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The idea of measuring happiness — or well-being — might seem a slippery undertaking. What are the metrics of such an intangible? Ramp up the concept to measuring the happiness of an entire country, and then to comparing the happiness of different countries, and you have an inscrutable challenge for economists — or so it might seem. It turns out there are some unlikely — even prominent — advocates for a happiness index who would like the residents of their countries to be the lucky ducks who live in an environment that encourages well-being along with economic success. They include U.K. Prime Minister David Cameron, who last year said the government will create a national well-being index. Cameron acknowledged that the concept of measuring happiness could easily be viewed as “airy-fairy and impractical,” yet nevertheless thinks it is important to do. He is joined by French President Nicolas Sarkozy, who has formed a team that includes two Nobel Prize-winning economists, Joseph Stiglitz and Amartya Sen, to come up with a system for measuring the nation’s well-being. And in China, happiness indexes have become so popular that cities there now compete for the title of China’s happiest city.
The idea is that purely economic measures of a country’s progress — such as gross national product (GDP) — fail to count many things people value highly, such as personal and community relationships or a healthy environment. The purely economic measures also count, as positive, items that have distinctly negative consequences. A huge oil spill requires a massive cleanup effort, with all the needed labor and materials adding to GDP. Meantime, negative effects on the environment or on people directly — such as lower incomes for fishermen — go uncounted.
To learn more about where measuring happiness fits in on the economic and human scale, Knowledge@Wharton spoke with Nic Marks, author of a new e-book, The Happiness Manifesto: How Nations and People Can Nurture Well-Being. Marks, a statistician and a psychologist, is also the founder of the Centre for Well-Being at The New Economics Foundation in the United Kingdom.
The following is an edited version of that conversation.
Knowledge@Wharton: Nic, you want to put into perspective the importance of GDP measurements as the sole measure of how well a country or its people are doing. So what is it that you think we should be measuring, and … how do you view GDP measures?
Marks: Starting with GDP and what’s wrong with it: There is a long list probably. But the first one is that it makes no differentiation between whether expenditures are for a good thing or for a bad thing. We call these “defensive expenditures” when they are for bad things, things that are basically done to defend quality of life rather than to promote it. So, for example, the big oil slick down off Florida (from the BP oil rig blowout) would have cost an awful lot of money to clear up. That would be added as a positive to GDP, but obviously it is an extremely negative situation. We can speculate about whether the cost of cleaning up after the earthquake in Japan will go through the GDP accounts as all positives. Yet, obviously, it was a hugely destructive event, and the loss of life and the issues involved with it are not accounted for in GDP. A lot of GDP expenditures are to defend quality of life rather than to promote it….
So, one, [GDP] counts some of the wrong things, and [on the other hand] it doesn’t count some things. It doesn’t count, for example, the loss of natural capital or the loss … of fossil fuel stocks, for example. It treats the running down of a capital good like the stock of oil under Alaska as an income, instead of a stock issue. So GDP has this great problem that it doesn’t know how to treat stocks of capital that you run down.
It does know how to do it with financial capital. It has ways of adjusting it, but not with natural capital. It just treats it as a free good altogether. There is also the fact that lots of things happen outside the economy, which are of value, but they are not valued. This is one of the things that Simon Kuznets — the original architect of GDP — was well aware of. Household labor, parenting, community work and volunteering … are the core economy in many ways, and yet they are not valued. So GDP has many, many problems when you think about quality of life.
Knowledge@Wharton: And how does that get back to talking about The Happiness Manifesto. Because there you are trying to identify the things that are outside of GDP, that are important and that contribute to a sense of well-being or happiness.
Marks: Basically the premise behind The Happiness Manifesto is that people’s quality of life is experienced. You experience your quality of life. I experience my quality of life. So we are going to have to get into the realm of actually asking people about their experience rather than just trying to measure it by how many things they have. We now have statistical methodologies — survey techniques — to do this. There have been great advances in psychological research. They have metrics, and we should be applying these for our public policy.
How do public policies affect people’s lives? That is really the plea of The Happiness Manifesto and, of course, it changes policy massively. If you are going for one target, policy makers become efficient, effective at how to improve that target. But if you give them another target, which is actually about people’s experience of life, they probably would have very different policies.
