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Abstract

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

This article considers the concept of gross national happinesss, as it has evolved in Bhutan, against the background of literature on the pursuit of happiness as a government objective and the problems associated with different approaches to measuring well-being. It concludes that since all measures of well-being are imperfect, including the measure of gross national happiness currently being applied in Bhutan, the best approach is to use a range of different measures, including conventional national accounting indicators.


Introduction

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

The statement ‘Gross National Happiness is more important that Gross National Product’ has been attributed to the former king of Bhutan, Jigme Singye Wangchuck. The former monarch is said to have made gross national happiness (GNH) the guiding philosophy of Bhutan's development process soon after his enthronement in 1972 (Thinley 2007). It was not until the late 1980s, however, that the king began to use the GNH concept explicitly in an attempt to ensure that economic development was in harmony with Bhutan's culture, institutions and spiritual values (Ura and Galay 2004:viii).

Opening Bhutan to outside ideas and institutions began in the early 1960s, and apparently picked up pace in the 1970s (Ura and Galay 2004:viii). In that context, the GNH concept probably evolved as a good-humoured play on words to make the point that the development process ought not be directed toward increasing gross national product (GNP) if this is at the expense of traditional values.

Some critics, including the present author, have had difficulty in viewing the GNH concept as more than a play on words. This is because the word ‘gross’ in GNH does not appear to have any meaning, and certainly does not have a meaning corresponding to that in national income accounting.1

Such semantic quibbles have not prevented the GNH concept from becoming a national objective in Bhutan. Article 9 of the Constitution of this new democracy states: ‘The State shall strive to promote those conditions that will enable the pursuit of Gross National Happiness’. The government of Bhutan has recently initiated efforts to measure GNH. In addition, GNH is widely discussed internationally. At least four international conferences have been held specifically on GNH, attracting participation by scholars from different disciplines and different parts of the world.

In preparing this article the author has viewed the recent evolution of GNH in Bhutan against the background of literature relating to the pursuit of happiness as a government objective and the problems associated with different approaches to measurement ofhappiness. The first question considered is whether aggregate happiness is the right objective. This is followed by a consideration of national accounting approaches, indicators of subjective well-being, summary measures of national progress and human development, and the measurement of GNH in Bhutan.

Is aggregate happiness the right objective?

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

There is evidence that happiness has been widely viewed as of fundamental importance for many centuries in Bhutan. According to Jigmi Thinley, the 1729 legal code of Bhutan ‘stressed that laws should promote happiness of the sentient beings’ (Thinley 2007:4). This long history of emphasis on the goal of happiness is consistent with the view that it is central to Buddhist teaching.2 In writing about the history of Bhutan, John Ardussi notes that as in other Himalayan states where traditional Tibetan cultural values held sway, ‘it was the declared obligation of the civil head of state to maintain law and order so that its subjects could devote themselves to leading a moral life and strive for a better rebirth in the next’ (Ardussi 2005). Similar sentiments about ensuring necessary conditions for a moral life have also been influential in European history. Darrin McMahon notes that St Thomas Aquinas ‘recognized the necessity of means to promote higher ends. It was difficult to do good in the world when one was starving or sick, difficult to give alms without alms to give, difficult to live a life of contemplation without the basic necessities of life fulfilled’ (McMahon 2006:132).

The modern view that the state should strive to promote conditions that will promote happiness of citizens is based on a widely shared value judgement that what promotes human happiness is good and what promotes human misery is evil. The 18th-century philosopher, David Hume, based this judgement on the observation that ‘. . . it is impossible for such a creature as man to be totally indifferent to the well or ill-being of his fellow creatures’ (Hume 1777:45).3

Jeremy Bentham is the historical figure most closely associated with the view that the objective of society should be to maximize aggregate happiness. Although Bentham did not claim authorship of the phrase, ‘the greatest happiness of the greatest number’, he certainly endorsed that objective. He also argued that an action ‘may be said to be conformable to the principle of utility . . . when the tendency it has to augment the happiness of the community is greater than any it has to diminish it’ (Bentham 1789:I.7).

Richard Layard, a modern-day Benthamite—also an eminent economist and member of the British House of Lords—argues in favour of maximizing aggregate happiness as follows:

People are calling out for a concept of the common good—and that is exactly what the Enlightenment ideal provides. It defines the common good as the greatest happiness of all, requiring us to care for others as well as for ourselves. And it advocates the kind of fellow-feeling for others that in itself increases our happiness and reduces our isolation. (Layard 2005:5–6)

Should the objective of enabling the pursuit of GNH be pursued by seeking to maximise aggregate happiness? Leaving aside the question of whether it is possible with known technology to add the happiness of different individuals together to measure the sum of their happiness, what objections could anyone have to maximisation of aggregate happiness?

One reason why some people object to maximisation of aggregate happiness has to do with what Derek Parfit describes as the ‘repugnant conclusion’. It is likely that the sum total of human happiness would be higher than at present if the human population increased massively, even though the members of that population might have lives ‘that are barely worth living’ (Parfit 1984:388).

