In my last post I talked about the failings of GDP. These observations, of course, are neither ground-breaking nor new. There are a number of initiatives under way already, each attempting to measure well-being more generally. The science of happiness is now a recognised and burgeoning field. And as long ago as 1972 the term Gross National Happiness was coined (by the former king of Bhutan as you might have guessed). At first glance it would appear that GNH is the obvious alternative to GDP that we've all been waiting for. It does indeed have the potential to be a very worthy measure, but for all its merits, it does suffer some major drawbacks itself. And in fear of becoming known as a bit of a naysayer, I will pick them apart here. (In my defence, this is hopefully another stepping stone on the way to an understanding of what is really important to us). I have three points to cover and I shall do them in reverse order of importance (as I see them). So if you are already bored with my constant whinging, you can skip ahead a bit.
The first problem with GNH is that it's a lot more tricky to define than GDP. To a large extent it is a subjective, interview-based measure. Fortunately, the subjective concerns regarding happiness questioning have largely been allayed by studies showing that people's responses to questions correlate well with other bodily indicators of emotion. However, the problem remains that the methods are not transparently portable across language and cultural boundaries. Questions can never be translated precisely, and responses from people of different cultures - such as those under more repressive regimes - may well not reflect emotions in the same way. As such, without a globally comparable measure of GNH, governments are unlikely to take it seriously and make it a top priority when policy making. Of course, it must be noted that the non-portability of a GNH measure across borders does not prevent it being used as a very valuable tool in gauging and comparing happiness between regions. In itself this makes it worthwhile pursuing.
Brushing aside those fluffy problems of measurement, and assuming we could pin something concrete down, then surely maximising GNH is exactly what we should be striving for? Drive this up the political agenda and it's happy days all round, right? Well, as you've come to expect, not quite. GNH brings along with it two of the major flaws with GDP.
The first is that blasted G at the front. Gross. Indeed it is. Actually, I think it's kinda the wrong term anyway, but, nevertheless, in this context it serves to mean 'total'. Total happiness. Sounds awesome, huh? Well, the problem is, you can increase the total by making the richest richer ... or rather the happiest happier ... and leaving the poor untouched. That is, you could increase GNH by increasing the happiness inequality. So a measure that obscures this is potentially dangerous. We need to be less gross about it.
Finally, the humdinger. Anyone remember the dot com bubble bursting or the recent credit crisis? These were both examples of what can result by short-termism, by borrowing from tomorrow to finance today. Eventually, it all comes tumbling down. The same applies to GNH. Such a measure does not account for the future and so could encourage 'unsustainable happiness'. (I'm not sure why I put that in quotes but it seemed right). The government could print a hundred billion pounds and give everyone a windfall payment, which would make everyone happier for a while, but it would come back to bite pretty soon, and hard. Similarly, we could do something in the short term to improve happiness which was detrimental to the environment - and therefore to happiness - in the long term.
So to summarise, I do believe in the concept of a happiness index, but it needs to incorporate inequality rather than being a 'gross' figure. And, fundamentally, it must take account of the happiness of future generations and not just those answering the questions today, in order that decisions made to improve well-being are sustainable. None of us wants to experience a happiness crunch! (Although it does sound rather deliciously like a new cereal from Kellogg's - in which case I'll give it a whirl). Finally, any happiness index must be as easy to calculate and as portable as possible. Easy for me to say, I know. I don't have any answers on this today, but I have every faith that lots of far cleverer people than me are working on this very issue in big shiny buildings somewhere :o/ All I can state is that until a happiness index is quoted on the news each month in the same breath as the inflation and unemployment figures, then it will do nothing to push policy.
Enough already. Time for you to do something more fulfilling. I will cease talking about boring stuff like measures now, and get on to the real issue of what happiness actually is, next time.
Thursday, 19 May 2011
Monday, 16 May 2011
Gross Domestic Poppycock
Somebody might suggest that a discussion on GDP is perhaps not the most scintillating of topics. That, of course, is an absurd notion, but should a rebuttal be deemed as necessary then let me state this, that taking a look at the significant failings in this most feverishly scrutinised of metrics, is a very good way to prompt debate about what really is important to us. So, on that basis, I shall grant myself permission.
