GDP can’t buy you happiness–so should economists start tracking GNH?

Would we all be happier if economists measured happiness?

I spent a lot of time thinking about that on a camping trip this weekend. (Hey, it was really cold and I had trouble sleeping.)

My friend Pamela had set my thoughts down this track by saying “You know, I don’t need all the stuff I have” as we watched the sun sink behind the Pennsylvania mountains.

It’s the kind of thing you say routinely on your first day out of the city standing around the campfire. After a few days, in my experience, the remark is likely to be met by protest ‘What about hot showers?” What about coffee without bugs in it?”

But this time, on this camping trip during the Great Recession, the sentence hung there. Gathering meaning (but unfortunately not giving off any heat) in the cold October air. (Have I mentioned that it was cold?) . Many of us have thought long and hard, probably in the deep of the night, about what we could do without—if we had to. I know I have.

And we’ve thought about the flip side of that: What of what we own, of what we spend money on, is worthwhile and makes us happy? More than occasionally these days I feel that some of the consuming I do is just habit. I can count on the fingers of one hand the things that I own that in and of themselves give me pleasure. The best of the rest gets some important job done. Much of the rest is, well,  just clutter.

From a purely economic point of view my dissatisfaction with what I own and my occasional dismay at how much I consume are relevant only if they lead me to shop less. Then, my lack of satisfaction can lead to a slowing economy and, at the worst, to a falling GDP.

GDP, gross domestic product, famously doesn’t care about how happy we are with the results of our economic activity.

Hurricanes, a frequent bringer of misery, provide a boost to GDP as the devastated survivors buy things, boosting the economy, to replace all that they’ve lost. Spending to treat preventable disease adds to GDP while preventing the disease in the first place with simple changes in life style doesn’t.

When we hang on the most recent quarterly report on national GDP, we feel better if the government announces “GDP climbed at an annual rate of 2% in the last quarter” and we feel if not depressed at least ill at ease if the report is “GDP contracted by 2% in the most recent quarter.”

Our sense of well-being is connected to these reports on the economy.

And, perhaps more importantly, in our politics and economics we treat increasing GDP as an important goal. Indeed we often treat increasing GDP as if it were the only goal.

There’s an assumption deeply imbedded in classical economics that increasing GDP is the same as increasing the quality of our lives. Mainstream economics doesn’t exactly ignore “happiness” but it treats it as if it meant the same as “utility.” What’s “utility?” Here’s a pretty standard economic definition: The ability of a good or service to satisfy one or more needs or wants of a consumer.

That definition isn’t very satisfactory in our contemporary consumer society where a significant number of our wants as consumers are generated by advertising and marketing, which itself is designed to constantly make us feel dissatisfied with the goods and services we have.

Once upon a time, way back in the eighteenth and nineteen centuries, the idea of utility was a way to escape subjective judgments. Giving more food to a man without adequate food was a clear case of increasing utility. Giving an inner London slum dweller a house with light and air and a modicum of sanitation increased utility.

And, of course they’d be satisfied by those goods and services.

In that day and time it made sense to see the goal of an economy as maximizing utility for the greatest number of people.

Today in a world quite starkly divided between people who have all their real needs and wants satisfied—me and many of my friends—and people who are still struggling to survive, the concept of utility is riddled with subjectivity.

In today’s world what exactly is “satisfaction”? Read more