This implication of aggregate happiness maximisation had previously been recognized by Henry Sidgwick, who did not regard it as repugnant. He argued that:

Strictly conceived, the point up to which, on Utilitarian principles, population ought to be encouraged to increase, is not that at which average happiness is the greatest possible . . . but that at which the produce formed by multiplying the number of persons living into the amount of average happiness reaches its maximum. (Sidgwick 1874/1907:415–6)

The most obvious solution to the problem identified by Parfit, namely maximising average levels of happiness, would be viewed by some as having implications that are even more repugnant. Assuming that it is possible to choose between a future in which a tiny population live wonderfully happy lives and one in which a much larger population live moderately happy lives, who is to say which outcome should be preferred? Value judgements are clearly involved here, and different people can obviously make different judgements. Many would argue that collective choices about such matters are repugnant because decisions about family size are best left to the people who are most intimately involved in producing children and caring for them.

This brings us to another set of objections related to the fact that maximisation of aggregate happiness can only take into account rights, ideas of justice and decision-making processes insofar as such matters influence the perceived happiness of individuals. Amartya Sen comments: ‘It is sensible enough to take note of happiness, but we do not necessarily want to be happy slaves or delirious vassals’ (Sen 1999:62). Bruno Frey and Alois Stutzer point to evidence from happiness research that ‘people have preferences for processes over and above outcomes’ (Frey and Stutzer 2007:9). Robert Sugden suggests how some of our ideas about rights, entitlements and justice are rooted in conventions that may have evolved spontaneously. In the light of this he argues that ‘a benevolent government may find that it cannot maximize social welfare, evaluated from some impartial viewpoint, without violating conventions that its citizens regard as principles of justice’ (Sugden 2004:8).

A further set of objections to maximisation of aggregate happiness arises because it implies that governments should adopt policies that take into account the capacities of people to adapt to the circumstances in which they find themselves. Amartya Sen suggests that a focus on happiness rather than individual well-being can be ‘deeply unfair’, as it may lead us to be unconcerned about people who claim to be happy even though they are suffering adverse circumstances. He notes: ‘desires and pleasure-taking abilities adjust to circumstances, especially to make life bearable in adverse situations’ (Sen 1999:62–3).

Bruno Frey and Alois Stutzer note other undesirable implications of taking into account different capacities for adaptation of different individuals. For example, if materialists with high-income aspirations suffer a great deal from personal income tax, does this mean that they should be exempted from the tax? Should courts award lower compensation to victims of accidents who can more readily adapt to disabilities sustained, and higher damages to those who cannot adapt so easily? (Frey and Stutzer 2007:8).

None of these objections to maximisation of aggregate happiness rule out the desirability of the kind of utilitarian approach that, to use the words of Leland Yeager, ‘invokes facts and logic to appraise institutions, policies, rules, character traits and dispositions according to how well they serve peaceful cooperation among individuals pursuing their own diverse goals in life’ (Yeager 2001:299).

Following Henry Hazlitt, social cooperation may be viewed as ‘the great means by which we all help each other to attain our individual ends, and so to attain the ends of “society” ’ (Hazlitt 1998:14). Along similar lines, Friedrich Hayek suggested that rules of conduct ‘can do no more than to increase the opportunities for unknown people’. He wrote: ‘If we do the best we can to improve the opportunities for any unknown person picked at random, we will achieve the most we can, but certainly not because we have any idea of the sum of utility which we have produced’ (Hayek 1982:vol. 2, 23).

It is common to see Hayek's views associated with an extreme form of individualism that he explicitly rejected (Hayek 1984:146). For example, Ross McDonald argued at a recent GNH conference that the ‘end result’ of Hayek's views (and those of Adam Smith) is ‘an encouragement towards a form of self-centredness’ in which individuals believe that they ‘can legitimately seek their own fulfilment without taking into account the corresponding interest of others—a dynamic that clearly violates the basic grounding of ethical maturity’ (McDonald 2008).

Robert Nozick has observed that the ethics of social cooperation has four levels or layers. The most fundamental level, the ethics of respect—mandating among other things respect for the rights of others, as emphasised by Hayek among others—is the level at which people help each other to attain individual ends. But this is also ‘the ground’ from which higher levels of ethics may grow. The full development of Nozick's third level of ethics, the ethics of caring, involves ‘love to all people, perhaps to all living creatures’ (Nozick 2001:280).4

Such considerations seem particularly relevant in considering the goals of GNH in Bhutan. In stating the goals of GNH, Karma Ura, president of the Centre for Bhutan Studies, expresses the view that ‘any government concerned with happiness must create conducive conditions for happiness in which individual strivings can succeed’. He also expresses the view that the ‘perception of happiness that doesn't take into account the needs of others' happiness is irresponsible and egocentric, and the pursuit of such happiness is likely to be unethical’ (Ura 2008). Applying Nozick's perspective, those statements may correspond to different levels of an inter-related system of ethics, in which conditions that enable individual strivings to succeed correspond to the ethics of respect while taking account of the needs of others corresponds to the ethics of caring.

