{"id":2548,"date":"2012-05-23T12:13:43","date_gmt":"2012-05-23T16:13:43","guid":{"rendered":"http:\/\/geraldguild.com\/blog\/?p=2548"},"modified":"2024-01-17T07:11:42","modified_gmt":"2024-01-17T12:11:42","slug":"happiness-as-measured-by-gdp-really","status":"publish","type":"post","link":"https:\/\/geraldguild.com\/blog\/2012\/05\/23\/happiness-as-measured-by-gdp-really\/","title":{"rendered":"Happiness as Measured by GDP: Really?"},"content":{"rendered":"

Citizens of the United States are endowed with certain unalienable rights: one of which is the right to pursue happiness.\u00a0 Governments generally need to attend to the common level of happiness of its citizens in order to sustain power.\u00a0 As evidenced by the Arab Spring, unhappy people have the capability to overthrow ineffectual governments.\u00a0 As it turns out, the way politicians and economists presume to measure happiness is through a statistical measure called the Gross Domestic Product (GDP).\u00a0 Let’s take a closer look at GDP and ponder the questions as to whether it is, in fact, an appropriate measure with regard to overall happiness.<\/p>\n

Following World War II, a metric called the Gross National Product (GNP) was adopted as the key indicator of a nation’s economic growth.\u00a0 Eventually GDP replaced GNP and it acquired broader meaning as a proxy of individual well-being (happiness).\u00a0 But what does GDP really measure?\u00a0 GDP as defined by InvestorWords.com<\/a> is:<\/p>\n

The total market value of all final goods and services produced in a country in a given year, equal to total consumer investment and government spending, plus the value of exports, minus the value of imports.<\/p><\/blockquote>\n

GDP is the measure we look at to determine whether our economy is growing, in recession, or in depression.\u00a0 This makes sense.\u00a0\u00a0 But the deeper fundamental belief is that GDP equates to personal wealth, and that the more personal wealth individuals posses, the happier they will be.\u00a0 Our economy grows when people have money and spend it.\u00a0 The bottom line assumption here is that money buys happiness<\/strong><\/em>.<\/p>\n

Since developed nations have strategically attended to this measure, GDP has skyrocketed.\u00a0 Concurrently, there have been unequivocal rises in living standards and wealth.\u00a0 The United States has done relatively well in this regard. \u00a0 But you might be surprised to know that according to a CIA website<\/a>, the US ranks 12th in the world on a measure of GDP per capita adjusted for purchasing power parity (PPP) behind countries like Qatar, Luxembourg, Norway, Singapore, Hong Kong, and Brunei.<\/p>\n

In poor nations where GDP is very low, quality of life and subjective measures of happiness are indeed low.\u00a0 As GDP increases, there is a correlated increase in both quality of life and happiness.\u00a0 But that relationship holds up, only to a certain point, and then it falls apart.\u00a0 For example, in developed Western Democracies such as the United States, UK, and Germany, since the 1970’s, GDP has grown, but on a variety of more direct measures, the happiness of its citizens has stagnated or declined.\u00a0 See the chart below from James Gustave Speth’s book The Bridge at the Edge of the World<\/a>.<\/p>\n

\"\"<\/a>
Average Income and Happiness in the USA<\/figcaption><\/figure>\n

As it turns out, when a nation’s GDP rises above $10,000.00 per capita there is no relationship between GDP and happiness.\u00a0 For a reference point, in the United States our GDP per capita rose above this $10k point in the 1960s and is currently around $50k per capita.\u00a0 The reality is that despite a five-fold increase in personal wealth, people as a whole, are no more happy today than they were in the 1970s.\u00a0 This suggests a fundamental flaw in the thinking of our policy makers.<\/p>\n

I am not alone, nor am I first to point out the problem with assuming that GDP equates to citizen happiness.\u00a0 James Gustave Speth, provides a ground shaking critique of our current political, economic, and environmental policies in his 2008 book The Bridge at the Edge of the World<\/a>.\u00a0 This GDP-Happiness issue is a prominent theme in his book and he explores what actually accounts for happiness.\u00a0 What follows is a summary of Speth’s discussion of this topic.<\/p>\n

Research suggests that there are a number of important factors associated with individual happiness.\u00a0 What is interesting is that the major factors are relativistic, innately internal, as well as social and interpersonal.\u00a0 Yes, below a certain point, when people are impoverished and struggling to survive, happiness is indeed tied to GDP.\u00a0 But above that $10K GDP per capita line, these other human factors play a major role.<\/p>\n

