Measuring Sugar, Spice and All That is Nice

By: Snigdha Jain (CCS Intern)

Economists love to measure, so much so that some say “science is measurement”. The most widely used measure is Gross Domestic Product (GDP). But some feel that it can be misleading because it fails to take into account natural resource depletion, voluntary unpaid services and most important ‘how people feel’. Thus the invention of Gross National Happiness, which includes sugar, spice and all that is nice.

According to Arvind Panagariya, Professor of Economics at Columbia University, “The thumb rule seems to be — if you are unhappy with the Gross Domestic Product (GDP), go for Gross National Happiness (GNH).” He goes onto reason, “We do not even have reliable data on the condition of rural primary schools, primary health centers, land use, land ownership etc. If the government is really serious, then it should prioritize collection of such data rather than indulging in GNH computation. ”

GDP measure includes many things considered “bad” such as pollution, health problems, crime and family breakdown but excludes ‘many things nice’ such as helping friends and neighbours, child rearing and voluntary community service.  All of these activities combine to make up the core of our economics but are not taken into account.  Some will be quick to point out that an increase in income will automatically result in an increase in the quality of life, as this will allow them the freedom to make choices, and since choice is ‘always’ better, more income means more happiness.

In reality the relation between income and happiness is a bit more complex that the simple ‘more income more choice more happiness’ story. According to the “Easterlin paradox”, at any given point in time within a given country, people with the higher incomes do report  greater happiness.  However, rising per capita income does not necessarily result in rising national happiness.  In fact across time levels, happiness is found to remains the same irrespective of increasing GDP.

Gross National Happiness has its flaws too. How do we measure all that is nice? Firstly, since GNH is based on a series of subjective judgements, it can only be used as a qualitative measure, not a quantitative one like the GDP.  At best an ordinal measure not a cardinal one. India ranks 35 in the happiness index, the truth maybe very different though because of measurement errors involved. The one advantage GDP has over GNH is that GDP uses a more standard method of measurement and thus lends itself to international comparisons. Take for instance the monsoon: are Indians as happy during the monsoon as they are before it? And should we compare India’s happiness during or before the monsoon with the happiness of Germans during or after Christmas? Is it possible that Indians are happier during mornings while the French during evenings, and how do we control for that? And I can go on.

John Halden – British biochemist – in a conversation with a theologian was asked by the latter “What inference might one draw about the nature of God from a study of his works?” Haldane replied: “An inordinate fondness for beetles.” Economists have an inordinate fondness for measures, cute beings.