National accounting measures

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

Was GNP ever intended to be a well-being measure? Steve Dowrick and John Quiggin assert: ‘The original motivation for the development of national accounts . . . was the need for accurate measures of aggregate economic activity as a basis for Keynesian macro-economic stabilisation policy’ (Dowrick and Quiggin 1998:94).

Simon Kuznets—who was given the task of developing estimates of the national income of the USA—warned that the ‘welfare of a nation’ can ‘scarcely be inferred from a measurement of national income’ in his first report to the US Congress in 1934 (Cobb et al. 1995).

Prominent economist and former Chairman of the US Council of Economic Advisers, Arthur Okun, saw virtue in the fact that national accounting conventions did not seek to measure welfare:

National accountants . . . would not assist by compromising on the proposition that [national income] is not a measure of total social welfare. The beauty of [the present] practice is that no sensible person could seriously mistake [national income] for such a measure. (Okun 1971:132–3)

By contrast, Colin Clark, a pioneer of national income accounting, seems to have been inspired by A.C. Pigou's view that the national dividend (national income) and economic welfare were closely related, as he quoted at length many passages on this subject written by Pigou (Clark 1957:7). Pigou argued:

Just as economic welfare is that part of total welfare which can be brought directly or indirectly into relation with a money measure, so the national dividend is that part of the objective income of the community . . . which can be measured in money. The two concepts, economic welfare and the national dividend, are thus co-ordinate, in such wise that any description of the content of one of them implies a corresponding description of the content of the other. (Pigou 1932:I.III.I)

Economists have expressed a wide variety of views about national income and its relationship to well-being. Some economists, such as Amartya Sen, have emphasised that an adequate conception of development must go much beyond the accumulation of wealth and the growth of GNP (Sen 1999:14). W. Arthur Lewis suggested that economic growth is important primarily because it increases the range of human choice (Lewis 1955:420). Some economists, such as Ezra Mishan, have suggested that as a result of negative externalities—such as environmental degradation—growth of national income may reduce social welfare rather than increase it (Mishan 1967:171). Benjamin Friedman has recently advanced the opposite view: that economic growth is associated with positive externalities—such as tolerance of diversity, social mobility, commitment to fairness and dedication to democracy (Friedman 2006:4).

There has been a long-running discussion among economists about the relevance of income distribution considerations. One influential contributor, I.M.D. Little, argued that there can be no welfare significance in national income comparisons unless a value judgement about changes in distribution is presupposed (Little 1957:227).

At a practical level, however, economists have made widespread use of estimates of per capita income in drawing inferences about material well-being. Writing in the 1950s, Gerald Meier and Robert Baldwin claimed: ‘almost everyone would agree that real national income and real per capita income are highly significant for economic welfare’ (Meier and Baldwin 1957:6).

How far can the problems in use of per capita income as a well-being measure be overcome within a national accounting framework? A more accurate picture of well-being may be provided in moving from the most commonly used national accounting concepts to concepts such as household disposable income. A study by Boarini, Johansson and Mira d'Ercole suggests that the difference between gross domestic product (GDP) and GNP is relatively small in OECD countries, but this is not likely to be so in countries where substantial remittances are obtained from citizens who are working abroad (Boarini et al. 2006:7–14).5 These authors also show that subtraction of depreciation to obtain net national product does not make much difference to country rankings for OECD countries, if official statistics are taken at face value. However, adjusting for tax payments, etc., to obtain household disposable income substantially changes the ranking of OECD countries by per capita income levels. It seems likely that even larger differences would have been observed if more low-income countries had been included in the study.

The main problems with the use of per capita GDP as a well-being measure arise from the limitations of the information available in standard national accounting systems. These include failure to account for changes in natural resources and intangible capital (including human capital), nonmarket household production (with some exceptions), leisure, external costs and benefits associated with production and consumption, income distribution, economies of household size, social costs of unemployment, threats to national security, democratic rights, and restrictions on liberty. There are also problems associated with the measurement of government services, such as education and health, at the cost of provision.

Economists have made various attempts to correct for the deficiencies of national income aggregates as measures of well-being. In the early 1970s, Nordhaus and Tobin sought to correct for the most obvious deficiencies of national income aggregates and concluded that ‘the broad picture of secular progress which they convey remains after correction’ (Nordhaus and Tobin 1972:532). These conclusions were subsequently questioned by John Cobb, Clifford Cobb, and Herman Daly, who developed the Index of Sustainable Welfare (ISEW) (Mathews 2006:12). The ISEW was subsequently modified slightly by an organisation called Redefining Progress in order to develop the genuine progress indicator (GPI). Although estimates of ISEW and GPI have been made for many countries, there is as yet no standard methodology. The experimental nature of GPI estimation is evident, for example, in the seven case studies in a recent book discussing sustainable welfare in the Asian-Pacific region (Lawn and Clarke 2008).

