Gross National Happiness vs. Gross Domestic Product

image from bhutan tourism ministry

The recent wedding in Bhutan of King Jigme Khesar Namgyel Wangchuck to Jetsun Pema on October 15, 2011 has brought the concept of Gross National Happiness vs. Gross Domestic Product (GDP) into the limelight once again.  

image from bhutan tourism ministry

According to the article, "Emulate Bhutan's Way to Gross National Happiness (GNH)" by Soo Ewe Jin (Malaysia Star online), the concept of "Gross National Happiness" was first developed by the current king's father in 1972. Instead of measuring success and wealth solely on the economic criteria of the GDP, this king also wanted to measure success on the well being of Bhutan's citizens. 

Over the years, the concept has gained popularity and the concept has spread to economic theory and international rankings (see Gross National Happiness rankings).

The main difference between the two measures is that the Gross Domestic Product only measures consumption, investment and spending.  If a building is built for $1 million, then gets vandalized and destroyed by fire, then is rebuilt, then is destroyed in a tornado, then gets rebuilt again, GDP measures that as $3 million in GDP--three times better than the value without the interim destruction.  This might not be the best measurement for judging wealth or success.  A straightforward but comprehensive explanation of GDP, its components and the ways it can be calculated, can be found in Wikipedia.

Gross National Happiness can seem to be more difficult to quantify; the issues are addressed in a policy paper by Med Jones of the International Institute of Management. More simplistically, GNH is measured on four parameters, or "pillars": 

• economic self-reliance
• respect for, and preservation of,the environment 
• the preservation and promotion of culture
• good governance in the form of a democracy

These national factors are interrelated and build from the bottom up, as delineated in this chart:

image from the document linked below by Pamela Shreiner, page 7

These concepts have spread beyond the borders of Bhutan.  They have been adapted and incorporated into academic business and economic planning. In a paper entitled "Exploring Gross National Happiness Using Balanced Scorecard and Appreciative Inquiry", submitted to the Second International Conference on GNH, Pamela Schreiner compared currently popular business decision-making models to the GNH concept.  She notes that the trend in decision making is to be more holistic, and include a broader range of outcomes, similar to the GNH model. Other researchers have also used inputs from the GNH model. The Malaysia Star article cites Richard Easterlin, an economics professor from USC, and other researchers as concluding that "once basic needs are met, policy should focus not on economic growth or GDP, but on increasing life satisfaction, or Gross National Happiness."

In the current environment of economic uncertainty, where financial algorithms can no longer predict market trends, the sustainable models have compelling appeal. This Venn diagram shows everything in balance.

graphic from 14wbpolicyglossary.wufoo.com

Follow up:

1. Access each of the links above until you can answer this question:  What countries ranked highest in GNH 2006, according to the article at the MSN Money site? What do these high ranking countries have in common?  How are they the same and different from the United States?

2.  Where is Bhutan?  What has been its political structure? What is the philosophy upon which the pillars of progress are built, according to Soo Ewe Jin's article?

3. If you want to hear a lecture on this topic, access this video  LINK from the GNHUSA conference, June 2010.  The introduction to the speaker is pretty dry, but hang in there.  The speaker, Eric Zencey, directly addresses GDP compared to measures of sustainable well-being.

After you watch, answer this question: What are some of the problems with GDP as a measure of economic activity, according to Zencey?