TPM Cafe: Opinion

Book Club: Why Don't Economists Care If You're Happy?

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The new monarch had seen just enough of the world to know that success globally was increasingly being defined by gross national product. And yet, the teenage king had a bold idea: instead of gauging the health of a country by how much stuff it produced, measure it by something else. Instead of emphasizing production and output, emphasize quality of life. And in the world of 1972, that was radical.

We’ve seen what most countries did: The United Nations had created a framework of national accounts that all countries were expected to use. The United States and the Soviet Union were engaged in a global contest to see whose system could gain the most adherents, and the two primary metrics were how many warheads and allies each had and how much and at what rate its economy was expanding. The royal family of Bhutan was not immune to these pressures. How your country ranked in the global pecking order became a primary pursuit of governments everywhere. The ubiquity of statistics created its own logic: governments looked for legitimacy domestically and internationally by pointing to their material achievements: more food grown, more houses built, more finished goods produced, more wealth created.

Instead of jumping on that bandwagon, King Jigme Singye Wanchuck, the inheritor of the Dragon Throne of Bhutan, jumped off. There is no evidence that the young king was aware of Robert Kennedy’s searing 1968 critique of gross national product. He would have been barely twelve years old when Kennedy delivered that speech in Kansas. But somehow, one of the first decisions made by this new king of Bhutan was to replace GNP with something else: happiness. From then on, the goal for Bhutan was not material prosperity but collective well-being. Bhutan, the king believed, would be a successful society only if most of its people deemed themselves happy.

As the Bhutanese started to formulate ways to measure national happiness, material needs weren’t ignored. But they were understood to be only one part of a multifaceted mix, along with spiritual contentment, family life, culture, and traditions.

Bhutan was the only country in the world to explicitly reject the national account framework adopted almost everywhere else. Even the Soviets and Communist China measured output according to these international standards, though the Soviets also kept track of what they called “gross social product” (which was the total stated—emphasis on stated—output of all their industrial activity). Bhutan, however, said no. In elevating happiness as the primary metric, it was both carving a new path and honoring its own traditions. The first recorded legal code of Bhutan dates from the eighteenth century. Formulated by a ruler who was also a Buddhist Rinpoche, or high-ranking monk, the code stated, “If the government cannot create happiness for its people, there is no purpose for the government to exist.” In Bhutanese lore, the current dynasty of kings descends directly from the monks who established the kingdom centuries ago, and there is a belief that each new king is, in fact, an embodiment of the spirit of the previous one. In that sense, the sixteen-year-old who ascended the throne in 1972 was far older than his earthly years. Or so many Bhutanese believed.

It was one thing for the king to pronounce that Bhutan would use a different measuring stick; it was another thing to create the measures. That process is still not complete, but over the subsequent decades, Bhutan did design an actual index and built a staff to conduct surveys, collect data, analyze it, and produce an official statistic. They drew on the expertise not just of statistical agencies and the United Nations but also on academics who had concluded that the way national economies were being reduced to gross national (or domestic) product distorts the way we answer vital questions.

Stemming from centuries of Buddhist teachings and an isolated culture steeped in that legacy, the methodology of the gross national happiness index bears more resemblance to New Age teachings than it does to the statistical mantras of the Bureau of Economic Analysis. Given the degree to which New Age teachings have been shaped by Buddhism, that shouldn’t come as a surprise. Many of the Bhutanese charged with developing the framework for the index trained as Buddhist monks, including Karma Ura, who combined an Oxford University education and Buddhist discipline to head the Centre for Bhutan Studies. The index defines happiness as “the creation of enabling conditions where people are able to pursue well-being in sustainable ways.” Happiness for the Bhutanese is as much a collective phenomenon as an individual one, and true happiness is said to encompass “spiritual, material, physical, and social needs.”

It’s hard to overemphasize how far this framework departs from the economic metrics developed in Great Britain and the United States in the middle of the twentieth century. For most of the individuals who invented and championed the leading indicators, it was inconceivable that softer, subjective factors such as happiness and well-being would be part of the mix. Yes, there were glimmerings of dissent, from Simon Kuznets advocating that unpaid housework ought to be included in national income to George Katona arguing for a strong link between subjective confidence and consumer behavior. But even those efforts were in the context of a belief that “the economy” was grounded in the material world and bounded by the decisions of rational actors. In that world, spiritual and social needs were at best invisible and at worst irrelevant.

In rejecting the then-accepted framework, tiny Bhutan started a movement that has since become global. While every country in the world except for Bhutan now uses GDP as the primary proxy for economic success, most countries in the world have begun to reconsider whether using GDP as the primary indicator is such a good thing. Even before Bhutan, of course, we had Robert Kennedy’s critique, and that, in turn, was only one eloquent expression of a larger cultural questioning. The 1960s and 1970s in the Western world witnessed a wholesale reexamination of core tenets and values, including the intense emphasis on economies as engines meant to maximize material output. Most of that questioning, however, was a cultural phenomenon that barely changed established institutions. At the same time that Arthur Burns was battling inflation and Washington policy makers were trying unsuccessfully to find the right mix of economic policies, popular culture was turning on, tuning in, and dropping out.

There may have been a link between training and inflation, but if so, no one could see it.

And yet, in academia, some economists started to reconsider the major indicators and wonder if something vital wasn’t being left out of a framework that said the more GDP, the better, the less inflation, the better. Some began to ask whether established economic systems were creating more happiness or less, and whether the pressures of modern society to maximize output were, in fact, satisfying the needs and wants of citizens.

Even here, there were powerful precedents. In the nineteenth century, Western philosophers such as Jeremy Bentham and John Stuart Mill, tapping into similar memes as their Buddhist doppelgängers, championed happiness of the greatest number of people as a key goal of society. By the twentieth century, as the mania for measurement took hold, so did the desire to quantify the softer sides of life, from family satisfaction, to sex, to subjective well-being. In the 1960s, the Gallup Organization started polling people about health and general life satisfaction. But until the 1970s, these efforts were ad hoc. The primary focus internationally remained on including all countries in the same statistical regime and standardizing indicators around the world.

By making happiness the national priority, Bhutan broke with that trend. As small as it is, it is nonetheless a nation, represented in the United Nations and accorded the respect of a sovereign entity. In that sense, its embrace of happiness as opposed to output was more significant than millions of people around the world living their lives geared toward personal fulfillment or a few private institutions arguing that GDP was not the way to measure societal success. Bhutan was the first—and, to date, the only—sovereign nation that has rejected the core metric of modern economies. Though no government has yet joined Bhutan in this exclusive club, in the years since 1972, more and more questions have been raised about what we are measuring and how we measure it.

Excerpted from THE LEADING INDICATORS: A Short History of the Numbers That Rule Our World by Zachary Karabell. Copyright © 2014 by Zachary Karabell. Reprinted by permission of Simon & Schuster, Inc. All Rights Reserved.

Zachary Karabell is an author, money manager, commentator, and head of global strategy at Envestnet. He is also the president of River Twice Research, where he analyzes economic and political trends. Educated at Columbia, Oxford, and Harvard, Karabell has written eleven previous books. He is a regular commentator on CNBC, MSNBC, and CNN. He writes the weekly “Edgy Optimist” column for Reuters and The Atlantic, and is a contributor to The Daily Beast, TIME, The Wall Street Journal, The New Republic, The New York Times, and Foreign Affairs.