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The king of Bhutan wants tomake us all happier. Governments, he says, should aim to maximize theirpeople’s GrossNational Happiness rather than their Gross National Product. Does this newemphasis on happiness represent a shift or just a passing fad?
It is easy to see why governments should de-emphasizeeconomic growth when it is proving so elusive.The eurozone is not expected to grow at all this year. The British economy iscontracting. Greece’seconomy has been shrinking for years. Even China is expected to slow down. Whynot give up growth and enjoy what we have?
No doubt this mood will pass when growth revives, as it is bound to.Nevertheless, a deeper shift in attitude toward growth has occurred, which islikely to make it a less important lodestar inthe future – especially in rich countries.
The first factor to undermine the pursuit of growth was concern about itssustainability. Can we continue growing at the old rate without endangering ourfuture?
When people started talking about the “natural” limits to growth in the 1970’s, they meant the impending exhaustionof food and non-renewable natural resources. Recently the debate has shifted tocarbon emissions. As the SternReview of 2006 emphasized, we must sacrifice some growth today to ensurethat we do not all fry tomorrow.
Curiously, the one taboo area in thisdiscussion is population. The fewer people there are, the less risk we face ofheating up the planet. But, instead of accepting the natural decline in theirpopulations, rich-country governments absorb more and more people to hold down wages and thereby grow faster.
A more recent concern focuses on the disappointing results of growth. Itis increasingly understood that growth does not necessarily increase our senseof well-being. So why continue to grow?
The groundwork for this question was laid some time ago. In 1974, theeconomist Robert Easterlin published a famous paper, “DoesEconomic Growth Improve the Human Lot? Some Empirical Evidence.” Aftercorrelating per capita income and self-reported happiness levels acrossa number of countries, he reached a startling conclusion: probably not.
Above a rather low level of income (enough to satisfy basic needs),Easterlin found no correlation between happiness and GNP per head. In otherwords, GNP is a poor measure of life satisfaction.
That finding reinforced efforts to devise alternative indexes. In 1972,two economists, William Nordhaus and James Tobin, introduced a measure thatthey called “Net EconomicWelfare,” obtained by deducting from GNP “bad” outputs, like pollution, andadding non-market activities, like leisure. They showed that a society withmore leisure and less work could have as much welfare as one with more work –and therefore more GNP – and less leisure.
More recent metrics have tried to incorporate a wider range of “quality oflife” indicators. The trouble is that you can measure quantity of stuff, butnot quality of life. How one combines quantity and quality in some index of“life satisfaction” is a matter of moralsrather than economics, so it is not surprising that most economists stick totheir quantitative measures of “welfare.”
But another finding has also started to influence the current debate ongrowth: poor people within a country are less happy than rich people. In otherwords, above a low level of sufficiency, peoples’ happiness levels aredetermined much less by their absolute income than by their income relative tosome reference group. We constantly compare our lot with that of others,feeling either superior or inferior, whatever our income level; well-beingdepends more on how the fruits of growth are distributed than on their absoluteamount.
Put another way, what matters for life satisfaction is the growth not of mean income but of medianincome – the income of the typical person. Consider a population of tenpeople (say, a factory) in which the managing director earns $150,000 a year and the othernine, all workers, earn $10,000 each. The mean average of their incomes is$25,000, but 90% earn $10,000. With this kind of income distribution, it wouldbe surprising if growth increased the typical person’s sense of well-being.
That is not an idle example. In rich societies over the last threedecades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority – a very small minority in countries likethe United States and Britain– has captured most of the gains of growth. In such cases, it is not moregrowth that we want, but more equality.
More equality would not only produce the contentmentthat flows from more security and better health, but also the satisfaction thatflows from having more leisure, more time with family and friends, more respectfrom one's fellows, and more lifestyle choices. Great inequality makes ushungrier for goods than we would otherwise be, by constantly reminding us thatwe have less than the next person. We live in a pushy society with turbo-charged fathers and “tiger” mothers,constantly goading themselves and theirchildren to “get ahead.”
The nineteenth-century philosopher John Stuart Mill had a more civilizedview:
“I confess I am not charmed withthe ideal of life held out by those who think…that the trampling,crushing, elbowing,and treading on each other's heels, whichform the existing type of social life, are the most desirable lot of humankind….The best state for human nature is that in which, while no one is poor,no one desires to be richer, nor has any reason to fear being thrust back, by the efforts of others to pushthemselves forward.”
That lesson has been lost on most economists today, but not on the king ofBhutan– or on the many people who have come to recognize the limits of quantifiable wealth
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