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Measuring happiness for a new economic paradigm

by Laura Matthews Jun 20 / 12
Tucked amid mountain slopes and river valleys in the Eastern Himalayas is the tiny kingdom of Bhutan. With a population of almost 700,000 and a long history of Buddhism, this peaceable country has been shielded from most of the globalization trends that have spread across the world over the past half-century.

Yet, despite its isolation, Bhutan garners significant interest from international economists and is viewed as the psychological leader of a new push to use well-being measures as a guide to economic policy.

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A monastery in Thimphu, the capital and largest city of the Kingdom of Bhutan. PHOTO, © MARC VAN VUREN, 2012

According to John Helliwell – the Arthur J.E. Child Foundation Fellow and a Co-Director of the CIFAR Social Interactions, Identity & Well- Being program – the Bhutanese have enjoyed “the luxury of separation from the rest of the world…and have been able to think about life a bit differently.”

In 1972 the King of Bhutan piqued the imagination of the world, including economists, when he declared that his country would not follow a policy geared to increasing gross national product; rather, his government would seek to maximize gross national happiness, or GNH. From that point on, the kingdom has oriented its national policy and development plans towards increasing GNH and, more recently, has begun to measure the effectiveness of policy in meeting that objective. Several other countries, like the United Kingdom and Brazil, are also now embedding similar measures in their systematic collection of national statistics.

IN 2011 THE BHUTANESE GOVERNMENT LED A CHARGE to put the goals of happiness and well-being on the development agenda for the United Nations. At a high-level meeting held in July of that year, the U.N. General Assembly passed a resolution inviting countries to pursue those goals as a guide to economic and social development – the only point in the day when the typically quiet room broke into spontaneous applause.

That level of excitement carried forward to April 2, 2012, when representatives from countries all over the world – including policy makers, diplomats, economists and social psychologists – gathered at the U.N.’s headquarters in New York City. Only 600 by-invitation-only seats were made available at this high-level meeting – “Well-being and Happiness: Defining a New Economic Paradigm” – hosted by Bhutan. The U.N. had to provide an overflow room to accommodate 200 more observers.

To John Helliwell, that event signalled that the economics of “subjective well-being” – the term often used to measure happiness – has reached a new threshold of interest and credibility. To coincide with the U.N. meeting, Helliwell – together with Richard Layard, a former CIFAR advisor and now Director of the Wellbeing Programme of the Centre for Economic Performance at The London School of Economics and Political Science; and Jeffrey Sachs, Director of the Earth Institute at Columbia University, New York City – was commissioned to produce the first comprehensive assessment of the state-of-happiness research. The result of their work – the World Happiness Report – presents research findings to date from around the world wherein survey participants were asked to rate the quality of their lives. The report assesses the validity of the research, identifies individual and national variations, and outlines how the information gathered could impact government policy.

According to the Happiness Report, there are many similarities in well-being ratings between countries from the same region or continent, and it is not just wealth that makes people happy. In explaining the well-being differences between the top-scoring countries and those that scored at the bottom of comparative scales, the report showed that political freedom, strong social networks and an absence of corruption are, when taken together, more important than income.

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On April 1, 2012, the editors of the World Happiness Report convened at Columbia University, for the Workshop on Happiness. It preceded the high-level meeting on April 2 at the U.N.’s headquarters in New York City. From left: Richard Layard, former CIFAR advisor and now Director of the Wellbeing Programme of the Centre of Economic Performance at The London School of Economics and Political Science; John Helliwell, the Arthur J.E. Child Foundation Fellow and Co-Director of the CIFAR program Social Interactions, Identity & Well-Being; and Jeffrey Sachs, Director of the Earth Institute at Columbia University. PHOTO BY SABRINA CECCONI, WORLD HEALTH COMMUNICATION ASSOCIATES (WHCA)

Jeffrey Sachs, co-editor of the report, notes that high average incomes do not necessarily improve average wellbeing. “In the U.S., there has been a three-times increase in GNP, but the happiness needle hasn’t budged. Other countries have pursued other policies and have achieved greater gains.”