A classic example of this is: Do you try to reduce levels of crime or do you try to reduce fear of crime? They would have very different policies around them. Yet, it is fear of crime that drives people’s behavior. It is fear of crime that stops the old lady going outside at night. It is not the crime levels. The crime levels might affect her fear of crime, but obviously the media and the way they report that also affect fear of crime. Those are subjective indicators when you ask people about their experience or their perception. And objective indicators interplay. They are both important.
Knowledge@Wharton: You are a statistician as well as a psychologist. You study how best to measure things. So what are the chief variables of happiness, and how would you measure them? Can they be measured?
Marks: I think we always have to remember with measurements — particularly when you start to get into something so precious as our happiness or well-being — that your measures are always approximations. I sometimes say this Chinese phrase: “The finger that points to the moon is not the moon.” Our statistics — our indicators — are the fingers. They are not the moon. We can indicate about levels of happiness, just the same way that healthcare professionals indicate mental illness. They ask people questions around it. We ask people questions about how happy they felt yesterday. But we also ask them questions about how well they are functioning, whether they feel they are in control of their life, whether they feel they are doing things that they enjoy, how are their relationships — your relationships are the most important thing — how are they going? You would ask an array of questions around that, and you build up a picture of people’s well-being. You do surveys.
Knowledge@Wharton: These things have bubbled up now beyond the think-tank stage. British Prime Minister David Cameron is talking about a happiness index. He is interested in having measures around how people in the United Kingdom feel about their quality of life. Some people have a cynical attitude about that. They say, “Well, he is about to slash the budget and he wants to divert attention away from that.” But there is also in France an effort by President Nicolas Sarkozy to measure these same kinds of things. As a matter of fact, he hired two Nobel Prize-winning economists to come up with a system. They have produced a system, with which I am sure you are familiar. Can you talk about what is happening at the government level and the fact that there are actually now some systems to try to track this — and in particular what’s happening in France and the United Kingdom?
Marks: Cameron really talks about an indicator of national well-being. Of course then the media turn it into happiness. I talk about happiness as well because “happiness” is a more attractive word than “well-being.” “Well-being” sounds a bit functional. But we are all talking about the same thing — just using slightly different language. As you say, David Cameron’s ideas don’t come in a bubble. They are not totally isolated. There is a lot of work going on in this area.
President Sarkozy famously [created] a special economic commission to look into this, which was headed by Joseph Stiglitz, with Amartya Sen on the committee and a French economist called Jean-Paul Fitoussi. Basically the Stiglitz Commission was looking at the problems with GDP, so the whole first section is on problems of GDP. The next section is on sustainability: How should we account for sustainability? The third is on quality of life now. What they are highlighting is that quality of life is really important, and sustainability is about quality of life in the future.
There is a tension between good lives now and good lives in the future, according to the Stiglitz Commission. That is something we totally agree with. That is actually why it is such a political issue because we often are trading off the future for the now with some of our decisions about consumption patterns and how much CO2 we are pumping into the atmosphere, and things of that nature. So that is a really, really important issue.
Cameron is looking at how you measure quality of life now. They haven’t explicitly put it in a sustainability context. I think they will. He has charged Jill Madison, the chief statistician in the United Kingdom Office of National Statistics, which is an independent body in the United Kingdom, to create an index of national well-being. That is the process they are going through at the moment. There is quite a Zeitgeist around this. I actually believe Cameron is very genuine about this. I don’t think it is about a distraction. I think actually they are taking a risk because the idea is open to ridicule in the media. I don’t think it’s about distracting from the budget cuts. If they were to do another big round of public spending, I think they should start to think about how these cuts impact people’s well-being. That is the vision of what the well-being index might be about.