Let us start with perhaps the most powerful factor associated with happiness, our genes.\u00a0 It is estimated that about one-half of the variability in happiness is accounted for by our genetic composition.\u00a0 One’s happiness is much like one’s personality, to a large extent it is written in our DNA.\u00a0 Some people are just congenitally happier than others.\u00a0 Some are chronic malcontents no matter what the circumstances provide.\u00a0 Such proclivities are difficult to override.\u00a0 But the remaining 50% of variance in happiness does seem to be rooted in variables that we can influence.<\/p>\n

One’s relative prosperity is a clear variable.\u00a0 There is an inverse relationship between happiness and one’s neighbors’ wealth.\u00a0 If you are relatively well-off compared to those around you, you are likely to experience more happiness.\u00a0 If however, you are surrounded by people doing much better than you (financially), you are likely to experience discontent.\u00a0 It is more about relative position rather than absolute income.\u00a0 And as everyone’s income rises, one’s relative position generally remains stable.\u00a0 So more money does not necessarily equate to more happiness.<\/p>\n

Yet another innately human factor that plays out in this happiness paradox is our incredible tendency to quickly habituate to our income and the associated material possessions that it affords.\u00a0 We seem to have a happiness set point. There may be an initial bump in happiness associated with a raise, a bigger better car, or a new house; however,\u00a0 we tend to return to that set point of happiness pretty quickly.\u00a0 We habituate to the higher living standards and quickly take for granted what we have.\u00a0 We then get a relative look at what’s bigger and better and begin longing for those things.\u00a0 This is the hedonic treadmill<\/em>.<\/p>\n

Happiness is to a large extent associated with seven factors:<\/p>\n

    \n
  1. Family relationships<\/li>\n
  2. One’s relative financial situation<\/li>\n
  3. The meaningfulness of one’s work<\/li>\n
  4. Ties to one’s community and friends<\/li>\n
  5. Health<\/li>\n
  6. Personal freedom<\/li>\n
  7. Personal values<\/li>\n<\/ol>\n

    Speth notes that “except for health and income, they are all concerned with the quality of our relationships.<\/em>”\u00a0 We clearly know that people need deeply connected and meaningful social relationships.\u00a0 Yet we are living increasingly disconnected and transient lifestyles where we relentlessly pursue increasing affluence all the while putting distance between us and what we truly need to be happy.\u00a0\u00a0 We are on that hedonic treadmill convinced that happiness comes from material possessions, all the while neglecting the social bonds that truly fulfill us.<\/p>\n

    Obviously, GDP misses something with regard to happiness.\u00a0 Speth quotes Psychologist David Meyers who wrote about this American Paradox<\/em><\/strong>.\u00a0 At the beginning of the twenty-first century he observed that Americans found themselves:<\/p>\n

    “with big houses and broken homes, high incomes and low morale, secured rights and diminished civility.\u00a0 We were excelling at making a living but too often failing at making a life.\u00a0 We celebrated our prosperity but yearned for purpose.\u00a0 We cherished our freedom but longed for connection.\u00a0 In an age of plenty, we were feeling spiritual hunger.\u00a0 These facts of life lead us to a startling conclusion: Our becoming better off materially has not made us better off psychologically.”<\/p><\/blockquote>\n

    The reality is that there is a great deal of disillusionment in this country (The United States).\u00a0 And we are falling behind in other areas of significant importance.\u00a0 Our healthcare systems ranks 37th in the world<\/a> with regard to life expectancy.\u00a0 The efforts of our education system finds us loosing touch with the world’s top performers.\u00a0 A 2010 US Department of Education report<\/a> releasing the 2009 Program for International Student Assessment<\/em> (PISA) scores indicated that 15-year-old students from the US scored in the average range in reading and science, but below average in math. Out of the 34 countries in the study, the US ranked 14th in reading, 17th in science and 25th in math.\u00a0 The US students ranked far behind the highest scoring countries, including South Korea, Finland, Canada, and Singapore, Hong Kong and Shanghai each in China.\u00a0 Secretary Duncan, at the time of the PISA announcement, said that:<\/p>\n

    \u201cThe hard truth is that other high-performing nations have passed us by during the last two decades\u2026In a highly competitive knowledge economy, maintaining the educational status quo means America\u2019s students are effectively losing ground.\u201d<\/p><\/blockquote>\n

