The Happiness Economy

Last year, 2014, was a bit of a struggle. Can't say this piece is one of my better ones as I basically revisited the Gross Happiness Index that I wrote about in 2010. Good idea at the time but there are probably repetitions. I called it the Happiness Economy this time:


Dec 2014

By Lim Yin Foong

With the year-end feasting and festivities all but over, this is usually the time when most people would take stock of their lives and make resolutions for a better and happier year ahead.

These days however, we're not the only ones interested in our state of happiness. Governments and policymakers also want to know what makes us happy and contented, and are now including happiness and wellbeing into national and even global agendas.

In end-2010 when I first wrote about the UK's plans to measure national wellbeing, it was but one of a few post-financial crisis initiatives to find an alternative to the Gross Domestic Product (GDP) to assess a nation's success and progress, in part inspired by Bhutan's Gross National Happiness (GNH) measure.

In the four years since then, the United Nations (UN) General Assembly has called on its member countries to measure its people's happiness and wellbeing, and to use this to guide their paublic policies. It has also declared an International Day of Happiness on March 20, in recognition of ' the relevance of happiness and wellbeing as universal goals and aspirations in the lives of human beings around the world and the importance of their recognition in public policy objectives.'

Today, there are a multitude of national efforts looking to measure happiness and wellbeing, such as the UK's Measuring National Wellbeing programme and Canada's Index of Wellbeing. The UN-backed World Happiness Report, considered to be the world's first global happiness survey, was first released in April 2012. This was just ahead of a high-level meeting of governments, initiated and chaired by Bhutan, to debate on what UN Secretary General Ban Ki-moon termed the 'new economic paradigm' - one that links between happiness, wellbeing and prosperity.

The Organization for Economic Cooperation and Development (OECD) has introduced guidelines to measure wellbeing, while the World Economic Forum has also begun producing its own annual happiness reports, calling wellbeing the 'new concept of progress'. And UK-based policy think-tank Legatum Institute's Prosperity Index, first produced in 2007, now receives much attention as reportedly the only global index that looks at both wealth and wellbeing in measuring national prosperity.

All these endeavours stem from a realisation that the GDP is a narrow and insufficient measure of a nation's progress, hence leading to the search for more holistic models that can help redefine national prosperity beyond looking at material wealth as the sole determinant of success and wellbeing.

Academics and researchers are calling for the formalisation of what's been termed as 'Beyond GDP' measurements that take into consideration social and environmental indicators when measuring a nation's success and wellbeing. These can range from the availability of cheap eyeglasses and the number of teenage girls attending school, to the average hours of sleep and level of random of acts of kindness in a society.

And it's about time. For far too long, the use of monetary benchmarks, like income and wealth as represented by the GDP, to measure and compare national progress has fuelled the relentless pursuit for even more economic growth at the expense of social and environmental factors that contribute to our quality of life and wellbeing.

Undoubtedly, we all need a certain level of financial income to achieve a decent life standard, but does money necessarily buy happiness? Not so after a certain point, say some researchers in happiness economics, who cite the Easterlin paradox. In the 1970s, American economics professor Richard Easterlin wrote about what how once basic needs have been met, more national wealth does not does not necessarily translate to a happier nation.

This view has been further corroborated by researchers from Warwick University and the University of Minnesota, whose recent study found that while national happiness rises as a country's GDP per capita goes up, life satisfaction levels peak at an annual income per head of US$36,000, before dipping slightly.

Warwick University economist Eugenio Proto attributes this to the fact that while higher GDP levels lead to higher aspiration, the resulting aspiration gap – the difference between actual income and the income we would like – begins to erode life satisfaction levels. In other words, greater wealth can lead to greater inequality and unhappiness as a result.

Little surprise then, that proponents of happiness economics like economist Lord Richard Layard believe that happiness is a more realistic measure of success than income. Layard, who's been called the 'father of happiness science', feels that government needs to do more to ensure the happiness of its people and that public policy should focus on helping them achieve a better work-life balance and mental health.

Indeed, economic growth in the West has come with increasing loneliness and depression, suggesting that a materialistic-only philosophy is not in accord with human nature, writes Reuters editor-at-large Hugh Dixon. In fact, he posits that the economy should serve society in providing the conditions that allow people to lead good lives.

Economic growth is important, but should not be the end-goal in itself. A change in mindset is therefore necessary if we want a more sustainable and conducive environment to achieve better quality of life for everyone.

Measuring wellbeing and taking a more holistic approach to assessing progress is a laudable first step towards this path. The next challenge though would be to see how the collected and analysed wellbeing data can be effectively applied in government policy-making as well as decision-making by businesses, communities and individuals.