As I'm sure you're aware, GDP, Gross Domestic Product, denotes the total value of goods and services produced by a country over a given period of time, usually a year. And it is generally used as an indicator of a country's economic health, and so in turn of the general standard of living of a country's citizens. All well and good. If, that is, the indicator was meaningful. Unfortunately, it is somewhat flawed.
Firstly, it gleefully ignores any negative impact that results from activities that contribute to it. In this way GDP can be considered as analogous to the revenue of a company. And although it's good to know that a company is taking £1 million a year in revenue, it is a worthless figure without knowing that the same company's costs are, say, £2 million. Similarly, GDP tells us the total value of our output, without even a hint at the value of the costs to society. These costs might be: environmental pollution, noise pollution, depletion of resources, crime, stress, reduction of leisure time, loss of community and family values. This negligence on the part of GDP can lead to ludicrous results. For example, natural disasters such as the Japanese earthquake and environmental disasters like Exxon Valdez do wonders for GDP - so does this mean we should have more of them? On a smaller scale, an individual that sits for two hours a day in traffic jams to get to/from work, actually has a greater positive effect on GDP than someone who travelled there congestion-free, because of all the extra money spent on fuel. So, this tells us that clogged up roads are good for the economy, right? Such examples are endless.
The second problem is the flip-side. The fact that, although the supposed role of GDP is to measure a country's output, it completely ignores a huge sector of unpaid but productive work. Imagine a mother who stays home to care for children - this is productive work which is not accounted for. It would have been, of course, if she'd paid a nanny instead - but where's the difference? Further imagine if, whilst this mother is at home, she also grows fruit and veg in the garden to feed her family. There is a very tangible output to this activity which is also not counted. Also, what if she cares for an elderly neighbour and volunteers at a charity shop and bakes cakes for the WI raffle and sits on the PTA. She's a busy lady, our mother, it's true. In fact, she is effectively in full-time productive (albeit unpaid) employment, and yet, apparently, it is not valued, it is not important!
But having had such fun tearing shreds out of GDP, let us step back, and ask, why are we even bothering to attempt to measure economic output in the first place? Do we really care how many Dysons we've bought and how many Ben & Jerrys we've consumed between us? Shouldn't we be more focussed on how these things make us feel ... and indeed how we feel in general? Isn't the goal to maximise our well-being, not our DVD back catalogue?
It's interesting to note that the politicians and world leaders already get this. Or at least some of them do ... to some degree. Back in 2008, President Sarkozy of France asked economists to set up the Commission on the Measurement of Economic Performance and Social Progress (CMEPSP). We've all heard lots about this haven't we? And in the US, one alternative being considered is the "genuine progress indicator" (GPI) which attempts to address the issues with GDP by discounting costs to society and including work done in the unpaid economy. And only last month the UK's Office for National Statistics started collecting data on happiness and satisfaction, albeit on a small scale of 200,000 people - the first country to do so at a national level.
These are promising steps, and remarkably they're even in the right direction, but until there is consensus among the world nations on a new measure to replace it, GDP will be all we have to rate our performance, which we all so love to do. Until then, GDP will continue to be touted by the public media as the primary indicator of a country's health, and so policy makers will have no choice but to strive to maximise a meaningless number, with increasingly dire consequences.
So the discussion continues: what should our social barometer be?
As I'm sure you're aware, GDP, Gross Domestic Product, denotes the total value of goods and services produced by a country over a given period of time, usually a year. And it is generally used as an indicator of a country's economic health, and so in turn of the general standard of living of a country's citizens. All well and good. If, that is, the indicator was meaningful. Unfortunately, it is somewhat flawed.
Firstly, it gleefully ignores any negative impact that results from activities that contribute to it. In this way GDP can be considered as analogous to the revenue of a company. And although it's good to know that a company is taking £1 million a year in revenue, it is a worthless figure without knowing that the same company's costs are, say, £2 million. Similarly, GDP tells us the total value of our output, without even a hint at the value of the costs to society. These costs might be: environmental pollution, noise pollution, depletion of resources, crime, stress, reduction of leisure time, loss of community and family values. This negligence on the part of GDP can lead to ludicrous results. For example, natural disasters such as the Japanese earthquake and environmental disasters like Exxon Valdez do wonders for GDP - so does this mean we should have more of them? On a smaller scale, an individual that sits for two hours a day in traffic jams to get to/from work, actually has a greater positive effect on GDP than someone who travelled there congestion-free, because of all the extra money spent on fuel. So, this tells us that clogged up roads are good for the economy, right? Such examples are endless.