In general terms, estimations of GPI use aggregate consumption as a starting point—as this is the aggregate in the national accounts most closely related to immediate well-being—and then make allowance for other factors believed to contribute positively or negatively to well-being. For example, amounts are added to account for the value of unpaid household labour and services provided by consumer durables, and amounts are subtracted to account for defensive and rehabilitative expenditure (such as costs of crime prevention and road accidents) depreciation of human-made capital, the cost of depletion of natural resources, and environmental effects.

Apart from the obvious difficulties in placing an appropriate monetary value on many of the factors allowed for in GPI estimations, acceptance of the results can also be adversely affected by such factors as the inclusion of contentious adjustments for changes in income distribution and foreign debt, as well as failure to allow for changes in human capital (Bates 2009).

The World Bank's efforts to measure wealth and changes in wealth suggest that failure to account for changes in natural resources and intangible capital can seriously limit the extent to which economic growth, as conventionally measured, reflects changes in well-being. This is particularly so in the case of low-income countries that rely heavily on natural resources for economic growth. Using estimates for 2003, the World Bank shows that some countries (for example, Nigeria and Azerbaijan) with high GDP growth rates had negative ‘genuine savings rates’. In other words, despite the apparent high growth rates of these countries, their net savings rates were negative after taking account of estimates of the value of depletion of minerals, energy, and forest resources, damages from air pollutants, and investments in human capital (World Bank 2006:45).

There seems to be a limit to how far the deficiencies of national accounting indicators of well-being can be overcome within a national accounting framework. Few economists would advocate attempting to incorporate indicators such as measures of democracy or liberty in measures of national income. As Dowrick and Quiggin note: ‘Such attempts will always be subject to the criticism that the scaling and weighting of the composite index is arbitrary or represents a particular political and value position’ (Dowrick and Quiggin 1998:106).

How much do the deficiencies of per capita income measures actually matter? The World Bank noted in the World Development Report for 2000/2001 that as countries become richer, on average, the incidence of poverty falls, and other indicators of well-being, such as average levels of education and health, tend to improve as well (World Bank 2000:45). Dollar and Kraay showed, using data for a large number of countries, that average incomes of the poorest fifth of society rise proportionately with average incomes (Dollar and Kraay 2002). Pritchett and Summers showed that infant mortality and life expectancy outcomes were much worse on average in countries with low per capita incomes than in other countries (Pritchett and Summers 1996).

However, a study by Easterly has shown that even though there is a great deal of evidence that indicators of quality of life tend to be positively associated with high per capita incomes, there is no consistent pattern of improvement in quality of life indicators while countries are experiencing economic growth (Easterly 1999). The author reached this conclusion using a panel data set of 81 indicators (covering individual rights and democracy, political instability and war, education, health, transport and communications, inequality, and a range of other factors, including crime and environmental pollution) for a large number of countries, for four time periods (from 1960 to 1990). He suggests several possible reasons for this result, including the possibility that there may be long lags between income growth and quality of life improvements.

Summing up, although there is strong evidence that higher per capita income is generally associated with higher life expectancy and improved quality of life, the deficiencies of per capita GDP may sometimes matter a great deal when it is used to make comparative assessments of well-being. Even so, there is little evidence to support the view that GDP is so fundamentally misleading that it should be abolished, as one commentator has suggested (van den Bergh 2007). Despite all its limitations, per capita income provides information that is relevant to assessing the material well-being of people at different times and in different countries.

Indicators of subjective well-being

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

Surveys in which respondents are asked to provide a numerical rating of their happiness or satisfaction with life (sometimes referred to as global well-being reports) are the most common method used to measure subjective well-being (Frey 2008:18). What are the main limitations of this data? The most important limitation for many purposes has to do with the potential for responses to survey questions to vary according to the context in which the question is asked. Schwartz and Strack have argued that ‘what is being assessed, and how, seems too context dependent to provide reliable information about a population's well-being, let alone information that can guide public policy’ (Schwartz and Strack 1999:80). Schwartz and Strack (1999) cite evidence that:

  • • 
    People base global well-being assessments on information that is most accessible at the time they make their judgements rather than on all relevant factors. This means, for example, that answers to survey questions can be sensitive to the order in which questions are asked (p. 63).
  • • 
    The way accessible information is used to make global assessments depends on judgements about how it relates to the question that is asked. For example, if an extremely positive event that occurred last year comes to mind, it could be judged to impact either positively or negatively on my assessment of ‘my life now’, depending on whether I am comparing my life now with my life 20 years ago or with my life last year (p. 65).
  • • 
    Individuals often draw on comparison information that is made temporarily accessible by the context in which they form their judgements rather than determined by relatively stable attributes of the respondent. For example, respondents tend to assume that the ‘average’ response is represented by values in the middle range of the scale of responses that they are asked to choose from (p. 73).
  • • 
    Judgements of subjective well-being are influenced by mood states at the time of judgement (p. 75).
  • • 
    Respondents may edit their private judgements of subjective well-being before they communicate them, for example by overstating their satisfaction with life in order to avoid appearing to be negative (p. 77).

