Opinions Column: Happy-ness Economics

By Annavajhula J.C. Bose, PhD; Department of Economics, SRCC (University of Delhi)

India has ranked at a dismal 144 out of 156 countries surveyed for the UN World Happiness Index 2019. This shameful finding should not be surprising at all as the Indian policy makers have never prioritized “human wellbeing”; instead, they have been worshipping, like their Chinese counterparts, the false god of GDP, which also explains India’s extremely stringent public health response to Covid-19.

There is an argument now coming from the ruling power elites in the US and the UK that the already meagre public health response to Covid-19 should be further eased in the interest of rebooting economic growth–that the Covid-19 hit to GDP will cost more lives than the virus itself. But this is a false argument in the light of what history shows that recessions often result in decreases in mortality, while periods of rapid growth are accompanied by immediate negative health impacts. “It was rather the invention of sanitation and later the provision of universal healthcare and education brought about by social movements, that accounted for much of Europe’s increase in life expectancy in the late 19th century—not GDP growth. And today, countries like Costa Rica and Cuba, prove that these services can be provided without having a high GDP per capita”. Kerala too exemplifies the same in India. But the ruling central government and its lackey state governments and their policy advisors care two hoots.

The very robust research findings of the new branch of Happiness Economics have had no influence on socio-economic policies in India and many other countries. Here, using a few non-technical readings, I summarise some of these findings which can catalyse your quest to deeply explore why our economies should be rewired to promote human wellbeing, not the false god of GDP.

Money brings happiness only in so far as it lifts people out of poverty. Once that point is clearly passed, the link between monetary wealth and happiness is actually very small. This finding might surprise many of us. But the more we look at the data comparing people’s monetary wealth with their levels of happiness, the harder it is to see any correlation at all once we get past the poverty line. A review of 150 studies on wealth and happiness concludes the same thus: “Although economic output has risen steeply over the past decades, there has been no rise in life satisfaction…and there has been a substantial increase in depression and distrust.” In other words, the solid conclusion is that money is like beer. Most people like it, but more is not necessarily better. A beer might improve our mood, but drinking 10 beers not only will not increase our happiness tenfold, it might not increase it at all.

Economists, politicians and other leaders, however, take for granted that the higher a nation’s GDP, the better off are its people. This is blatantly wrong. “The GDP simply adds together all monetary expenditures. The GDP does not care one whit what it is we’re consuming, about how equitably distributed a country’s wealth might be, nor whether the money we spend is ours or is borrowed from future generations. It is entirely possible for the nation with the world’s highest GDP to also have the world’s highest poverty rate and the world’s highest level of national debt. The GDP rises whenever money changes hands. When families break down and children require foster care, the GDP grows, but not so when parents successfully care for their children. People who max out their credit cards buying things they don’t need make the GDP look good. People who save their money and live sensibly don’t. Seen through such a lens, the most economically productive people are cancer patients in the midst of getting a divorce. Healthy people in happy marriages, in contrast, are economically invisible, and all the more so if they cook at home, walk to work, grow food in a home garden, and don’t smoke. In recent years, the GDP has gotten substantial boosts from toxic waste spills such as the Exxon Valdez disaster and the boom in prison construction. Meanwhile, natural resources such as rivers and oceans, topsoil and forests, the ozone layer and the atmosphere, are seen as essentially valueless, unless, of course, they are exploited and converted into revenue. But even then, the GDP measures the resulting economic activity in a manner that is fundamentally misleading.” By counting the depletion of natural resources as current income rather than as the liquidation of assets, the GDP “violates both basic accounting principles and common sense.”

The value of happiness economics lies in developing alternatives to the GDP that take into account the health of our lives, the strength of our communities, and the sustainability of the environment. The government of China, for example, is now thinking of adopting “green GDP accounting” after recognizing that the torrid Chinese economic growth has come at a humongous ecological and social cost. Countries such as Bhutan, France and the UK have reckoned more or less with the alternative of Gross Domestic Happiness.  “And yet it is no simple task to develop a monetized system that can measure the real determinants of happiness and well-being and do justice to the vast complexities of modern economic life. It may be that no single alternative index will emerge to entirely replace the GDP, and we will come to rely on a variety of indexes, each with its own perspective, to provide us with as complete a picture as possible of the real state of our economic affairs and our societal well-being. And then perhaps we will be able to develop policies that lead to our ultimate goal—a sustainable prosperity shared by all.”

Happiness indexes are usually a composite measure of objectively measurable indices of levels of literacy, access to health care, political freedom, quantity of leisure, income levels and pollution levels on the one hand, and normative subjective surveys asking people to report their own happiness levels on the other. And so they are not straightforward  and easy to construct.

Six factors that affect happiness can be identified—income albeit with diminishing returns, quality of work, quality of consumption, leisure, quality of environment, and non-economic issues like social interactions, confidence, self-respect, religious beliefs, etc. 

To conclude, at least six policy implications of happiness economics can be listed as follows. 

First, the link between income and happiness is limited or non-existent. As such, there is a strong case for focusing more on non-monetary factors like quality of the environment, reducing working week and satisfaction from work.

Secondly, economic growth can be beneficial in terms of reducing unemployment and creating job opportunities, but it should not be the sole objective of society like it is now in many countries including India.

Thirdly, governments should nudge and influence consumer choice away from demerit goods (alcohol, drugs) towards merit goods (education, training, cultural appreciation).

Fourthly, inequality and sense of unfairness are the source of dissatisfaction. And so, more equitable society has potential to improve happiness levels.

Fifthly, there is a strong case for redistribution between developed and developing countries. Low-income countries have the potential for significant increase in happiness from rising income.

Sixthly, in workplace environments, firms will have to emphasize factors which increase value of work, rather than cruder performance related pay and financial bonuses.

In the immediate and short-term Indian context now, employment policies via public expenditures on health, education, and public goods creation, as suggested by the Azim Premji University’s economic think tank  or similar other full employment  proposals like that of the unconventional economist Amit Bhaduri can tremendously increase happiness of people. 

Restructuring the economy to overcome our toxic growth dependency and secure a socially and environmentally prosperous future without growth, for us all, would be the medium and long term gut-sanity-intervention of the useful policy makers. Also, noteworthy in this regard for further studies on your part is the report titled “Circular Economy in India: Rethinking Growth for Long-term Prosperity”, produced by the Ellen MacArthur Foundation with the United Nations Conference for Trade and Development as knowledge partner and funded by ClimateWorks Foundation. This report reveals that in addition to creating cost savings for businesses and households, following a circular economy (not linear economy) development path would reduce negative externalities: greenhouse gas emissions would be 44% lower in 2050 compared to the current scenario, and congestion and pollution would fall significantly, leading to health and economic benefits to Indian citizens.

Sources: Amit Bhaduri. 2020. Unemployment. www.ecosocsrcc.com July 13.

David Barnes. Now’s the Time to Stop Worshipping the False God of GDP. www.positivemoney.org

John Robbins. 2010. The Economics of Happiness. Greater-Good Magazine. Greater Good Science Centre at UC Berkeley. July 20.

Tejvan Pettinger. 2017. Happiness Economics. https://www.economicshelp.org/blog/ April 28.

Azim Premji University. 2019. State of Working India. Centre for Sustainable Employment.

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