International Day of Happiness: Why happiness and wellbeing count more than income

International Day of Happiness
International Day of Happiness is an occasion to re-examine the development metrics that measure just income or output.

International Day of Happiness 2022: Gross Domestic Product, arguably the most powerful statistical metric in history, is the most widely used measure of an economy’s size and level of development. Clarke, Kuznets, Stone, Keynes and Galbraith considered production, income and output as the determinants of economic progress. The metric has its roots in William Petty’s political arithmetic and Adam Smith’s notion of the invisible hand as described in the Theory of Moral Sentiments and The Wealth of Nations.

Paul Samuelson regarded GDP as one of the great inventions of the twentieth century. None of these economists could have imagined that nations would become so obsessed with GDP that all of their policies and practices would revolve around GDP growth indicators, and that nations’ progress would be measured and compared using this measure.

Empirical evidence, as discussed at length by economists and psychologists, shows that increases in GDP have not resulted in an enhancement of people’s life satisfaction. Though their physical standard of living has improved manifold, their contentment has not improved pari passu. Physical infrastructure has been transformed to provide the comforts of the so-called good life, but this has also added to community and social problems. Disparities have grown by leaps and bounds, value (human) erosion is rampant, and consumerism and materialism are influencing people’s actions and choices. Individuals are judged on the amount of money they have.

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Need for new measures of progress

Despite the fact that nations are becoming more economically developed and independent, issues such as inequality, work-life balance, discrimination, crime, depression, environmental imbalance, and social alienation are on the rise. In The Progress Paradox, Gregg Easterbrook establishes that while physical infrastructure and standard of living have improved over the last 50 years, it has not reflected in people’s life satisfaction or happiness.

The construct of happiness as discussed across disciplines broadly revolves around the human’s state of being. The first two decades of the 21st century witnessed the outcome of political and intellectual battles in the form of voluminous literature on the different aspects of happiness and wellbeing. Literature across domains centres around subjective or objective indicators to measure the status of happiness using different coinages like Hedonism and Eudaimonism, feeling well vs being well, having well vs wellbeing, and outside in vs inside out phenomena.

Though India is one of the largest and the fastest growing economies, the state of being of its people as indicated using various proxy indicators is not satisfactory. As per the latest available data, it ranks 131st in HDI ranking, 139th in the Happiness Index, 129th in the World Inequality Index, 135th in the Global Peace Index, 142nd in the World Press Freedom Index, 85th in the Corruption Perception Index, 116th in the Human Capital index, 101st in the Global Hunger Index, 119th in the Human Freedom Index, 155th in the Environmental Performance Index, 145th in the Healthcare Access and Quality Index and 140th in the Global Gender Gap Report.

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What do all these say about the Indian economy and society? Is it a mistake to equate people’s happiness with GDP per capita, considering its creator Simon Kuznets’ warning “the welfare of a nation can scarcely be inferred from a measure of national income”? How did thinkers begin to view everything through the lens of GDP, and how did it become the dominant gospel indicator in public policy?

Stiglitz, Sen and Fitoussi addressed this enigma in their book ‘Mis-Measuring Our Lives: Why GDP Does Not Add Up’, saying “the theories we construct, the hypotheses we test and the beliefs we have are all shaped by our system of metrics”. What if the metric is riddled with flaws? What if the metric was designed to serve a specific purpose and is now being used to measure things it was never meant to measure? “It counts the labour used and wood produced when a tree cut down, but does not deduct the shade and beauty that are lost,” wrote Banerjee and Duflo in their latest book Good Economics for Hard Times. (p.153)

policy circle image

policy circle image

The last decade of the twentieth century saw the rise and popularity of HDI as a tool for comparing the progress made by nations. It has been recognised as a better measure for public policy as outcomes need to be measured by examining people’s satisfaction with the initiatives as well as improvements in their subjective wellbeing. It was felt that the direction of policy should be one that focuses on the welfare of citizens by empowering them. Public policy should prioritise the development of better social infrastructure in order to address economic indicators rather than the other way around.