Comparisons of happiness ratings over time may also be affected by problems that people have in relating their subjective states to rating scales. Yew-Kwang Ng makes the point that an apparently unchanged happiness rating could hide a very large change in happiness if people change their descriptions of their subjective states over time (Ng 2008:254). For example, a person rating herself initially as ‘very happy’—at the top of the rating scale—who subsequently experienced a large increase in happiness would still have to describe herself as ‘very happy’. With the benefit of hindsight, she might describe her previous state as ‘not too happy’.

International comparisons of happiness ratings may be biased if the words used in other languages to translate the English words happy and satisfied do not have exactly the same meaning. Anna Wierzbicka suggests that such linguistic considerations pose a substantial problem. She also suggests that the reliability of international comparisons of happiness levels is affected by differences in cultural norms, for example, relating to the extent to which people are willing to express happiness and good feelings (Wierzbicka 2004). However, John Helliwell and others have found, as a result of their research using an extensive international database, that (with the exception of an unexplained boost to life satisfaction ratings in South and Central America) international differences in life satisfaction ratings can be attributed to the social, institutional and economic circumstances of life rather than to cultural differences (Helliwell et al. 2009:11).

More fundamentally, there is the question of whether interpersonal comparisons of happiness levels are meaningful. The subjective feelings that different individuals associate with being ‘happy’ or ‘very happy’ might vary a great deal. But as Bruno Frey suggests, it is possible that ‘interpersonal comparability may be less problematic on a practical level than on a theoretical level’ (Frey 2008:163).

Another possible limitation of the usefulness of survey data on happiness and life satisfaction arises because of the potential for survey results to be biased if respondents answer questions strategically with a view to the way information may be used. For example, if they think survey results will be used to judge the performance of the government, some respondents are likely to use their responses to send messages to the government about its performance rather than about their own well-being.

So, in view of these limitations, why does anyone believe that data on happiness and life satisfaction is anything more than noise? Gilbert suggests that the law of large numbers tends to cancel out the imperfections of individual reports of subjective well-being. He argues that ‘we can be confident that if we ask enough people the same question, the average answer will be a roughly accurate index of the average experience’ (Gilbert 2006:77).

Gilbert is not impressed by the defence of the survey measures on the grounds that they tend to be strongly correlated with more objective measures of happiness (see, for example, Brooks 2008:8–9; Layard 2005:17–20). Gilbert argues that:

The only reason why we take any of these bodily events—from muscle movements to cerebral blood flow—as indices of happiness is that people tell us they are. If everyone claimed to feel raging anger or thick, black depression when their zygomatic muscle contracted, their eyeblink slowed, and the left anterior brain region filled with blood, then we would have to revise our interpretations of these physiological changes and take them as indices of unhappiness instead. (Gilbert 2006:72)

Some economists take comfort from correlations between happiness ratings and other variables that can plausibly be claimed to be associated with well-being. For example, Di Tella and MacCulloch cite research reporting that unemployed individuals tend to report relatively low happiness scores. They comment: ‘This outcome seems reasonable given that other “bads” like divorce, addiction, depression and violence are correlated with unemployment. The findings also suggest that happiness surveys are capturing something meaningful about true utility’ (Di Tella and MacCulloch 2006:28). Similarly, Kahneman and Krueger discuss several different kinds of evidence in support of the validity of life satisfaction data, including evidence that life satisfaction typically increases immediately following positive changes in circumstances and decreases immediately following negative changes. In addition, they note that a person's subjective evaluation of his or her well-being is, to a significant extent, a personality trait. Identical twins separated immediately after birth show the same concordance on happiness, as on other traits for which a genetic basis is wellestablished (Kahneman and Krueger 2006:7–9).6

Do self-reports of satisfaction with life as a whole provide a better indication of well-being that self-reports of happiness? At first sight, it might appear obvious that self-reports of satisfaction would be better for this purpose than self-reports of happiness. When people are asked to rate how happy they are, the answers they give are presumed to relate mainly to emotional states.7 It would seem reasonable to suggest that in attempting to assess well-being, researchers would need to use a concept that involves more than just a positive emotional state. Indeed, nearly all empirical work so far undertaken in economic happiness research has been based on survey respondents' global evaluations of their life satisfaction (Frey 2008:20).

