Hello Reader,
This week we were posed the question: "Gross domestic product or gross national happiness? What should governments be striving for, and how?"
To answer the first question, it seems appropriate to define each of the two terms plus a third term. Then, I want to explore purpose of measuring the two indicators. I believe this will make the choice self-evident. Finally, the how will have to be largely based on conjecture. Particularly due to the fact that most of the scholarly papers that I have run across thus far simply define the problem rather than offer solutions.
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Gross Domestic Product (GDP)
The monetary value of all the goods and services produced by an economy over a specified period. It includes consumption, government purchases, investments, and exports minus imports.
From: Investopedia.com. Retrieved October 12, 2009, from Dictionary.com website: http://dictionary.reference.com/browse/gross%20domestic%20product
The Gross Domestic Product (GDP) is most likely to be familiar to you, and is considered one of the key metrics by which most countries measure economic success. Essentially, the larger the GDP, the more economic activity has occurred (typically over the course of a year or a month) and the more valuable the countries is considered. This particular indicator is critical to the sustainable consumption debate, because it gets to the root of the quote that in the Story of Stuff Annie Leonard attributes to economist Victor Lebow. That is, "Our enormously productive economy...demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction in consumption...we need things consumed, burned up, replaced and discarded at an ever accelerating rate." To translate this into GDP terminology, it means that for an economy to be successful, the GDP must grow continuously!
Gross National Happiness (GNH)
An index that represents the overall well being of a nation's population. It is measured using indicators of well being (i.e. life expectancy and life satisfaction).
Summarized from the Happy Planet Index Report
As far as I can tell, there is no strict definition of Gross National Happiness (GNH) anywhere that is readily accessible. However, the essence of the definition is the average life satisfaction of a nation's population multiplied by the average life expectancy of a nation's population. Basically, it amounts to a measure of how happy people tend to be and how long they can expect to enjoy that happiness. For example: if the average person in Country A was extremely satisfied during their life (10 out of 10) but died at about age 25, and if the average person in Country B was moderately satisfied during their life (5 out of 10) but died at about age 50, both Countries A and B would have the same GNH (=250).
Ecological Footprint
"[A] measure of the amount of land required to provide for all [of a nation's] resource requirements plus the amount of vegetated land required to sequester (absorb) all [its] CO2 emissions and the CO2 emissions embodied in the products [it] consume[s]"
From: the Happy Planet Index Website
For my own (brief) elaboration regarding the shortcomings of the Happy Planet Index (HPI) definition of ecological footprint please refer to the first paragraph of the section entitled My Concern on my post entitled Ecological Debts and Rights. Otherwise, I am going to accept their definition as sufficient for discussing this topic.
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What's the Point?
Both GDP and GNH are simply measures of human activity. GDP is a measure of how much economic activity there is. GNH is a measure of how much activity there is that contributes to well being. Of course, both of these measures are simply a representation of (one statistic describing) the real world. In other words, GDP and GNH are models for the real world. This has a few implications for their meanings. The first (and often overlooked part) is that a model is only as accurate as the components which it takes into account, and is thus limited in its usefulness. Furthermore, thanks to the practical limitations caused by chaotic systems, such as human behavior, it is impossible to create a completely accurate model without recreating the entirety of the system...at which point your model is useless, because it is just as complicated as the thing you were trying to understand in the first place. Therefore, all models must be used with caution. However, the second implication is that if your model measures the appropriate attributes of a system to a reasonable degree of accuracy, you can often get at the gist of the information you desire.
In our case, the gist is "What should governments be striving for, and how?", which I have taken to mean "Which metric, GDP or GNH, will more accurately represent a successful government?" And thus, governments will be able to accurately measure how successful current and prospective policies may be. Of course, success in and of itself can be considered subjective. Fortunately, in this case both mainstream economics (from which GDP springs) and alternative economics (from which GNH arises) seem to agree on success to some degree. Going back to the basics of mainstream economics, Adam Smith's invisible hand of the market economy is based on the ideal that markets will inevitably fall in line with the interests of society so long as each individual consumer attempts to maximize their own welfare. Similarly, alternative economics is looking to improve the overall well being of individuals in society, which (unless I'm completely missing the mark) is an attempt to maximize welfare.
As such, both GDP and GNH are an attempt to measure how successfully a country is promoting the welfare of its people! Great, now that we know where we are trying to go, we just need to determine which is the best way to get there (i.e. which model more accurately portrays how many units of welfare a country has).
A Caveat
The reason I added the third term, ecological footprint, to the two main possibilities offered by the question, GDP and GNH, is to add some context. It is all well and good to take either measure, GDP or GNH, on its own and have a little celebration about the fact that my country's GDP or GNH is higher than your country's, but what does this really mean? To me it makes more sense to look at efficiency.
That is, we consider how many inputs (resources) are being used to get one unit of output (welfare) rather than simply how many units are being output. This will give us a more realistic view of how profitable various countries are with respect to GDP and GNH. Otherwise, to put it into an economic perspective, it is like considering the marginal revenue from selling a product without considering the marginal cost to produce the product! If you do this, it will always seem like a great idea to strive to produce and sell additional products without limitation.
All Things Considered
Assuming that a country's GDP and GNH are considered in comparison its ecological footprint, then it makes significantly more sense, at least in theory, for an individual government to strive to maximize its country's GNH rather than its GDP. Because, as discussed before, GNH is a direct measure of how much well being its citizens possess, and is essentially by quantization of the amount of welfare the country possesses. Whereas, GDP is a direct measure of how much economic activity its citizens have participated in, which is used along with a number of other assumptions to infer how much welfare the country possesses. And the more assumptions the user of a model has to make, the less accurate the model tends to be. However, I suspect that the theory falls apart in practice due to a lack of context and standardization.
By context I am referring to the fact that most people (more importantly most policymakers) have no concept of what a good GNH rating would look like if it fell on their desks. However, it seems as though this could be remedied in a scientific manner by taking data and comparing measurements of the same situation using both GDP and GNH for an extended period of time before phasing out GDP in favor of GNH. This practice would likely be accompanied by an analysis of the discrepancies between the two metrics and their practical implications.
By standardization I mean that a metric such as GNH would probably not be able to withstand outside pressure if only one or two countries used it as their sole measure of success. It seems likely that a large number of countries chasing after GDP goals might trample over (either literally by means of physical war or occupation) or undermined (metaphorically by means of cultural diffusion) an individual country following a path laid by GNH. As a result it seems that this practice would need to be agreed upon and enacted simultaneously by several countries at once to have a decent chance at success.
We must also be cognizant that GNH is based on the averages for a nation. This means while a change would be beneficial to society as a whole, it might not be beneficial for all individuals (i.e. those whose social status based solely on high economic activity). Also, there will may be temporary transitional problems that arise for people who are now wholly dependent upon features of the current system of measure. Therefore, it should be expected that such a social change, just like any other, will meet resistance from those who stand to lose out entirely or initially.
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I hope you have enjoyed my conjecture. I look forward to feedback and apologize for how long it took me to post this assignment. It seems that the work is already starting to pile up for the semester, so an ungraded blog tends to fall toward the end of the list of priorities. In any event, please look for another posting soon(er than before).
Sincerely,
Sean Diamond
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