Gross National Happiness

person

This is an excerpt from Mattieu Ricard's blog on GNH by the prime minister of Bhutan, where they use gross national happiness instead of gross domestic product (GDP).

If we were to cut down all our forests in Bhutan, GDP would mushroom, because GDP only counts the timber value of our forests once they are cut and sold at market. GDP takes no account at all of the resources we leave behind, and so it entirely ignores the value of our standing forests.

Yet, as we well know, and as our own Constitution wisely recognizes by vowing to keep most of our country under forest cover, our standing forests have immense value – protecting wildlife, biodiversity, watersheds, soils, and sacred places, sequestering carbon from the atmosphere, ameliorating the danger of landslides, and much more. Because those values are invisible in GDP, it’s no wonder the world has accumulated a massive ecological debt that appears in no country’s national accounts.

Keeping accounts this way, as the world presently does, is like a factory owner selling off all his machinery and seeds and counting it as profit, even though he’ll have nothing to produce next year. And yet that’s the way the world, and even we here in Bhutan, keep our national accounts! How absurd and foolish..….!

http://www.matthieuricard.org/en/index.php/blog/208about_gross_national_happiness_and_gross_national_product_1/

There are 5 entries on this topic this link is to the first one, you can find the links to the others on the right of the web page.

person

In fact, many things that make GDP grow, and that are therefore conventionally (and misleadingly) counted as positive signs of an expanding economy, actually signify a decline in wellbeing. The more crime, pollution, war, and sickness we have, for example, the more GDP will grow, simply because money is being spent on prisons, police, weapons, drugs, cigarettes, and pollution clean-up costs to deal with the consequences of these ills. So long as you spend money, GDP will grow, regardless of whether that spending signifies an improvement or a decline in wellbeing. So simple GDP growth can’t actually tell us if we are better off or not.

And if GDP counts as gain many questionable things that actually signify a decline in wellbeing, it entirely ignores a whole range of productive economic activity that genuinely does contribute to wellbeing – ignoring it simply because no money is exchanged. And so, volunteer work, community service, and the vital unpaid work done in households count for nothing in GDP, and the precious free time that we need to meditate, garden, and socialize with family and friends is completely value-less in GDP.

And since equitable development is one of our core GNH principles, it is noteworthy that GDP only measures the total amount of income a country produces and takes no account of how that income is shared. So the rich could be getting richer while the poor are getting poorer, and GDP can still continue to grow, with the growing inequities invisible in our standard accounts.

Dakini

There's an alternative to the all-or-nothing scenario outlined in the point about cutting Bhutan's forests. The forests can be preserved and a small lumber enterprise can be set up, if sustainable forestry practices are followed. It doesn't have to be either-or, it can be both-and. When we get locked into black-and-white thinking, we miss all the rich shades of grey in-between, and we miss opportunities for problem-solving and economic diversification as well.

AMH

Yes our middle way! I have had people comment that because I love my job I should not have worries about what I earn. This happiness quotient is supposed to be so big that I don't notice the rest. However there is stress to not being self sustaining as well. That seems the case here, a country that needs an industry can find a middle ground, however I think that it is more complicated to manage that middle ground rather than taking one side or another.

Dakini

Yes our middle way! I have had people comment that because I love my job I should not have worries about what I earn.

Who are these thoughtless idiots? Do they know you have kids to support, and that you're getting paid minimum wage? Comments like this, nobody needs. :shake:

person

There's an alternative to the all-or-nothing scenario outlined in the point about cutting Bhutan's forests. The forests can be preserved and a small lumber enterprise can be set up, if sustainable forestry practices are followed. It doesn't have to be either-or, it can be both-and. When we get locked into black-and-white thinking, we miss all the rich shades of grey in-between, and we miss opportunities for problem-solving and economic diversification as well.

Good point. I didn't think he was saying though that economic production has no value, just that they would now count the normally uncounted value of a forest. So they could still use resources but now the negative effects would also be figured into the equation.