However, an examination of the issues involved by Dan Haybron, a philosopher, suggests that the relationship between life satisfaction and welfare is far more convoluted than we might tend to expect. Haybron points out that attitudes about life satisfaction are not simple assessments of well-being. They have an ethical dimension as well: ‘such attitudes embody, not just our view of how well our lives are going, but also our sense of how it is appropriate to respond to our lives’ (Haybron 2007:107). For example, you might be satisfied with your life, not because it is going well for you, but because you aspire to such virtues as gratitude or fortitude. Such considerations would clearly affect use of life satisfaction surveys to make well-being comparisons where differing emphasis is given to particular virtues—for example, in making well-being comparisons between cultures and over long time periods.

How do measures of subjective well-being relate to utility, the concept of well-being conventionally used in economics?8

Conflicting views about the relationship between utility and survey measures of happiness have recently emerged as economists have sought to make use of this information. The first view considered is that the happiness surveys measure utility. For example, Frey and Stutzer assert: ‘Utility can and should be cardinally measured in the form of subjective well-being’ (Frey and Stutzer 2002:43). Under this view, any divergence between revealed preference and changes in measured happiness—for example, if a person makes decisions that lead to a reduction in happiness—must be attributable to either poor decision making or inaccurate measurement of happiness. A recent article by Clark, Frijters and Shields suggests that if subjective well-being measures are accepted as a direct proxy for utility, the traditional utility function can be readily modified to incorporate relative considerations that may account for the failure to observe increases in average happiness with further increases in income in high-income countries (Clark et al. 2008:136–7).

Other researchers are opposed to the view that any divergence between revealed preference and changes in happiness must be attributable to either poor decision making or inaccurate measurement of happiness. For example, I have previously suggested that successful pursuit of personal goals, such as having children, is not reflected in measures of life satisfaction, because parents often look forward to satisfaction for decades to come when they decide to have children, whereas immediate sacrifices loom large when parents appraise their current life satisfaction (Bates 2004:14). Gary Becker and Luis Rayo have recently presented a more general argument that it is plausible for people to follow courses of action that would reduce their happiness but nevertheless increase their utility. They suggest that happiness should be viewed as a commodity in the utility function in the same way as health (Becker and Rayo, 2008:89–90).

How can measurement of subjective well-being be improved? Better measurement seems likely to require movement beyond the current practice of reliance on global ratings of happiness or life satisfaction. For example, Emma Samman suggests that current practice ‘largely overlooks more robust measures of psychological well-being’ (Samman 2007:5). In arguing for a broader approach, she has proposed that international comparisons of well-being be based on previously tested indicators covering psychological well-being and domain-specific life-satisfaction, as well as overall life satisfaction and happiness. The domain-specific questions would cover satisfaction with material well-being, health, productivity, security, community and spiritual well-being.

Composite indexes of human well-being

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

When people want to obtain an overall picture of well-being, it often makes good sense to look at a suite of indicators rather than to rely exclusively on particular indicators, such as per capita GDP or average life satisfaction. This approach can be pursued systematically, for example, using an approach adopted by the Australian Bureau of Statistics (ABS 2006). The ABS has identified three domains of progress—economy, society and environment—and has provided indicators for various dimensions of progress within each of these domains.

The ABS claims that its approach ‘provides a digestible selection of statistical evidence that will allow Australians to make their own assessment of whether life in Australia is getting better’ (ABS 2006:6). This approach avoids imposing a particular set of values (weights) in order to provide a single composite indicator of national progress. It is consistent with the view that attempts to develop a single composite indicator of national progress are fundamentally misconceived because there can be no single answer to the question of whether life in most countries is getting better or worse (Castles 1998:352).

Such views have not discouraged attempts to develop composite indexes of the quality of life and human development. One possible reason for the development of composite indexes is a belief that the blending of components together makes a statistical feast more easily digestible. An alternatively possibility, given some support in remarks by Amartya Sen, is a desire to compete with the ability of GDP numbers to grab public attention (Sen 1999:318, n41).

The best known composite indicator of human well-being is the Human Development Index (HDI) developed by the United Nations Development Program (UNDP) and presented in the Human Development Report, since its inception in 1990 (UNDP 2006:263). The HDI gives equal weight to three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and enrolment at the primary, secondary and tertiary level) and having a decent standard of living (measured by per capita GDP at purchasing power parity). As improvements in life expectancy and education are usually closely associated with economic growth, it is hardly surprising that high-income countries tend to have high HDI ratings.

Sen, who contributed to the development of this index, has suggested that while it is useful ‘in rough and ready work’, it would be ‘a great mistake to concentrate too much’ on the HDI ‘or on any other such aggregative index’ (Sen 2000:22).

The major conceptual problem in constructing composite indexes is in deciding what weight, if any, should be given to various factors that are relevant to well-being or human development. Sen has argued strongly that what weights may emerge ‘is ultimately a matter for social choice’ supported by ‘enlightened public discussion’ (Sen 2000:21).

Although transparent weights that emerge from an enlightened social choice process are likely to be viewed widely as having greater legitimacy than value judgements of technicians, the judgements of individuals—determined using survey techniques—could be viewed as having even greater legitimacy. In this context, it is worth noting that the National Statistical Coordination Board of the Philippines is proposing to ask individuals to identify domains of happiness from a list and assign weights to each domain in the process of deriving a happiness index (Virola and Encarnacion 2008).

