Towards a new economic paradigm
Towards a new economic paradigm
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In 1974, Richard A. Easterlin discovered the Easterlin paradox, which shows the rich are generally happier than the poor, though neither GDP growth nor higher GDP per capita increase happiness once development satisfies basic needs. It also shows that people judge their lives better the richer they become, though an individual’s day-to-day happiness is unaffected by income improvements beyond a sufficient amount, about $75,000 a year in the United States. Though Easterlin was challenged in 2008 by Stevenson and Wolfers, who demonstrated a logarithmic correlation between GDP growth, income improvements, and happiness, in large part, the disagreement was caused by differences in the particular questions, methodology, and population surveyed, and does not disprove two important observations.
Firstly, the diminishing returns of money on happiness causes a decoupling between continued economic growth and improved well-being. As economies develop and individuals become financially secure, happiness increasingly depends on how incomes relate to each other, such that the increased well-being afforded by a country’s absolute income or rising GDP may be undermined by disparities in relative income. Secondly, the discrepancy between evaluating and experiencing happiness results from a difference in income’s impact upon life satisfaction versus positive emotion.
At the heart of these two observations lies a global shift in values, explaining the transformation of people’s perceptions and feelings of happiness as modernizing societies struggling for material survival become postmodern societies valuing democratic self-expression and freedom of choice. As freedom of choice and material abundance spread, happiness becomes bound by heightened expectations. As a result, relative affluence may cause individuals to judge their lives as comparatively better, despite feeling increasingly dissatisfied, regretful, or blameworthy at failing to obtain optimal outcomes.
Two cases in point: happiness in the United States has stagnated for over half a century, in part because top-earners sky-rocketing incomes have drastically outpaced meaningful improvements in average living standards, while happiness in China has actually fallen in the last thirty years, due to an increase in the number of “frustrated achievers” who try keeping up with the Joneses. Although the U.S. and China are the respective homes of the world’s wealthiest people and the world’s fastest growing economy, high levels of income inequality and social stratification produce lower levels of fairness and trust in contradiction to the world’s happiest country, Denmark, where low levels of inequality and materialism contribute to social cohesion and well-being. In conclusion, money is essential to secure basic needs, but its importance to well-being declines relative to a broader range of factors.
The architect of GDP, Simon Kuznets, said in his very first report to the US Congress in 1934, “…the welfare of a nation can, therefore, scarcely be inferred from a measure of national income…” This warning was repeated by Robert F. Kennedy in 1968, who said “[GDP] measures everything in short except that which makes life worthwhile.” In light of the divergence between continued economic growth, improved income, and well-being, an international effort is attempting to shift the measurement of progress away from GDP and toward national well-being. Recently, societies have begun to develop alternative indicators that redefine progress by measuring economic well-being beyond the limitations of GDP, and by quantifying subjective values. It is believed the more quantitative and qualitative measurements effectively complement each other, the more societies can both value what counts and count what’s valued, so that positive social outcomes can reach those in need and relevant social concerns can be better addressed.
In 1972, the Kingdom of Bhutan became the first country to measure progress using Gross National Happiness instead of Gross National Product. The Center for Bhutan Studies formulated a scientific survey that holistically defined eight domains of happiness, including physical, mental and spiritual health, time-balance, social and community vitality, cultural vitality, education, living standards, good governance, and ecological vitality. The survey data mapped Bhutan’s well-being onto a metric that allowed economic policy to balance material and spiritual needs according to the country’s Buddhist values. In 2008, French president Nicolas Sarkozy directed an international commission inspiring other governments to consider happiness in policy frameworks, and in 2011, the United Nations made happiness a key indicator guiding the worldwide development agenda.
Though providing citizens a life of flourishing (eudaimonia) and virtue (arete) was Thomas Jefferson’s visionary goal for the United States government, politics is only now considering Gross National Happiness in America. Leading proponents of the agenda, such as Lord Richard Layard and Nic Marks, confront opposition legitimately concerned by its potential for exploitation,exemplified in North Korea, and by serious concerns over people’s different understandings of happiness and adaptability to given circumstances. Though happiness is universally desired, its colors and shades are culturally, philosophically, and historically varied, perhaps viewed as hedonism to an affluent Westerner, as equanimity to a Chinese Buddhist, or as contentment to a poor Afghani. The efficacy of happiness based politics therefore depends on the degree to which the normative objectives of its policies correspond to scientifically verifiable improvements in well-being.
Though the etymology of happiness attributes to it a happenstance condition of good luck or fortune, the science of happiness explains that our actions determine 40% of happiness, and that well-being can be both synthetically created and habitually formed. The new field of study expounds the benefits and methods of improving happiness based on sophisticated concepts like PERMA, developed by Martin Seligman at the University of Pennsylvania’s research center for positive psychology.
As a result of the growth in scientific knowledge, people are engaging in happiness boosting activities (i.e. meditation, cultural participation, political activism, etc…), cultivating positive qualities (i.e. emotional intelligence, compassion, a positive outlook, engagement, stress management, work-life balance,etc…), and building vibrant communities (i.e. urban planning) that help promote health, quality of life, and performance. At the same time, government programs (i.e. Mindapples, Local Wellbeing Project, Educating for GNH, etc…), organized movements (i.e. Action for Happiness, Delivering Happiness, GNH USA, etc…) universities (i.e. UC Berkeley, School for Wellbeing, etc…), research centers (i.e. The Mind and Life Institute, The Happiness Institute, Centre for Confidence and Well-being, etc…), and think-tanks (i.e. NEF’s Centre for Wellbeing) are creating public, professional and private spaces where happier lives can be created. Lastly, there are initiatives like ours, which use aggregate happiness indices to shape society at all levels (i.e World Database of Happiness, Mappiness, NEF’s Happy Planet Index, the OECD’s Better Life Index, the UK’s Well-being Index, China’s Happiness Index, Greater Victoria’s Happiness Index, Australian Unity Wellbeing Index, Community Indicators Victoria, Somerville’s Happiness Survey, and Gallup-Healthways Wellbeing Index).
