Chasing GNH vs GDP growth 


Ever heard of the Easterlin paradox? 

No, me neither. Or at least I didn't realise it had a name. 

The Easterlin paradox, named after Professor Richard Easterlin, the founder or happiness economics, expounds the theory that more national wealth does not necessarily translate to a happier nation once basic needs have been met. In other words, having more money does not necessarily make a person happier, once his or her basic needs have been met.

Perhaps I've put it a bit simplistically. Many people think that the more money we have, the happier we will be, because the money will enable us to achieve our needs and wants, our dreams and aspirations. Money to buy all the things that you want, to do all that you want, to stop working, to take care of your family well, to provide the best for them. While we admit that money can't buy everything, it sure can help especially to provide the best education, healthcare, service. Can't argue with that.

Hence, nations chase economic (GDP) growth as that signifies growth in wealth which in turn is expected to attain national happiness. But is that the right way to go? Can money buy peace of mind and security?

In a recent lecture at the University of Warwick, Prof Easterlin discusses how 'growing material circumstances was cancelled out by a substantial decline in peace of mind with their life, health and job satisfaction. Under socialism, jobs, healthcare and childcare had been assured.' 

(More about his lecture here at Warwick Knowledge - with a catchy headline like 'Does Money Make Us Happy? how could I resist reading it?)

Reading this really makes me think of Asia, and how people have such bad work-life balance because they are working so hard to achieve greater wealth and the material lifestyle they aspire to. I do realise that the cost of living - at least in Malaysia -  has risen substantially since we moved away in 2006, and that many people have to work long hours to provide the basic necessities for their family. 

Costs of living have gone up but the quality of living hasn't. Why? Because what is deemed as basic necessities - a safe and secure home, good healthcare, good education for one's children - are no longer at 'basic' costs. Property prices have soared thanks to speculation, and most middle-income families are opting for private education as well as healthcare, because they feel that public schooling and hospitals are not up to mark. 

Beyond those basic necessities however, there are also the aspirational (yes, that word again) wants which to me is fuelling the increasingly material consumerism that is very conspicuous in Asia. Yes, the Pradas, the LVs, the iPhones, the Beemers. But conventional economic theory says that more consumer spending/demand fuels economic growth which in turns generate more wealth. 

But does more of it really make us any happier? Or does it make us more stressed and pressured to climb the corporate/career ladder chasing better salaries (ie more wealth) to sustain the lifestyle we have grown accustomed to? 

On Wikipedia, it says that the implication of the Easterlin Paradox is that once basic needs are met, government policy should focus on Gross National Happiness (GNH) and not GDP or economic growth. 

I would second that, but then again I'm a sucker for achieving happiness (which I personally believe, is not necessarily directly correlated with great wealth).