Measurement of GNH in Bhutan

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

The Centre for Bhutan Studies has recently constructed a GNH index that is intended to ‘provide appropriate indicators for Bhutanese development’ (Ura 2008). The way this index has been constructed reveals a great deal about the way GNH is now perceived in Bhutan. Rather than attempting to obtain a measure of aggregate happiness or average happiness, researchers have sought to measure the extent that the attainments of members of the population approach a ‘sufficient level’ in a range of dimensions. The underlying philosophy seems to be that a range of minimum conditions must be met before a person can be considered to be happy.

The nine dimensions of well-being incorporated in the index are: psychological well-being, time use (whether respondents feel that they have sufficient time for various non-work activities), community vitality (strengths and weaknesses of relationships and interactions within communities), culture (diversity and resilience of cultural traditions), health, education, environment (perceptions and ecological knowledge), living standards, and governance (perceptions of equity, honesty, and quality). These dimensions ‘were selected on normative grounds, and are equally weighted, because each dimension is considered to be relatively equal in terms of equal intrinsic importance as a component of gross national happiness’ (Ura 2008).

The construction of the index gives greater weight to large deficits in any dimension than to small deficits or shortfalls in several dimensions. This means that a large deficit in any particular dimension has a magnified negative impact on the GNH index. The sufficiency cut-off points for particular dimensions could thus have a substantial impact on the results obtained. However, current cut-off points may not be chiselled in stone, as Ura notes that each cut-off point ‘is a value judgement, which can be a topic for public discussion’ (Ura 2008).

The method of construction of the GNH index is an adaptation of one developed by Sabina Alkire and James Foster for research into multidimensional aspects of poverty (Alkire and Foster 2008). Use of this methodology enables the GNH index to be decomposed in various ways; for example, to indentify which dimensions show the highest shortfalls for particular regions or language groups. Ura comments that this characteristic makes the index ‘a good tool for tracking changes across time, or for guiding policies to address specific needs of different groups efficiently’ (Ura 2008).

Preliminary estimates of the GNH index have been published using pilot data (Alkire et al. 2008). The data collection process is much more thorough than that usually associated with happiness research. Ura notes that the pilot survey questionnaire was found to be too lengthy and was pared down to enable interviews to be conducted in half a day. He reports that 950 respondents were interviewed in 12 districts (Ura 2008).

In my view, Bhutan's GNH index is an impressive contribution to measurement of human well-being. However, it is not yet clear to what extent the judgements implicit in its construction reflect the values of the people of Bhutan: whether they reflect a consensus on such matters as the dimensions of well-being that are important and the weighting that should be given to each dimension, as well as the determination of the cut-off points for sufficiency in each dimension. It also unclear whether there is a consensus view within Bhutan that if a greater number of people attain excellence, rather than just sufficiency, in particular dimensions of well-being that this makes no contribution to GNH.

Summary and conclusions

  1. Top of page
  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References

Different views have been expressed on whether maximising the sum total of human happiness would be an appropriate government objective. One of the problems discussed in the literature is that maximising aggregate human happiness could involve governments in encouraging large increases in population, even if members of this much larger population lived lives that were barely worth living. This suggests that we cannot assume that the outcomes of government decisions made to maximise aggregate happiness are necessarily superior to the outcomes of decisions made by individuals and families without government intervention.

Problems associated with adopting maximisation of aggregate happiness as a government objective do not rule out the goal of promoting peaceful cooperation among individuals pursuing their own diverse goals in life. There is obviously no consensus about the role of government in society, but the surveyed literature suggests that recognition of the desirability for governments to promote conditions in which individuals can succeed in striving to achieve worthwhile goals, provided they give appropriate consideration to the well-being of others, is not confined to individualistic western culture.

Efforts to measure happiness or well-being do not necessarily presuppose maximisation of aggregate happiness. Such efforts can be useful in considering the effects of different institutions or policy approaches wherever happiness and well-being are valued.

A range of approaches to measurement of happiness and well-being have been considered, including national accounting indicators such as GNP and GDP. Such indicators are the most commonly used measures of material well-being, despite claims that they were never intended to be used in this way.

The problems associated with the conventional national accounting measures have been widely discussed. They include failure to account for most nonmarket household production, leisure, changes in natural resources and human capital, external costs and benefits of production, and income distribution.

We have to learn to live with the fact that the national accounting measures have important deficiencies. While progress has been made in dealing with some measurement deficiencies in particular studies, attempts to overcome all problems within a national accounting framework would involve an unacceptable sacrifice of measurement accuracy to produce results that are likely to be sensitive to controversial assumptions.

The deficiencies of per capita income should not be exaggerated, however. There is strong evidence that higher per capita income is generally associated with higher life expectancy and improved quality of life.