Gross National Happiness as a measure

Bhutan, which adopted a democratic constitution, has been practising a development philosophy known as Gross National Happiness (GNH), which is based on the premise of people’s wellbeing. This tiny country became the youngest member of the club of parliamentary democracies in the early months of 2008. Bhutan has been sharing its concern for people’s welfare through its focus on GNH for more than 40 years.

There have been ongoing efforts to popularise the concept and advocate for the importance of happiness in policy framework. Wikipedia included this term and defines it as an attempt to define quality of life in more holistic and psychological terms than GDP. According to one of its national human development reports, the pursuit of GNH necessitates a multifaceted approach to development that seeks to maintain harmony and balance among economic forces, environmental preservation, cultural and spiritual values, and good governance. These four priorities are known as the four pillars of GNH.

Former French president Nicholas Sarkozy established the Commission on the Measurement of Economic Performance and Social Progress in 2008 led by Stiglitz, Sen, and Fitoussi. The commission’s mandate was to identify the limits of GDP as an indicator of economic performance and social progress, including measurement issues, to consider what additional information might be needed for the production of more relevant indicators of social progress, to assess the feasibility of alternative measurement tools, and to discuss how to present the statistical data in an appropriate manner. The members conducted research on social capital, happiness, health and mental wellbeing.

The committee’s report, known as the Sarkozy Report, made a compelling case for a change in our measurement system by shifting emphasis from economic output to people’s wellbeing. It was also suggested that wellbeing measures be placed in the context of sustainability. Apart from considering the wellbeing spectrum, the commission also made other recommendations such as measures of non-market activities.

International day of happiness

On July 19, 2011, 68 countries joined Bhutan in supporting the adoption of its resolution on ‘Happiness: Towards a Holistic Approach to Development’ by the United Nations. This resolution was adopted by the United Nations General Assembly. It recognised happiness as a fundamental human goal and emphasised a more inclusive, equitable, and balanced approach to economic growth that promotes happiness and well-being for all. The resolution directed member countries to take steps toward implementing and realising the vision of a development paradigm that integrates economic, social, and environmental goals that go beyond GDP-based development.

Taking the lead from this resolution, the UN held its first high-level meeting on the theme, ‘Happiness and Well-being – Defining a New Economic Paradigm’ on April 2, 2012. Jigme Y Thinley, Bhutan’s Prime Minister, was the driving force behind inviting all relevant stakeholders to this meeting.

Select heads of states, ministers, Nobel laureates, eminent economists, scholars, and spiritual and civil society leaders from developing and developed countries attended this historic meeting. UN Secretary General Ban Ki Moon said, “We need a new economic paradigm that recognizes the parity between the three pillars of sustainable development. Social, economic and environmental well-being are indivisible. Together they define gross global happiness.” On June 28, 2012, all the 193 members of the UN General Assembly unanimously adopted UN resolution 66/281 and decided to observe 20th March as International Day of Happiness.

In the era of dominance of market forces and enormous capital flows, focus on happiness and wellbeing in public policy can be viewed as a transformational initiative. This, however, does not imply that GDP is a redundant indicator. In terms of measuring economic progress, it is the most brilliant invention in economic history. It is an insufficient and inappropriate indicator for gauging the care of human life and happiness, but this does not preclude it from being considered for public policies.

Since the mid-twentieth century, attempts have been made to investigate alternative approaches to GDP to measure progress and development so that future generations can view societies through newer perspectives and parameters. Indicators developed so far are divided into three categories: ones that replace GDP, ones that adjust GDP, and ones that supplement GDP.

It is important to give happiness an edge over quantifiable measures. Despite the fact that this noble thought originated in a small country, it is capable of addressing major issues confronting powerful nations. Around the beginning of the current century, Polly Toynbee wrote in The Guardian, “When God died, GDP took over and economists became the new high priests.” This has been the story of the last century. The 21st century should go down in history as an era prioritising human wellbeing and happiness over economic development. On the occasion of the International Day of Happiness, it will be a true tribute if nations commit to rationally examining the quality and composition of economic growth and improving people’s lives.

(VK Shrotryia is Professor, Department of Commerce, Delhi School of Economics. Shashank Vikram Pratap Singh is Assistant Professor, Shri Ram College of Commerce, University of Delhi.)