In class last week, we briefly went over the definitions and concepts of both Gross Domestic Product (GDP) and Gross National Happiness. Gross Domestic product is defined as “the market value of all officially recognized final goods and services within a country in a given period of time”; Gross National Happiness is “an indicator that measure quality of life or social progress in holistic and psychological terms than the economic indicator- GDP”.
Developed for US Congress report in 1934, GDP is a commonly used as a measure of a country’s economy. The simplest and most common way to measure GDP is the product approach, which is the sum of outputs, or simply, the market value of all final goods and services produced in one year. Hence, it is given by the formula:
Value of output = Value of Total Sales – Value of Intermediate Consumptions
To simply calculations, value of total sales is obtained by multiplying output of each industry by the corresponding market price.
Gross National Happiness was named by Bhutan’s fourth Dragon King, who had hope to use this indicator to show his intention on improving his country’s economy by using Bhutan’s culture that is based on Buddhist spiritual value. It is a measure of population’s general well-being, and place heavy emphasis on side-by-side development of material and spiritual growth. The seven metric used to measure GNH is: Economic Wellness, Environmental Wellness, Physical Wellness, Mental Wellness, Workplace Wellness, Social Wellness and Political Wellness.
Personally, I support the idea of measuring happiness. As a country matures, it needs to develop not just its economy, but ensure high standard of living and welfare for its citizens. However, there are some fatal flaws in the Gross National Happiness approach. First, it is a subject survey regarding immeasurable properties. Governments can choose to define their own standard on measuring GNH that suit their interest. At the same time, it is nearly impossible to quantify happiness. Hence, this approach is hardly scientific, and the result cannot be objectively used for comparisons across countries. Furthermore, since this concept is based in Buddhist value, significant importance is place on anti-consumerism. However, that may not be a true measure of progress. With the growing importance of trading and specialization, countries must be able to establish trade to gather importance resources.
Maybe we should view these indexes as complements to each other, instead of hoping for a simple, single answer to define a country’s growth. After all, GDP was established to measure the economic progress only. It was never meant to be used as a measure for welfare.