Dakini

In an economic model like Bhutan's, I would think that the value of a living forest would already be factored in. It's good for tourism, harvesting of forest products for alimentary and medicinal use, possibly good for controlled hunting and therefore food production, etc., to say nothing of the environmental factors he mentions: carbon sequestration and oxygen production, and so forth.

I guess what I'm saying is that he makes a good point, but he does so by exaggerating the dominant economic model. Generally, no economist would advocate mowing clean a country's forests. In many countries where deforestation is occurring, it's done illegally. Poaching of tropical hardwoods is epidemic. Then there are countries like Brazil, that encourage settlers to cut down the tropical forest for farming (which collapses within a couple of harvests, due to unsuitable soils), but no one on an international level thinks that's wise. So this model he sets up as the fall guy doesn't exist, it's sort of an oversimplification of reality on the ground, but it's not part of any global (or sane economist's) policy. But I guess it's a useful lens through which to view Bhutan's, or any environmentally-minded entity's, perspective.

vinlyn

In an economic model like Bhutan's, I would think that the value of a living forest would already be factored in. It's good for tourism, harvesting of forest products for alimentary and medicinal use, possibly good for controlled hunting and therefore food production, etc., to say nothing of the environmental factors he mentions: carbon sequestration and oxygen production, and so forth.

Bhutan appears to significantly restrict tourism, so I doubt they want to develop forests to increase tourism.

Dakini

Bhutan makes a lot of money off their restricted tourism. That's the smart thing about it. They allow a limited number of people in, but they charge exorbitant prices, so they get a lot of buck for their bang, or.. something.

What Bhutan fails to do in their GNH index is factor in rampant domestic violence.

person

Whenever we hear in the news about how the economy is growing the number they use is GDP. The point is that we think if growth is at %5 means everything is great, but GDP counts the expense of someone getting cancer or getting hit by a car as economic activity and thus is a plus and it doesn't count pollution of our ecosystem or the benefit of a stay at home parent.

So sure any sane person would realize the impact of cutting down a whole forest but the impact wouldn't be included in any normal type of cost-benefit analysis.

Dakini

Right enough. It's disturbing to think that calamities and the economic activity they stimulate only go toward strengthening the GDP. I'm not sure I buy that part of it, I'll have to chew on it some more. But when you look at the private prison industry, it's true--the industry has a vested interest in incarcerating an ever-growing percentage of the population. That's scary. Something's really wrong with that model.

It used to be that war was a great economic stimulant, but that's no longer true. War only gets us into a dangerous state of debt.

person

GDP also only counts production not destruction so a massive hurricane that causes billions in damage and 100's of lives would only count as a positive in GDP from the rebuilding dollars. The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

Dakini

The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

This is interesting.

But in the case of a weather disaster--fire, hurricane, etc., does all the public money spent on disaster relief figure into the GDP? DIsasters cause a tremendous loss of funds from public coffers, some of which goes to pay for rebuilding. It's a double-edged sword in that case, and I don't know how it works out in the balance for calculating GDP.

person

The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

This is interesting.

But in the case of a weather disaster--fire, hurricane, etc., does all the public money spent on disaster relief figure into the GDP? DIsasters cause a tremendous loss of funds from public coffers, some of which goes to pay for rebuilding. It's a double-edged sword in that case, and I don't know how it works out in the balance for calculating GDP.

I'm not sure if or how public funding is calculated into it. Here's my source for that:

It is also important to understand that GDP counts production, not destruction, so rebuilding a city after a hurricane provides a boost to GDP but overlooks the billions of dollars in losses from the storm

Read more: http://www.investopedia.com/articles/economics/11/flaws-in-market-indicators.asp#ixzz1qdRFuI6E

person

Here's the calculation from Wikipedia:

GDP = private consumption + gross investment + government spending + (exports − imports)

So it looks like spent public money counts as much as anything else.

vinlyn

GDP also only counts production not destruction so a massive hurricane that causes billions in damage and 100's of lives would only count as a positive in GDP from the rebuilding dollars. The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

Probably true. But then again, what single measure would be better. GDP is a measure of production, and really not much else. There are lots of other indexes which measure other aspects of the nation's well-being.

