Cal­cu­lat­ing Hap­pi­ness

The prob­lem with sub­jec­tive in­di­ca­tors, such as Bhutan’s Gross Na­tional Hap­pi­ness In­dex, is that they can be eas­ily ma­nip­u­lated by gov­ern­ments to their ad­van­tage.

Southasia - - REGION BHUTAN - By Hus­sain H. Zaidi The writer is a free­lance con­trib­u­tor. He writes on eco­nomic is­sues.

Across the globe, the gross do­mes­tic prod­uct (GDP) or gross na­tional prod­uct (GNP) is the most cred­i­ble in­di­ca­tor of eco­nomic per­for­mance. Sus­tained and healthy GDP growth is be­lieved to sig­nal that a na­tion is far­ing well on the eco­nomic front.

Mea­sur­ing an econ­omy by its GDP is not with­out its lim­i­ta­tions. For one thing, GDP is es­sen­tially a mea­sure of how much is pro­duced, not of what is pro­duced. GDP cal­cu­la­tors, for in­stance, would at­tach as much im­por­tance to the pro­duc­tion of mil­i­tary goods as to that of food, as much im­por­tance to the pro­duc­tion of luxuries as to that of ne­ces­si­ties.

The GDP in­dex does not take into ac­count who in the main is ben­e­fit­ing from the ex­pan­sion of the na­tional out­put or who is pri­mar­ily los­ing from its con­trac­tion. It may hap­pen, and it gen­er­ally does, that the fruits of GDP growth are largely en­joyed by a small sec­tion of so­ci­ety. Hence, not sur­pris­ingly, economies un­der­go­ing rapid GDP growth also tend to ex­pe­ri­ence grow­ing in­come dis­par­i­ties.

The use of the GDP in­di­ca­tor is based on the premise that the more a na­tion pro­duces, the higher would be its stan­dard of liv­ing. It does not take into ac­count the neg­a­tive ex­ter­nal­i­ties, such as the en­vi­ron­men­tal degra­da­tion in­volved in the pro­duc­tion of goods.

In view of such lim­i­ta­tions of GDP and re­lated in­di­ca­tors, econ­o­mists and psy­chol­o­gists have long de­bated al­ter­na­tive eco­nomic in­di­ca­tors, though such de­bates have not been more than aca­demic ex­er­cises.

How­ever, there is one coun­try, and only one, that has shunned the GDP in­di­ca­tor and em­braced an­other in­dex. The coun­try is Bhutan and the in­dex is called Gross Na­tional Hap­pi­ness (GNH). Be­fore we look at Bhutan's GNH In­dex, a brief in­tro­duc­tion of the coun­try's econ­omy seems in or­der.

Though it may not be fair to de­scribe an econ­omy us­ing in­di­ca­tors that it does not ap­prove of, the re­liance on such in­di­ca­tors is un­avoid­able.

Bhutan is one of the least de­vel­oped coun­tries (LDCs) in South Asia and one of the small­est economies in the world, ranked at 171 in terms of eco­nomic size, ac­cord­ing to the World Fact­book. Al­though its per capita in­come is about $6,000, this is mainly be­cause of the very small pop­u­la­tion of 0.72 mil­lion.

Of late, Bhutan has ex­pe­ri­enced rapid eco­nomic growth, with the GDP grow­ing at 8.5 per­cent and 9.4 per­cent in 2011 and 2012, re­spec­tively (World Bank data), mainly on ac­count of hy­dropower projects. Bhutan's eco­nomic growth has thus clearly out­paced the aver­age growth of South Asia, which was 6.1 per­cent and 3.6 per­cent in 2011 and 2012 re­spec­tively.

The econ­omy is largely agrar­ian with ce­ment, wood prod­ucts and pro­cessed food, in ad­di­tion to tourism, be­ing the ma­jor in­dus­tries. Agri­cul­ture is the largest source of em­ploy­ment and ac­com­mo­dates nearly 44 per­cent of the la­bor force. Bhutan’s to­tal ex­ports in 2012 were $ 722 mil­lion. The ex­port bas­ket con­sists largely of pri­mary, low value-added prod­ucts such as ce­ment, metals and veg­etable oil. The coun­try has an elec­tric­ity sur­plus, which it mainly ex­ports to In­dia.

Al­though it is South Asia's small­est, and ar­guably the most back­ward, econ­omy, Bhutan has far more eq­ui­table dis­tri­bu­tion of in­come than other coun­tries in the re­gion. Mea­sured by the in­ter­na­tional stan­dard of earn­ing $2 per day, the poverty per­cent­age in Bhutan de­clined from 23.2 in 2007 to 12 in 2012. Com­pare this with other South Asian coun­tries: Bangladesh (76.5), In­dia (68.8), the Mal­dives (12.2), Nepal (57.3), Pak­istan (60) and Sri Lanka (23.9). In 2003, the per­cent­age shares of the rich­est 20 per­cent and the poor­est 20 per­cent in the na­tional in­come were 53 and 5.4, re­spec­tively. By 2007, the lat­est year for which rel­e­vant data is avail­able, this had changed to 45.2 and 6.6, re­spec­tively. The Gini in­dex, a mea­sure of in­come dis­tri­bu­tion, fell from 46.8 in 2003 to 38.1 in 2007 (World Bank data).