The second problem is the flip-side. The fact that, although the supposed role of GDP is to measure a country's output, it completely ignores a huge sector of unpaid but productive work. Imagine a mother who stays home to care for children - this is productive work which is not accounted for. It would have been, of course, if she'd paid a nanny instead - but where's the difference? Further imagine if, whilst this mother is at home, she also grows fruit and veg in the garden to feed her family. There is a very tangible output to this activity which is also not counted. Also, what if she cares for an elderly neighbour and volunteers at a charity shop and bakes cakes for the WI raffle and sits on the PTA. She's a busy lady, our mother, it's true. In fact, she is effectively in full-time productive (albeit unpaid) employment, and yet, apparently, it is not valued, it is not important!
But having had such fun tearing shreds out of GDP, let us step back, and ask, why are we even bothering to attempt to measure economic output in the first place? Do we really care how many Dysons we've bought and how many Ben & Jerrys we've consumed between us? Shouldn't we be more focussed on how these things make us feel ... and indeed how we feel in general? Isn't the goal to maximise our well-being, not our DVD back catalogue?
It's interesting to note that the politicians and world leaders already get this. Or at least some of them do ... to some degree. Back in 2008, President Sarkozy of France asked economists to set up the Commission on the Measurement of Economic Performance and Social Progress (CMEPSP). We've all heard lots about this haven't we? And in the US, one alternative being considered is the "genuine progress indicator" (GPI) which attempts to address the issues with GDP by discounting costs to society and including work done in the unpaid economy. And only last month the UK's Office for National Statistics started collecting data on happiness and satisfaction, albeit on a small scale of 200,000 people - the first country to do so at a national level.
These are promising steps, and remarkably they're even in the right direction, but until there is consensus among the world nations on a new measure to replace it, GDP will be all we have to rate our performance, which we all so love to do. Until then, GDP will continue to be touted by the public media as the primary indicator of a country's health, and so policy makers will have no choice but to strive to maximise a meaningless number, with increasingly dire consequences.
So the discussion continues: what should our social barometer be?
Tuesday, 10 May 2011
The Deception of Growth
So what am I (and what am I going to be) bleating on about in general anyway? Well, the world has many problems of course, and I'll discuss some of them in future posts, but it seems clear that a great deal of them are captured neatly by one single statement of fact:
Sadly it is true. And the reason is well understood. It stems from the fact that although people care about their income, their wealth and their PS2 games catalogue, what they care about a lot more is how it relates to everyone else's - to the average. Whether someone feels happy or not depends on how well their lot compares to the Jones's.
And herein lies the paradox. For whereas society's real incomes can continually grow over time, it is a mathematical impossibility to improve society's relative incomes. Add up everyone's income expressed as a delta from the mean and the answer will always be zero.
So, what can we conclude from this? Quite simply,
In my next post I will discuss GDP and how it executes the impressive double-whammy of (a) completely failing to measure what it is trying to measure and (b) not being of any relevance even if it succeeded. Tune in for the next exciting instalment.
People are no happier today than they were in the 1950s, despite a three-fold increase in their income.I've paraphrased here for impact, so let me break it down for you. It refers to people in the US and the UK, and the increase in income is in real terms, meaning that we can buy three times as much stuff with our earnings today than we could in 1950 - and our standard of living has improved correspondingly. We can fill our homes with PlayStations, mobile phones, HD TVs; and other frivolities like toilets, lighting, central heating and hot running water. And yet we are no happier? Surely that can't be? I've seen how happy Lego Star Wars for PS2 alone makes my friend and this family.
Sadly it is true. And the reason is well understood. It stems from the fact that although people care about their income, their wealth and their PS2 games catalogue, what they care about a lot more is how it relates to everyone else's - to the average. Whether someone feels happy or not depends on how well their lot compares to the Jones's.
And herein lies the paradox. For whereas society's real incomes can continually grow over time, it is a mathematical impossibility to improve society's relative incomes. Add up everyone's income expressed as a delta from the mean and the answer will always be zero.
So, what can we conclude from this? Quite simply,
Economic growth is not a viable route to a happier society.And yet growth is still the single most quoted indicator of a country's performance and of its government's success at the helm. It's almost implicitly understood that growth is good, stagnation is bad and recession is, well, downright cataclysmic. Yet, considering that growth does not improve well-being in the long run (as proven above), and given that we have a finite number of resources on the planet, which makes the goal of indefinite growth grossly irresponsible anyway, then controlled long-term recession may well be part of the solution. And stagnation almost certainly is. It's time to focus on a different indicator.