Dakini

Spent money counts as a plus? That is a skewed model, for sure. Time for reform. Time for fresh ideas and a new economic model. A model that would include in the calculation the billions lost in a natural disaster. Imagine--the unmitigated disaster that trashed the entire city of New Orleans would actually come up as a boost to the GDP?? It's hard to believe. Surely someone can come up with an index that would take all factors into consideration. Seems like the only sensible thing to do.

vinlyn

Spent money counts as a plus? That is a skewed model, for sure. Time for reform. Time for fresh ideas and a new economic model. A model that would include in the calculation the billions lost in a natural disaster. Imagine--the unmitigated disaster that trashed the entire city of New Orleans would actually come up as a boost to the GDP?? It's hard to believe. Surely someone can come up with an index that would take all factors into consideration. Seems like the only sensible thing to do.

Dakini, GDP is just one measure out of many that continually flow out of Washington. And the reason it is so often referred to is that it's an easy comparison to economies all over the world.

Estimates of the expense of disasters are also available, and are used widely by insurance companies. Housing starts. Ratio of home owners to renters. Unemployment rate. And on and on.

GDP is just relatively easy.

Dakini

The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

OK, but I was posting with this statement in mind. If GDP is what we're using to indicate the nation's economic welfare, it's giving us an inaccurately optimistic view. I thought that was an important point.

person

GDP also only counts production not destruction so a massive hurricane that causes billions in damage and 100's of lives would only count as a positive in GDP from the rebuilding dollars. The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

Probably true. But then again, what single measure would be better. GDP is a measure of production, and really not much else. There are lots of other indexes which measure other aspects of the nation's well-being.

That is what the OP is about, also there is the GPI or gross progress indicator. I imagine other factors do get measured but when you hear about how the country is doing its usually in terms of how the economy is growing which is straight GDP. Its not that GDP is a useless indicator its how its being used (and how much it gets used) to indicate the welfare of the country. So if we're going to use one calculation to determine the well being of a country lets use something that takes into account other factors besides raw economic output.

vinlyn

GDP also only counts production not destruction so a massive hurricane that causes billions in damage and 100's of lives would only count as a positive in GDP from the rebuilding dollars. The inventor of the GDP also warned congress way back in the 1930's that it was a poor indicator of a nation's welfare.

Probably true. But then again, what single measure would be better. GDP is a measure of production, and really not much else. There are lots of other indexes which measure other aspects of the nation's well-being.

That is what the OP is about, also there is the GPI or gross progress indicator. I imagine other factors do get measured but when you hear about how the country is doing its usually in terms of how the economy is growing which is straight GDP. Its not that GDP is a useless indicator its how its being used (and how much it gets used) to indicate the welfare of the country. So if we're going to use one calculation to determine the well being of a country lets use something that takes into account other factors besides raw economic output.

I understand. I think the value of the GDP is that it is relatively cut and dried. GPI sounds fuzzy to me. What one group thinks is progress (let's say Democrats) might not appeal to another group (let's say Republicans).

person

It can be argued that reliance on GDP for measuring progress has led to our highly consumer economy as it places an over importance on production and consumption and doesn't figure at all the costs to environment, health or anything.

vinlyn

It can be argued that reliance on GDP for measuring progress has led to our highly consumer economy as it places an over importance on production and consumption and doesn't figure at all the costs to environment, health or anything.

Agreed. But, there are so many varying views on environmental concerns and health (as demonstrated by current political arguments in the country) that it would be very difficult to come to consensus as to what to include and how to evaluate it.