Money equals happiness, right?

The standard measure of a nations wealth is the GDP or Gross Domestic Product which is the total market value of all final goods and services produced within a given country in a given period of time. We, as Americans, tend to associate more money with more happiness so it should follow that the richest nations should be home to the happiest and most satisfied citizens. But that’s not the case.

 

 

So what do we know about the happiness of nations?

A 2005 Australian study made these conclusions:

1. For a person, money does buy a reasonable amount of happiness. But it is useful to keep this in perspective. Very loosely, for the typical individual, a doubling of salary makes a lot less difference than life events like marriage.

2. Nations as a whole, at least in the West, do not seem to get happier as they get richer.

3. Happiness is U-shaped in age - that is, it falls off for a while, then stabilizes, and rises later in life. Women report higher well-being than men. Two of the biggest negatives in life are unemployment and divorce. More educated people report higher levels of happiness, even after taking account of income.

4. At least in industrial countries such as France, Britain, and Australia, the structure of a happiness equation looks the same.

5. There is adaptation. Good and bad life events wear off - at least partially - as people get used to them.

6. Comparisons matter a great deal. Reported well being depends on a person’s wage relative to an average or “comparison” wage. Wage inequality depresses reported happiness in a region or nation. But the effect is not large.

 

 

Alternatives To The GDP

So we know GDP is good for measuring economic value but what are some ways we can measure the happiness and satisfaction of nations? There are a number of scales and indices that hve been proposed and/or are currently in use. Here are the leading 3 alternatives to GDP.

The Economist Quality-of-Life Index*
A nation’s score is determined by the answers to 9 quality of life factor survey questions:

1. Material wellbeing: GDP per person, at PPP in $.
2. Health: Life expectancy at birth (in years.)
3. Political stability and security: Political stability and security ratings.
4. Family life: Divorce rate (per 1,000 population)
5. Community life: Dummy variable taking value 1 if country has either high rate of church attendance or trade-union membership; zero otherwise.
6. Climate and geography: Latitude, to distinguish between warmer and colder climes.
7. Job security: Unemployment rate (%.)
8. Political freedom: Average of indexes of political and civil liberties.. Source: Freedom House
9. Gender equality: measured using ratio of average male and female earnings.

 

 

Genuine Progress Indicator
The GPI starts with the same personal consumption data that the GDP is based on and then:

1. Adjusts for factors such as income distribution
2. Adds factors such as the value of household and volunteer work
3. Subtracts factors such as the costs of crime and pollution

Other factors included are: Higher Education, Resource Depletion, Long-Term Environmental Damage, Changes in Leisure Time, Defensive Expenditures, Lifespan of Consumer Durables and Public Infrastructure, and Dependence on Foreign Assets.

 

 

Human Development Index*
Used by the United Nations Development Programme to create its annual Human Development Report. It measures three basic dimensions of human development:

1. A long and healthy life, as measured by life expectancy at birth
2. Knowledge and education, as measured by the adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio
3. A decent standard of living, as measured by the natural logarithm of GDP per capita at purchasing power parity (PPP) in US dollars

 

 

Gross National Happiness*
GNH is “based on the premise that true development of human society takes place when material and spiritual development occur side by side to complement and reinforce each other”. GNH grades 7 development areas:

1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution
2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic
3. Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses
4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients
5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits
6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety ,divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates
7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts.

 

 

* source Wikipedia