform abortions or provide contraceptive care in opposition to their closely held beliefs. In Washington, D.C., Catholic charities may lose contracts with the city if they do not modify their view on same-sex marriage.

In the realm of education, Trinity Western University (British Columbia) and some other Christian colleges in Canada have come under attack by organizations that claim that hiring policies for faculty based on religious faith are illegitimate. In the United States and other countries, forms of homeschooling that emphasize religious values have sometimes been determined to be against the "national interest." These are just two ways that Christians have seen fit to design and consume educational services. If economic wellbeing (including production and consumption of education) comes to be defined and then enforced by a group of elites, we may be in more trouble than we were before.

One strong point of free markets is that they give individuals great room to exercise stewardship in a variety of ways, according to their beliefs. Christians have the opportunity, through both verbal persuasion and economic activity, to lead our economies to greater levels of stewardship and justice. We must confess, however, that we have done a very poor job of this. We also can work in politics to prod governments to allow more room for the exercise of good stewardship. In some areas, like pollution control, we may agree that government action is the best way to combat the problem.

Economic growth as measured by GDP can often be beneficial, and we want things that are positive to grow. However, in some cases things grow only if other aspects of life are neglected. As Christians we can welcome the discussions of gross national happiness that broaden our understanding of economic welfare. This may give us a "seat at the table" where we can put forward notions of stewardship and justice. Happiness may not always align with justice, as happiness may become just another avenue to serve ourselves and to neglect loving God and our neighbors. Whether GDP or gross national happiness, we need to keep our goals aligned with our responsibilities as stewards of God's creation and its human and natural resources.

Topics: Business Culture
 

Todd P. Steen is the Granger Professor of Economics at Hope College in Holland, Michigan, where he has worked since 1988. He earned his Ph.D. at Harvard University, where he studied under President Obama's chief economic adviser Larry Summers. His favorite economists are Summers, Greg Mankiw, and Bob Goudzwaard.

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