Thinking beyond GDP to the measurement of happiness

Our idea of economic growth derives from a particular view of the world that privileges the market as the basis on which to distribute goods and on which we decide what’s valuable. In a market, the extent to which something is valued depends on how much someone is prepared to pay for it. Although we know that there are certain things that are far more valuable than anything that you can buy in a market, such as friendship, family and the experience of nature, the way that GDP – gross domestic product – is calculated is as an aggregate of all of the different prices of things that are paid for in a particular national economy.

That means that there are various absurdities that have developed within the calculation of GDP that many environmental economists, feminists and other critics of GDP have pointed out. For instance, if I pay someone to drive something up the length of the country and back, then that counts as a contribution to GDP, even if it’s polluting the atmosphere and even if it wasn’t a worthwhile journey to make. Nevertheless, the fact that I paid for it to happen means that it will count as a positive benefit to GDP. Meanwhile, caring for my own children or going for a walk in the countryside – things that might be of far greater value – don’t make any kind of contribution to GDP one way or the other because they are not associated with a market value.

Believing that gross domestic product is the most important economic indicator in our society has always had this limitation that it excludes lots of things that most people believe are valuable and includes lots of things that many people believe are not valuable. But the problem is, what do we use instead?

GDP became established around the time of World War Two and became something that policymakers began to focus on in the decades after. But in a famous speech, Robert Kennedy criticises gross domestic product, saying that it doesn’t capture anything that makes life worth living – and this was in the mid-1960s. It’s not a new complaint that GDP is a bad indicator of what society is really for or what human beings deem most valuable, but it’s very difficult to come up with an alternative. Over the years, green economists and others have developed what are called “social indicators”. These are attempts to try and quantify different aspects of socio-economic activity or to focus on things like well-being, understood either in a psychological sense or in a more sociological sense, so as to come up with a different way of measuring the value of different activities, which doesn’t always resort back to market prices in the way that gross domestic product does.

There are alternatives and those alternatives have been around for quite a long time. And while some have had quite useful benefits, particularly in areas such as development policy – and already many statistics offices around the world now do collect official data and publish indicators about things like happiness and well-being – the question is, to what extent can they actually displace GDP now that it’s such a powerful indicator? Our entire public sphere, our politics, the business pages of the newspapers are now so focused upon this GDP indicator that it’s quite difficult to imagine how that gets sidelined.I think it’s very important that we do find ways of thinking beyond GDP, not least because, as environmental economists have argued since the 1970s, the idea that it’s possible to carry on having indefinite levels of economic growth in a planet of finite resources is becoming more and more obviously untenable. I think that the ecological crisis, but arguably also the crisis of care or the crisis of social value, means that these debates are becoming more critical at the moment.

There’s been quite a long history of interest in the idea of well-being as something that could potentially become an object of economics and statistics, as an alternative to focusing on market prices. The science of economics, as we currently understand it, which was born in its current form in the late 19th century, has always used prices as the main source of data because it is a science of price formation with various underlying assumptions about human psychology, many of which are not remotely plausible. For example, the idea that people will always rationally take the most utility-maximising option is not how we behave in our everyday life. So, the question is, how would economics and statistics be refashioned in ways that didn’t apply this emphasis and make these assumptions that price is the best indicator of value and that rational choice is the best assumption about how humans behave?

There is another way out of this dilemma, which is to focus on what psychologists and economists sometimes refer to as subjective well-being: “How do I feel about my life?” This has been the basis since the 1960s of various efforts to map trends across populations, to carry out surveys which study how much happiness there is in different societies by asking people, broadly speaking, how satisfied are you with your life? How happy did you feel yesterday? How anxious did you feel today or yesterday? These kinds of questions, which prompt all sorts of arguments on a methodological level about whether you should have a zero to ten scale or a minus five to plus five scale, have quite a big influence over how people answer them. Nevertheless, survey instruments and statistical instruments allow societies to be studied, mapped and compared in terms of how much psychological satisfaction and fulfilment people experience as a result of their conditions, lifestyles and so on.

Whether that happiness is a result of economic prosperity or whether it’s a result of other aspects of their lives is something that happiness scientists spend a lot of time trying to understand. The idea that happiness is simply something purely subjective or something that can’t be pinned down is no longer deemed to be the case, as far as various psychologists, economists and statisticians are concerned.

There is still one further philosophical dilemma that runs through all of this: what’s most important about happiness? Is it the ability to reflect on one’s entire situation and say I’m satisfied with this? Or is it the ability to experience pleasure from one moment to the next? There is a strange paradox that we discovered: that unemployed people feel very dissatisfied with their overall situation in life. Meanwhile, people who are at work might experience low levels of pleasure while they’re at work, but nevertheless feel satisfied with the fact that they have a job. These become ethical questions all over again because it’s not entirely straightforward to decide, certainly not on the basis of statistics or economics, what is most important: Is it the ability to have sudden surges of pleasure of the sort that might be associated with particular experiences or even with taking particular drugs? Or is it more important to be able to have a feeling of one’s life making sense and being something that one’s satisfied with, even if on a day-to-day basis it’s quite stressful and difficult, and doesn’t generate constant feelings of pleasure.