GDP Along with GDH Would Be the Right Indices for Judging the Wellbeing of a Country

In 1934, presenting the first national income accounts to the United States Congress, the economist Simon Kuznets cautioned that the welfare of a nation can scarcely be inferred from a measurement of national income. Three decades later Robert Kennedy, campaigning in 1968, said that the gross national product counted air pollution, cigarette advertising and the locks on prison doors, and did not include the health of children, the quality of education or the joy of play. In the 1970s the young king of Bhutan, Jigme Singye Wangchuck, is credited with declaring that Gross National Happiness was more important than Gross National Product. The topic, which proposes that GDP along with GDH would be the right indices, takes up this old argument.

Gross Domestic Product is the total value of goods and services produced within a country in a year. It has real strengths. It is measurable in a standard way across countries and time, based on prices and quantities that can be counted. It captures the level of economic activity, correlates with jobs, tax revenue and the capacity to pay for schools and hospitals, and is a vital guide for policy. Rich countries are, on the whole, healthier and longer lived than poor ones. A country that grows quickly can lift millions from poverty, as India and China have shown.

But GDP is not a measure of well being, and was never designed to be. It does not tell how output is distributed, so an economy in which a few get everything has the same GDP as one in which gains are widely shared. It counts activities that are harmful, such as the cleaning up of an oil spill or the treatment of illnesses caused by pollution, as additions to output. It leaves out unpaid work, mostly done by women, such as cooking, child care and care of the old, as well as leisure. It does not record the depletion of forests, rivers and fish stocks. It takes no account of how people feel about their lives.

Evidence of the gap between income and satisfaction comes from the economist Richard Easterlin, who found in 1974 that within a country richer people report more happiness, but that over time, as a country grows richer, average happiness does not rise correspondingly. Later work has qualified this, finding some link between income and happiness at lower levels. The broad lesson is clear. Beyond a point, more income adds less to satisfaction than other factors such as relationships, health, security and a sense of purpose. Kerala has lower incomes than many Indian states but better health and education, and Bhutan places a high weight on community and culture.

Beyond a point, more income adds less to satisfaction than other factors such as relationships, health, security and a sense of purpose.

Gross Domestic Happiness, in the term of the topic, or Gross National Happiness as Bhutan has called it, tries to measure what GDP leaves out. Bhutan's index covers nine domains, including psychological well being, health, education, time use, cultural diversity, good governance, community vitality, ecological resilience and living standards. In July 2011 the United Nations General Assembly, on a resolution led by Bhutan, invited member states to measure the happiness of their peoples as a guide for policy. The first World Happiness Report was prepared in 2012, in which the Nordic countries such as Denmark and Norway stood high. The British government began measuring national well being in 2010. In 2009 a commission headed by Joseph Stiglitz, Amartya Sen and Jean Paul Fitoussi, established by the French President, recommended shifting emphasis from measuring production to measuring well being.

Happiness measures have their own problems. They are subjective, depending on how people answer questions about their feelings, which may vary with mood, with wording and with culture. A poor person who has adapted to his condition may report contentment, and a rich one with high expectations may report dissatisfaction, a phenomenon called adaptation. Comparisons across cultures are difficult, since concepts of happiness differ. There is a political risk too, that a government may claim that its people are happy to deflect demands for economic and political progress, or may define happiness in a way that suits its rule. Critics of Bhutan note that the official stress on harmony coexisted with the exclusion of its Nepali speaking minority in the 1990s.

Other indices already attempt a broader picture. The Human Development Index, devised in 1990 by Mahbub ul Haq and Amartya Sen, combines income with life expectancy and education, and India's rank on it is typically well below its rank on GDP. Indices of inequality, gender gaps, environmental performance and the Multidimensional Poverty Index add detail. The Genuine Progress Indicator adjusts GDP for social and environmental costs. The lesson is that no single number is enough.

So the topic has the right instinct and perhaps the wrong form. To judge a country's well being, GDP should be kept, since material prosperity is the basis of most other goods, and it should be supplemented. A dashboard that includes health, education, inequality, environment and subjective well being would give a fuller view. For India, whose rank on happiness indexes is low despite fast growth, such a view might direct attention to nutrition, sanitation, security and public services, which a growth rate hides.

There is also the question of what a government should do with the information. Surveys that show unhappiness among the unemployed, the lonely or the overworked can suggest policies on jobs, mental health services or working hours. Used honestly, they can make governments accountable for the quality of life, and not only for production. But a happiness measure cannot replace the argument about justice. A contented slave remains a slave, and the value of freedom does not depend on how cheerful the free feel.

Kuznets knew what his figure could not say, and yet it became the one that governments announce and newspapers print. A number that is easy to publish tends to drive out one that is true. Whether a country will ever make the effort to track what matters with the same persistence it gives to what is easy to count depends on citizens who ask for it, and so far most have not.