    Although GDP is an important economic measure, many economists and some leaders suggest that we should assess well-being more precisely.\u00a0 For example, alternatives include the Genuine Progress Index<\/strong> (GPI) that factors into the equation environmental and social costs associated with economic progress.\u00a0 See the graph below for how we in the US have fared on GPI.<\/p>\n

    \"\"<\/a>
    GDP and GPI Growth<\/figcaption><\/figure>\n

    This GPI data suggests that since the early seventies there has been a clear divergence between GDP and the well-being of the citizens of the United States.\u00a0 This GPI line correlates strongly with the relative happiness line over the same time period.<\/p>\n

    Another effort made with regard to measuring the well-being of the citizens is the Index of Social Health<\/strong> put forward by Marc and Marque-Luisa Miringoff.\u00a0 They combined 16 measures of social well-being (e.g., infant mortality, poverty, child abuse, high school graduation rates, teenage suicide, drug use, alcoholism, unemployment, average weekly wages, etc.) and found that between 1970 and 2005 there has also been a deteriorating social condition in the United States despite exponential growth in GDP.<\/p>\n

    The New Economics Foundation in Britain has developed the Happy Planet Index<\/strong><\/a> (HPI) that essentially measures how well a nation converts finite natural resources into the well-being of its people.\u00a0 The longer and happier people live with sustainable practices the higher the HPI.\u00a0 The United States scores near the bottom of this list.\u00a0 At the top of the list in the Western Developed nations are countries like Malta, Austria, Switzerland, Italy, Iceland, and the Netherlands (due to long happy lives and lower environmental impact).\u00a0 At the bottom across all nations are countries like the US, Qatar, UAE, Kuwait (each as a result of atrocious environmental impact) and Rwanda, Angola, Sudan and Niger (due to significantly shortened life spans).<\/p>\n

    “Right now,<\/em>” Speth notes, “the reigning policy orientation and mindset hold that the way to address social needs and achieve better, happier lives is to grow – to expand the economy.\u00a0 Productivity, wages, profits, the stock market, employment, and consumption must all go up.\u00a0 Growth is good.\u00a0 So good that it is worth all the costs.\u00a0 The Ruthless Economy <\/em>[however] can undermine families, jobs, communities, the environment, a sense of place and continuity, even mental health, <\/em>[but] in the end, it is said, we’ll somehow be better off.\u00a0 And we measure growth by calculating GDP at the national level and sales and profits at the company level.\u00a0 And we get what we measure.<\/em>”<\/p>\n

    All this taken together seems to suggest that we would be better off as a citizenry if we radically re-prioritized our economic, social, and environmental policies with increased focus on factors that more closely align with human well-being.\u00a0\u00a0 Yet, we continually forge ahead striving unquestionably for economic growth because we believe it will make us better off.\u00a0 Closer scrutiny suggests that we should broaden our thinking in this regard.\u00a0 If we were to focus our energies on GPI and\/or HPI, like we have on GDP over the last 50 years, just imagine what we could accomplish.<\/p>\n

    References:<\/strong><\/p>\n

    Central Intelligence Agency<\/a>. The World Fact Book: GDP per capita adjusted for purchasing power parity (PPP).<\/p>\n

    Guild, G. (2011). We’re Number 37! USA! USA! USA!<\/a><\/p>\n

    Happy Planet Index.<\/a> NEF<\/p>\n

    Johnson, J. (2010). International Education Rankings Suggest Reform Can Lift U.S.<\/a> US Department of Education.<\/p>\n

    Speth, James Gustave.\u00a0 (2008).\u00a0 The Bridge at the Edge of the World<\/a>. New Haven: Yale University Press.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Citizens of the United States are endowed with certain unalienable rights: one of which is the right to pursue happiness.\u00a0 Governments generally need to attend to the common level of happiness of its citizens in order to sustain power.\u00a0 As evidenced by the Arab Spring, unhappy people have the capability to overthrow ineffectual governments.\u00a0 As … <\/p>\n

    Read more “Happiness as Measured by GDP: Really?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[58,52,85],"tags":[103,102],"class_list":["post-2548","post","type-post","status-publish","format-standard","hentry","category-happiness","category-politics","category-poverty","tag-happiness","tag-politics"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3mcUm-F6","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/posts\/2548","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/comments?post=2548"}],"version-history":[{"count":51,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/posts\/2548\/revisions"}],"predecessor-version":[{"id":3810,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/posts\/2548\/revisions\/3810"}],"wp:attachment":[{"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/media?parent=2548"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/categories?post=2548"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/geraldguild.com\/blog\/wp-json\/wp\/v2\/tags?post=2548"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}