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Posted: November 01, 2009

The Economist: What is the best way to measure a country’s happiness?

Tucker Hart Adams

There has been lots of talk recently about the shortcomings of Gross Domestic Product, the most widely used measure of a country's output of goods and services.

Various pundits have argued that it is an incomplete measure of how well a country is doing, since, for example, it excludes unpaid work and includes the cost of treating illness.

A couple of years ago, I spent several weeks in Bhutan, a tiny Buddhist kingdom approximately the size of Vermont and New Hampshire combined, tucked between India and China in the eastern Himalayas. The country spreads from east to west, while the mountains run from north to south, which means there are two directions - up and down. One paved road bisects its length, too narrow for cars to pass except at an occasional turnout, with an average of 22 sharp curves per mile.

Its 700,000 people are mostly subsistence farmers (93 percent), scratching a living off of the 2.3 percent of the land suitable for growing crops. Every Bhutanese family has at least five acres (but no more than 25 acres) of ground, granted to them by their king. Guest workers are imported from India and Nepal to do roadwork and other heavy construction, since few Bhutanese apply for these jobs.

The country is a constitutional monarchy in the midst of a gradual transition to a parliamentary democracy, and its king measures his people's wellbeing by Gross National Happiness (GNH) rather than Gross Domestic Product (GDP). The basic concept is difficult to argue with - there is more to progress than the increase in the monetary value of the goods and services a country produces; we need a more holistic measure of how we are doing.

The devil is in the details. GDP measures the output of goods and services produced by labor, land and capital goods located in a country. GNH adds and subtracts various components based on value judgments made by the person or group making the calculation.

Some economists argue that such things as additional vacation time, shorter commutes and/or more time to interact with friends increase happiness. Yet Americans, who work about six hours a week longer than Europeans, spend far longer commuting and have less vacation, seem to be quite happy.

The Pew Research Center reports than 84 percent of us are either very happy (34 percent) or pretty happy (50 percent), and the Harris Poll finds that 91 percent are pleased with our social lives. As someone who went from working in a downtown office to working in an office in my home, I can tell you that shortening your commute time to 90 seconds isn't all good - you are never away from your job.

A friend who has been out of work for six months has plenty of time to interact with friends, but she isn't happier than she was when she had a steady income.

Most surveys show that the rich are happier than the poor and that people in wealthy countries are happier than those in poorer countries. Polls by the Pew Research Center indicate that 49 percent of Americans with annual incomes of more than $100,000 say they are very happy, but only 24 percent of those earning $30,000 or less.

However, when everyone becomes richer in tandem, reported happiness for the two groups doesn't change. Perhaps it is relative wealth, not absolute wealth that is important. Or perhaps it is how well off you are relative to your expectations. Another study points out that Norwegians, who usually rank as the happiest Europeans, have very low expectations and hence are easily satisfied.

All of which leads me to conclude that, as appealing as it is, we can't yet measure Gross National Happiness. We have to hope that most of us behave rationally most of the time, spending our money and energy on what makes us happiest. Gross Domestic Product, flawed as it is, is going to be our best yardstick for the foreseeable future.

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Tucker Hart Adams, president of the Adams Group, monitored and analyzed the Colorado economy for 30 years. She can be reached via her website, coloradoeconomy.com.

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