In my next post I will discuss GDP and how it executes the impressive double-whammy of (a) completely failing to measure what it is trying to measure and (b) not being of any relevance even if it succeeded. Tune in for the next exciting instalment.
Thursday, 5 May 2011
In Pursuit of Happiness
Occasionally, you will read something that will stay with you forever.
Occasionally, you will attempt to begin a new blog and be struck with a lack of confidence in your worth.
Considering these two facts, I feel it only appropriate to begin my (possibly very brief) career in the blogosphere with the words of someone far more qualified and talented:
The girl, we later discover, was called Fenchurch (after the railway station ticket queue in which she was conceived), and ever since first reading this, as a significantly younger human male, it has haunted me. It has returned to me frequently. Because, to me it seems more than just fiction. I really think there is a simple answer. Because, all complex systems are based on very simple rules. This has been proven time and time again. Consider Einstein's famously elegant equation.
So, of course, I've thought about what the answer might be ... a lot. Mostly, when I shouldn't be. People who know me will be aware of my tendency to drift into some other realm mid conversation. Annoying as this may be for them, trust me, it's far safer than when I've done it driving down the motorway on cruise control, only to return to reality and realise I've forgotten what the pedals do.
Anyway, I'm rambling. Back to the blog. My goal with this column is to seek out the essence of Fenchurch's lost epiphany. To find the simple answer - without nailing anyone to anything. The journey, I suspect, is long, for before we get anywhere near an Answer there are an awful lot of things that need to be discussed. The intention is that that will occur here. I cannot promise as to how regularly my posts will arrive. But then, we've been tackling this problem for two thousand years already, so a short delay here and there will hopefully not serve to inconvenience too many.
Until my next post, with more meat on the bones, so long ... I'm off to eat some fish.
(PS: to pre-empt anyone who makes the rather obvious comment that the answer is 42, let me clarify that that is not the question we are considering. I'm expecting the answer to be nearer 74.)
Occasionally, you will attempt to begin a new blog and be struck with a lack of confidence in your worth.
Considering these two facts, I feel it only appropriate to begin my (possibly very brief) career in the blogosphere with the words of someone far more qualified and talented:
One Thursday afternoon, nearly two thousand years after [a] man had been nailed to a tree for saying how great it would be to be nice to people for a change, a girl sitting on her own in a small café in Rickmansworth suddenly realized what it was that had been going wrong all this time, and she finally knew how the world could be made a good and happy place. This time it was right, it would work, and no one would have to get nailed to anything. Sadly, however, before she could get to a phone to tell anyone about it, a terrible stupid catastrophe occurred, and the idea was lost for ever.
The Hitch Hiker's Guide to the Galaxy
Douglas Adams, 1979
The girl, we later discover, was called Fenchurch (after the railway station ticket queue in which she was conceived), and ever since first reading this, as a significantly younger human male, it has haunted me. It has returned to me frequently. Because, to me it seems more than just fiction. I really think there is a simple answer. Because, all complex systems are based on very simple rules. This has been proven time and time again. Consider Einstein's famously elegant equation.
So, of course, I've thought about what the answer might be ... a lot. Mostly, when I shouldn't be. People who know me will be aware of my tendency to drift into some other realm mid conversation. Annoying as this may be for them, trust me, it's far safer than when I've done it driving down the motorway on cruise control, only to return to reality and realise I've forgotten what the pedals do.
Anyway, I'm rambling. Back to the blog. My goal with this column is to seek out the essence of Fenchurch's lost epiphany. To find the simple answer - without nailing anyone to anything. The journey, I suspect, is long, for before we get anywhere near an Answer there are an awful lot of things that need to be discussed. The intention is that that will occur here. I cannot promise as to how regularly my posts will arrive. But then, we've been tackling this problem for two thousand years already, so a short delay here and there will hopefully not serve to inconvenience too many.
Until my next post, with more meat on the bones, so long ... I'm off to eat some fish.
(PS: to pre-empt anyone who makes the rather obvious comment that the answer is 42, let me clarify that that is not the question we are considering. I'm expecting the answer to be nearer 74.)
Subscribe to:
Posts (Atom)