Com­ing back to Bhutan's GNHI, it goes be­yond num­bers to take, what is com­monly re­ferred to, as a holis­tic and so­cial view of de­vel­op­ment. The ed­i­fice of GNHI rests on four pil­lars – pro­mo­tion of sus­tain­able de­vel­op­ment, preser­va­tion and pro­mo­tion of cul­tural val­ues, con­ser­va­tion of the nat­u­ral en­vi­ron­ment and es­tab­lish­ment of good gov­er­nance. These four pil­lars are fur­ther di­vided into eight gen­eral in­di­ca­tors: (a) phys­i­cal, men­tal and spir­i­tual health, (b) time-bal­ance, (c) so­cial and com­mu­nity vi­tal­ity, (d) cul­tural vi­tal­ity, (e) ed­u­ca­tion, (f) liv­ing stan­dards, (g) good gov­er­nance and (h) eco­log­i­cal vi­tal­ity.

The GNHI is thus a blend of in­di­ca­tors that are sub­jec­tive and ob­jec­tive, quan­ti­ta­tive and qual­i­ta­tive. While the level of phys­i­cal health can be fairly gauged by the aver­age life ex­pectancy and in­fant mor­tal­ity rate, it is dif­fi­cult to do so in the case of men­tal and spir­i­tual health. Spir­i­tual health is even dif­fi­cult to de­fine. And the over­all 'hap­pi­ness' is even harder to as­sess.

In the first place, it is dif­fi­cult to give a def­i­ni­tion to hap­pi­ness. Does it lie in the sat­is­fac­tion of de­sires – as ar­gued by he­do­nists? Or does it lie in the con­trol of de­sires – as main­tained by some great moral teach­ers? Is an ed­u­cated per­son hap­pier than an il­lit­er­ate one? We may de­fine hap­pi­ness as well-be­ing. But such a def­i­ni­tion is cir­cu­lar, for what re­ally is well­be­ing? Ma­te­rial progress? Spir­i­tual sat­is­fac­tion? Men­tal calm­ness?

In the sec­ond place, hap­pi­ness is largely sub­jec­tive, a state of mind so to speak. Wealth may be the strong­est in­gre­di­ent of hap­pi­ness for one per­son. For an­other, a sense of recog­ni­tion may be the key to hap­pi­ness. Thirdly, sub­jec­tive in­di­ca­tors are dif­fi­cult, if not im­pos­si­ble, to com­pare over times and across re­gions and na­tions. Are people liv­ing in the coun­try­side hap­pier than those liv­ing in the cities? Are the Bhutanese hap­pier to­day than they were, say, 20 years ago? Are In­di­ans hap­pier than Amer­i­cans?

Hap­pi­ness, how­ever, does have some ob­jec­tive con­tent. For in­stance, all else be­ing equal, the healthy tend to be hap­pier than the sick, those hav­ing ac­cess to ba­sic needs, at least in nine out of ten cases, are hap­pier than those who do not. Ac­cord­ing to the UNDP Hu­man De­vel­op­ment Re­port 2013, life sat­is­fac­tion tends to be greater in coun­tries that are higher on the HD In­dex, which is based on ob­jec­tive in­di­ca­tors. And Bhutan, it may be men­tioned, ranked 140th out of 185 coun­tries on the 2012 HDI.

An­other prob­lem in the case of sub­jec­tive in­di­ca­tors is that the govern­ment can eas­ily ma­nip­u­late these to boast its ef­fec­tive­ness. A despot can claim that the people are bet­ter off and thus hap­pier un­der his 'pa­ter­nal­is­tic' regime than they were un­der a demo­cratic dis­pen­sa­tion. Of course, gov­ern­ments at times fudge ob­jec­tive in­di­ca­tors, such as GDP growth rate. But it is al­ways more con­ve­nient to ma­nip­u­late sub­jec­tive in­di­ca­tors than the ob­jec­tive ones.

That said, the GNHI and sim­i­lar sub­jec­tive in­dices are a re­minder that ob­jec­tive in­di­ca­tors such as per capita in­come and in­fla­tion lev­els are of­ten mis­lead­ing. Such in­dices also re­mind us that eco­nomic wel­fare is part of the over­all so­cial wel­fare; it is a means and not an end in it­self. How­ever, sub­jec­tive in­di­ca­tors can at best com­ple­ment and not be a sub­sti­tute for ob­jec­tive data.

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