National happiness beats GDP hands down

Economist Ed Conway claims in The Times that “GDP is actually pretty good at measuring the total amount of income generated in Britain”

His main point is that:

  • Every politician from right to left obsesses about income above all other measures of progress
  • Yet income comes surprisingly far down the list of what really matters to people


Losing a major chunk of your pay certainly dents your well-being but losing your job reduces it by three (?) times as much

A job not only provides an income but social interaction, satisfaction from completing tasks, routine and a change of scenery – all things which keep us happy

This leads him to claim: “Levels of happiness across a population are a better predictor of election results than economic statistics such as GDP, and they’re linked to higher productivity” – (contradicting President Clinton’s mantra: ‘It’s the economy, stupid’)

Furthermore, he says levels of happiness bear out that:

  • People are far more dented by losses than gains
  • Recessions leave lasting scars
  • We deeply resent others earning more than us


The story they tell is quite distinct from the one told by our income levels viz:

  • Real incomes are facing a big squeeze
  • Britain’s national income remains weak


Nevertheless, according to economists Colin Green, Alex Bryson and Andrew Clark, not only are levels of life satisfaction among British workers higher than before the 2008 crisis, they are now at the highest level since comparable records began in 1991

So, for all the disappointment over our (apparent) GDP levels, employment is at the highest level in history – and the happiness gap between the vast majority employed and relatively few unemployed is said to never have been greater

This is all very thought-provoking but what’s missing, as with so many economists’ claims about national productivity and progress, are credible, widely-accepted measures of happiness

Indeed, as Gus O’Donnell, UK Cabinet Secretary, once said: “To measure a country’s progress, we also need to look at how satisfied we are with our lives and how worthwhile our lives are”

Some formula for a NHI (National Happiness Index) is needed

To date, two indices are known to have been proposed

  1. A GNH – Gross National Happiness- based on the total national average per capita of the following:
  • Economic wellness – covering consumer debt, average income to consumer price index ratio and income distribution
  • Environment wellness – covering pollution, noise and traffic
  • Physical wellness – covering physical health and severe illnesses
  • Mental wellness – covering usage of antidepressants and rise or decline of psychotherapy patients
  • Workplace wellness – covering jobless claims, job changes, workplace complaints and lawsuits
  • Social wellness – covering discrimination, safety, divorce rates, domestic conflicts, family lawsuits, public lawsuits, crime rates
  • Political wellness – covering quality of local democracy, individual freedom, foreign conflicts


2. The World Bank’s HCI – Human Capital Index – based on five parameters:

  • Child survival
  • School enrolment
  • Quality of learning
  • Healthy growth
  • Adult survival


The index is said to be ‘the result of compelling evidence of economic benefits derived from investments in health and education’ – and ‘may be more highly correlated than other kinds of industrial and infrastructure investment that many heads of countries may favour’

The HCI ranks Singapore, South Korea and Japan in the top three places – African countries occupy the bottom spots – and India’s quality of human capital places them at 115 out of 157 countries, lower than most of its neighbours in South Asia

India’s score is 0.44 which means a child born in the country today will be only 44% as productive when she grows up as she could be if she enjoyed complete education and full health

Unsurprisingly, India rejects these findings

Economics Affairs Secretary Subhash Chandra Garg says: “A better metric is needed for the index to measure the status of human capital in the digital age – there is a need to recognise that the digital technological changes taking place are more fundamental than even the invention of the steam engine which laid the foundation for the industrial revolution – and human capital needs to continuously evolve and develop”


This is yet another example of a vitally important driver of any nation’s economic success stumbling at the first hurdle for lack of any good and agreed measures

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