The report concluded that the happiest countries in the world “tend to be high-income countries that also have a high degree of social equality, trust and quality of governance,” and that there is sufficient evidence from the research to support policy-making that uses happiness as a goal. As well, the report emphasized that “indeed, large-scale collection of data will improve macroeconomic policy-making and inform service delivery.”

The national comparisons sparked a flurry of media interest around the world, confounding reporters who struggled to understand why some countries scored well while others did not. THE INTEREST IN HAPPINESS RESEARCH AMONG ECONOMISTS has grown independently of the movement in Bhutan. About 40 years ago, U.S. economist Richard Easterlin introduced the concept of “diminishing marginal utility of income,” which stipulated that once an individual attained a certain level of income, further gains did not translate into an increased quality of life. Since then, more and more economists have argued that countries’ national accounts, which measure aggregate income levels and the value of trade, do not adequately assess the health of their economies nor the level of progress of their societies.

Helliwell also attributes some of the recent groundswell of interest to the seminal Stiglitz Report in 2009. The report was issued by the Commission on the Measurement of Economic Performance and Social Progress – which was initiated by the French government under then President Nicolas Sarkozy and chaired by Joseph Stiglitz, a Nobel Prize–winning economist from Columbia University. Addressing the U.N. meeting this past April, Stiglitz explained that maximizing GDP is not the same as maximizing well-being. “GDP per capita doesn’t reflect what is going on,” he said. “In the U.S., GDP is going up, but most individuals’ incomes have been going down.” To illustrate the problem, Stiglitz pointed out that while GDP has been rising, leisure time has been declining, which has negative implications for the quality of family life – i.e., we have less time available to invest in our children’s upbringing.

Helliwell also recalls how he became involved – albeit almost by accident – in happiness research. It was more than 15 years ago, when Robert Putnam – a leading social scientist and CIFAR advisor – introduced Helliwell to the concept of social capital, which represents the numerous resources that support the social dimension of our lives, from the small businesses lining the streets and neighbourhoodwatch programs to the community organizations and the corner post office. “Putnam told me that people in the United States with higher levels of social capital were happier,” says Helliwell. “And he showed me the data to support it…. I thought this was worth a serious, systematic investigation.”

Focusing on happiness research, Helliwell quickly established himself as a world authority on the subject. In 2005 he accepted an invitation from George Akerlof – another Nobel Prize– winning economist and a professor at the University of California, Berkeley – to co-direct a CIFAR program that set out to create a new framework for social science theory. The program has since been exploring the interface between many of the traditional social sciences, including economics, to better understand human behaviour in a social context.

CIFAR’s intellectual platform has been pivotal to shaping the World Happiness Report, says Helliwell. “Much of the research basis of the [report] was produced by CIFAR program members, advisors and post-docs, and by guests who have presented at various CIFAR meetings. CIFAR has helped greatly to create the research, to assemble a critical mass and to communicate the results in the academic and policy communities, and to the broader public.”

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World Happiness Report, 2012, edited by John Helliwell, Richard Layard and Jeffrey Sachs. IMAGE COURTESY OF THE AUTHORS

SINCE THAT HIGH-LEVEL U.N. MEETING IN APRIL, more than 250,000 copies of the World Happiness Report have been downloaded. Helliwell is hopeful that more governments will see the value in collecting the data. “If the science continues to bear out the validity of these measures and their usefulness, then they’ll take hold and become much more central, and will be used in a variety of ways to help individuals, communities and governments do their job better.“

Meanwhile, another major milestone for well-being research is on the horizon. The U.N. Secretary-General’s High- Level Panel on Global Sustainability is scheduled to update its Millennium Development Goals, which end in 2015. A new set of goals will be presented at a conference in September 2013, and economists, including Jeffrey Sachs, are advocating that the U.N. also adopt well-being measures to complement GDP, so that economic, social and environmental dimensions are better integrated in measures that gauge the success of our societies.

For Helliwell, this is another reason why the research must move forward urgently. We need to be able to explain what measures are most appropriate, as this will affect how a country could incorporate improvement in wellbeing as a policy goal. Happiness measures can’t be used as societal goals unless it’s scientifically sound.

“You can’t wait until it’s an objective and then decide to study it,” says Helliwell. “We need the data first.”