Gross National Happiness versus GDP to Measure Prosperity

Once countries accept that GDP does not give them the big picture of how society is doing, but only how much the economy is growing, then they will understand the importance of creating and implementing approaches that better captures its population’s needs.

  |  5 min read

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Highlights

  • GDP has been the long-standing indicator used to measure a country’s economic performance
  • Alternatives to GDP include the Human Development Index (HDI) & the Gross National Happiness Index (GNH) 
  • Measures focused on improving the wellbeing of people are being introduced by various countries.
GDP calculation image
Where is the benefit to society, the environment, fulfilment and wellbeing?
There is nothing here that make us better.

A Summary of GDP

Since 1944, the go-to indicator of measuring a country’s success and prosperity has been determined by the Gross Domestic Product (GDP). In essence, GDP measures a country’s economic performance. It considers – solely –  the monetary value of the market; goods and services produced within a certain time frame. GDP can be calculated in three ways:

  1. Income method: the total income generated by employees and businesses,  – meaning, generally, profits and wages.
  2. Expenditure method: total value of expenditure by consumers, businesses and governments on final goods and services,  including imports and exports.
  3. Output method : total value added from the goods and services produced from all sectors of the economy, including agriculture, manufacturing, energy, construction, the service sector and government.

While there are three different methods, most major economies use all three to measure growth.   For example, Australia generally takes the average of these values to estimate their final GDP.   This measurement is then used to determine the health of a country’s economy; as in, whether an economy is growing or in a recession, impact on stock prices, how economists and investors make investment decisions, and so on. 

But this measurement of growth isn’t telling the full story. What about the health and wellbeing of the people? The carbon footprint? The distribution of income in a country?

 

While GDP may be a powerful and globally comparable indicator, it has its limitations. This has led to new variations of GDP indicators being developed. For example, the Human Development Index (HDI), developed in 1990, has elements of wellbeing by including indicators of education, life expectancy and gross national income per capita. Another example is the Genuine Progress Indicator (GPI), which assesses the prosperity of a country by looking at ecological and social variables. Essentially, it is measured as if the GDP were taking into account  the social and ecological expenses a country incurs.

The beginning of ‘happiness’ indicators

When it comes to looking at the wellbeing of people, indicators that measure ‘happiness’ are also being considered. In the 1970s, Jihme Singye, the fourth king of Bhutan, invented the Gross National Happiness index (GNH).  This index consists of 33 indicators from 9 different categories.

The measurement tool covers basic domains such as health and education, whilst also including less obvious categories such as community vitality and time use.  In the not too distant past, some may have perceived a happiness index as a ‘fluffy term’, but it is now seen as increasingly important and countries are starting to adopt similar measures.

The foundation of GNH is based on four pillars; good governance, sustainable socio-economic development, cultural preservation and environmental conservation. This is then broken down into the following nine dimensions which are equally weighted and reflect a holistic view of a person’s wellbeing:

  1. Psychological well being
  2. Health
  3. Education
  4. Time use
  5. Cultural diversity and resilience
  6. Good governance
  7. Community vitality
  8. Ecological diversity and resilience
  9. Living standards

  

An individual is identified as ‘happy’ if they have achieved sufficiency in at least 70% of the domains.

Where are we now?

Happiness is becoming globally recognised as an important indicator of measuring a country’s success and prosperity. Since 2012, the UN started producing World Happiness Reports where surveys are conducted to identify how happy citizens believe themselves to be and countries are ranked accordingly. In 2016, UAE introduced a Minister of State for Happiness and launched the “National Programme for Happiness and Positivity”. This programme focused on including happiness policies, services in government bodies and workplaces, promoting wellbeing and happiness as a lifestyle, and developing tools to measure happiness.

In 2016, the Indian state of Madhya Pradesh also launched the country’s first Happiness department, which introduced 70 programs aimed at improving happiness. In 2019 New Zealand introduced its first ‘well-being budget’ where the initiative focuses on low carbon emissions, digitisation of the economy, lifting of incomes, skills and opportunities, reduction of child poverty as well as improving the mental health of its people. 

Other initiatives in this area include:

With the recognition of these new non-monetary measures, how can you measure happiness in your programs, policies and projects? This is where we come in!

How can we help?

We envision a regenerative, sustainable and prosperous future – where people and the planet thrive – and we’re building the technology for those who work on the frontline, fighting for a better world. isgood.ai uses digital tools and AI to measure and optimise an organisation’s social impact. Using metrics aligned with the SDGs, we can help you measure how effective your organisation is in delivering well-being to your targeted communities. We provide the tools and models that will make sense of the problem you’re trying to fix so you can focus on what matters.

A holistic and comprehensive model that considers the many factors that can make a city, society and the world thrive is Doughnut Economics, and we are at the forefront of enabling this in the real-world with localised and global Doughnut Dashboards, highlighting the good and the bad to inform positive action for a future where we can all be more happy  🙂

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Change the Goal – from GDP to the Doughnut.
Humanity’s 21st century challenge is to meet the needs of all within the means of the planet. In other words, to ensure that no one falls short on life’s essentials (from food and housing to healthcare and political voice), while ensuring that collectively we do not overshoot our pressure on Earth’s life-supporting systems, on which we fundamentally depend – such as a stable climate, fertile soils, and a protective ozone layer. The Doughnut of social and planetary boundaries is a playfully serious approach to framing that challenge, and it acts as a compass for human progress this century.