Surveys in which respondents are asked to provide a numerical rating of their happiness or satisfaction with life provide an alternative approach to assessment of well-being. On the basis of the literature considered, however, such measures could hardly be viewed as having greater reliability than those derived from national income accounting.

If we accept happiness ratings at face value we are left with the question of how these ratings relate to the concept of well-being (utility) used in economics. Some researchers have viewed such ratings as a direct proxy for utility, whereas others have argued that happiness, as an emotional state, should be viewed as a commodity in the utility function, in the same way as health.

Some researchers have suggested that better measures of subjective well-being can be obtained through more extensive use of complex questionnaires that seek to measure psychological well-being and satisfaction with various aspects of life including material well-being, health and relationships.

Various attempts have been made, with varying levels of success, to develop composite indicators of human well-being to supplement or replace conventional national accounting indicators. All such indicators, including the widely used HDI, involve judgements about the items included and the weights given to each item. There may be merit in an approach being adopted in the Philippines that allows survey respondents to identify items affecting their well-being and to assign weights to those items.

The recent approach adopted towards GNH measurement in Bhutan is a major innovation, in that what is measured is the extent that members of the population approach a ‘sufficient level’ in a range of dimensions related to well-being. As with other approaches to measurement of human well-being, this approach is imperfect. It will be interesting to observe to what extent it succeeds in providing reliable information on the well-being of the people of Bhutan.

Few people would disagree with the proposition that happiness is more important than product. Yet when we come to assessing human well-being, it is difficult to escape the conclusion that the best approach is to gather together a range of imperfect indicators—including the conventional national accounting indicators and objective indicators of health, longevity, education, and quality of the natural environment—rather than rely exclusively on imperfect measures of subjective well-being.

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  2. Abstract
  3. Introduction
  4. Is aggregate happiness the right objective?
  5. National accounting measures
  6. Indicators of subjective well-being
  7. Composite indexes of human well-being
  8. Measurement of GNH in Bhutan
  9. Summary and conclusions
  10. References
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Footnotes
  • 1

    In national income accounting, ‘gross’ refers to the fact that depreciation of capital has not been deducted from the value of production.

  • 2

    Darrin McMahon, author of a widely acclaimed history of ideas about happiness, has suggested that it seems incongruous for Buddhism to be associated with the art of happiness, as Buddhists believe that all life is suffering (McMahon 2006:471). However, Buddhists maintain that suffering can be overcome. Buddhism sets up nirvana as the final liberation from the suffering of repeated embodiment (Honderlich, 1995:107).

  • 3

    I leave aside the question of whether the judgement that what promotes human happiness is good is the ultimate value judgement. Rival considerations that are claimed by some to be of more fundamental importance include individual liberty, human capability, a just society and conformity to God's will (Yeager 2001:229).

  • 4

    Nozick's second level of ethics, ‘the ethics of Responsiveness’, mandates acting in a way that enhances and supports the inherent value of individuals. His fourth level, ‘the ethics of Light’, encompasses being a vessel and vehicle of truth, beauty, goodness and holiness.

  • 5

    GDP is defined as the value of all final goods and services produced in a country in one year. GNP equals GDP plus income earned by citizens living abroad minus income earned by foreigners in the country concerned.

  • 6

    However, if we accept survey data at face value, we are left with puzzles when it conflicts with other evidence about human well-being. The most famous of these puzzles, the so-called ‘Easterlin paradox’, arose from Richard Easterlin's observation that despite increases in average incomes, there appeared to be no corresponding increase in average happiness levels (Easterlin 1973, 1974). Additional data and subsequent research, particularly recent work by Betsey Stevenson and Justin Wolfers, has greatly reduced the extent to which any part of this puzzle remains to be explained (Stevenson and Wolfers 2008:1).

  • 7

    This is explicit in the Fordyce Emotions Questionnaire, used by psychologists, including Martin Seligman, in which respondents are asked to rate their level of happiness from ‘extremely happy’ to ‘extremely unhappy’, and to indicate the percentage of time in which they feel ‘happy’, ‘unhappy’ and ‘neutral’ (Seligman 2002:15).

  • 8

    Many economists use the terms ‘utility’ and ‘happiness’ interchangeably, as did Jeremy Bentham when he wrote: ‘By utility is meant that property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness, (all this in the present case comes to the same thing) or (what comes again to the same thing) to prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered’ (Bentham 1789:I.III). When economists speak of an additional unit of good A providing more utility to some person than an additional unit of good B, however, they are not necessarily making any claims about the psychological states that might result from consumption of additional units of A or B. The point was made clearly by Irving Fisher in 1892 when he stated: ‘the conception of utility has its origins in the facts of human preference or decision’. He explained: ‘No-one ever denied that economic acts have the invariable antecedent, desire. Whether the necessary antecedent of desire is “pleasure” or whether independently of pleasure it may sometimes be “duty” or “fear” concerns a phenomenon in the second order remove from the economic act of choice’ (Fisher 1892/1925:11).