Move over, GNP: Ready for GNH?

MUCH HAS BEEN SAID ABOUT how little GNP (gross national product) or GDP (gross domestic product) really tells us—and yet GNP/GDP remains the most widely used measure for assessing the performance of economies around the world. GNP measures production by a country’s nationals wherever they are (whether within or outside the country), while GDP measures production that happens within the country, regardless of nationality of producers. Either way, each measures both the value of total production and of total incomes in the economy, which are two sides of the same coin.

But does higher output or higher income necessarily mean greater well-being or happiness? It doesn’t take much to see that the answer, whether one looks at it from the macro (aggregate) perspective or from an individual’s point of view, is no.

GNP/GDP issues

At the aggregate level, growth in GNP/GDP says nothing about how output and incomes are distributed within the economy. Where there is a wide gap between a minority who are rich and a majority who are poor, rapid GNP/GDP growth can come with increased misery, particularly when the benefits of growth accrue mainly to the former. Case in point is the Philippine experience of recent years: Based on the Family Income and Expenditures Survey, income poverty had gone up since 2003 even as GNP/GDP had been growing at supposedly record rates.

The way by which GNP/GDP is actually measured likewise casts serious doubt on what exactly these yardsticks are measuring. In a recent article, Nobel laureate economist Joseph Stiglitz points out several such issues with what he calls “GDP fetishism.” Among other things, he points out that output in one key sector—government—is simply measured by the inputs (via the budget), for lack of any other way of doing so.

If government spends more, even if inefficiently (or even if much of the money leaks out in graft and corruption), measured government output goes up. Another question arises from the use of market prices to value goods and services in measuring GNP/GDP. He observes that in the wake of the financial crisis, even those with the most faith in markets are now questioning reliance on market prices, as they argue against mark-to-market valuations.

Sources of happiness

At the individual level, the age-old premise that increased income or access to goods and services leads to improved well-being (increased happiness) has long been questioned, even by economists themselves. Students in mainstream economics are taught that “utility,” which is synonymous to “satisfaction” or “happiness,” is directly related to levels of consumption, and that “more is better” for a rational consumer. But satisfaction or pleasure is a state of mind and can originate from many sources other than consumption. Psychologists have long known that happiness or well-being—or what economists call “utility”—can be improved not only from “having,” but also “doing,” “being” and “being related with.”

Moreover, humans also have an inherent instinct for altruism or for caring and sharing, even as economics assumes them to be intrinsically selfish. This would further add “giving” to the above list of utility generators.

In other words, we all know that humans may increase happiness not just from consuming more goods and services. They may actually do so from giving more to others as well, deriving joy from the increased joy of others. They may also derive satisfaction from doing something enjoyable such as playing a sport or even doing their jobs (hence the word “workaholic”).

Or they may derive it from being famous, popular or respected by the community. Or they may get it from loving someone and being loved or having good relations with family and neighbors or from having many friends. In many cases, these other sources of happiness may actually be associated with having less of the things that are measured in GNP/GDP.

Gross national happiness

Almost exactly four years ago, I wrote in this space about how King Jigme Singye Wangchuk of Bhutan has championed the advocacy for gross national happiness (GNH) as a superior yardstick for development than GNP. While he had argued that the obsession with measuring GNH could even undermine its usefulness as a policy goal, much work has since transpired to make the concept more operational.

The literature on the economics of happiness and well-being has grown by leaps and bounds in recent years. Conferences and well-funded research programs have been devoted to the topic, such as the International Conference on Happiness and Public Policy held in Bangkok, Thailand, two years ago, and the Wellbeing in Developing Countries Research Group at the University of Bath in the United Kingdom.

Books (like economist Richard Layard’s 2005 volume “Happiness: Lessons from a New Science”) and journal articles now lend the topic technical legitimacy, in contrast to the cynical if not derisive reactions the very idea of GNH elicited in its earlier days.

Thailand, for one, explicitly aims to track environmental and social happiness in its Tenth Plan (2006-2011). Maybe it’s time we did, too, so that government may put its energy and money into the things that really matter for ordinary Filipinos. –Cielito Habito, Philippine Daily Inquirer

Comments welcome at chabito@ateneo.edu