Knowledge@Wharton: There are correlations between well-being and happiness, and certain things such as healthcare, if you have a system that contributes to the general happiness. There are two Wharton business and public policy professors Justin Wolfers and Betsey Stevenson, who have written a paper with Daniel W. Sacks. They point out that if you increase GDP in general — raise the level of income of a country — that usually allows you to provide some of the things that would increase the level of self-satisfaction or happiness. You can afford a better healthcare system, for example. As the United States became more affluent between, say, 1960 and today, the level of infant mortality — even in a place like the United States, which was low to begin with — improved dramatically. So that is one argument. I don’t know that you mean to separate a level of affluence from happiness, but can you talk about that dynamic? Perhaps there is a minimum level of affluence that one needs to become satisfied — after which further affluence doesn’t make you much happier?
Marks: Definitely. All the well-being research suggests that there is the classic falling marginal utility of income — that basically a thousand dollars in the pocket of a rich person is worth much less than a thousand dollars in the pocket of a poor person — and that’s clear [even at] the country level. It is the same everywhere. The idea of GDP growth is that a rising tide lifts all boats and that everyone [becomes] better [off economically]. The problem is that most GDP growth has been extremely unequal, so it is actually tipping the boats in lots of ways. Secondly, the things that are really, really critical for well-being simply don’t cost so much. I mean, yes, it is important to have good healthcare systems. But, for example, the United States spends twice as much on healthcare as France, but has very worse health outcomes [and that has] to do with the system. So it is not simply about having more GDP. It is about actually how we do that.
I think lots of the gains in life expectancy and reductions in infant mortality, which are to be hugely welcomed, have come with nations whose GDP is growing, but there is absolutely no need [to assume] that it is a causal link. We could actually just decide to spend more of our money on that and not grow. There are all sorts of ways of doing that. There are technological advances. So I don’t agree with Wolfers’ argument that you have to have rising GDP. We can see nations [that are examples] — Costa Rica’s average life expectancy is longer than the United States’ — or very, very similar. Some years it is higher and some years it is not. They have a great healthcare system there. They are much happier than people in the United States and they have a quarter of the GDP.
Knowledge@Wharton: That is a good example. Didn’t they come up number one in your happiness index?
Marks: Yes. They actually come out as the happiest nation on the planet, which is a surprise result. But actually I have since been to Costa Rica — the beginning part of this year. You can see it is very, very relational. They feel quite free, and they also have very strong family relationships, very strong community relationships. They have their problems. They have unemployment. They have rising income inequality and they have rising crime. So they are not without problems. But they are a very, very different society than several. Latin American countries also are blessed with a sort of life philosophy, which is quite vibrant and of course, good for health and well-being. So there are interesting things that I think we can learn from countries like that.
Knowledge@Wharton: What are some of the other things that contribute to happiness? You talked about community relations and family relations. Those are important measures in the way that you look at things, are they not?
Marks: Yes. Every piece of well-being research will say that human relationships are the most important thing. In fact, from an evolutionary perspective, we have evolved in groups, and our relationships are absolutely key to our survival. We shouldn’t be surprised that, from a biological perspective, our happiness is tied in with that. We feel good around relationships, just as we feel great about giving — and that is something totally outside of the economy. How does the economy deal with gifts? Yet, we love giving. You can see the reward mechanisms in the brain and the scans actually fire up when we are being generous and compassionate. There are lots of things outside of the economy that are really, really important.
At the New Economics Foundation, we talk about there being five things that really generate people’s happiness and well-being, and the first is “Connect,” which is your social relationships.
The second is “Being Active,” which is physical activity. It is great for our well-being. The fastest way out of a bad mood is to go outside, go for a walk, run or whatever it is you like doing.
“Taking Notice” is about allowing yourself to be moved by things around you, noticing them, noticing what is going on with other people, noticing the changing seasons — beauty. Aesthetics are very, very important for well-being. Also noticing what is coming up from within you. Listening to those sorts of doubts or those suppressed joys in your life and actually starting to act them out.
The fourth is to “Keep Learning.” Curiosity is great for well-being. [That means] understanding things — less about knowledge [and] more about an engagement with the world and actually wanting to learn new things, right through the life course. Older people who keep learning have much better health outcomes.
And then, finally, the last one is “Give.” Be compassionate. The Dalai Lama sometimes says, “If you want other people to be happy, practice compassion. If you want to be happy, practice compassion.” I think there is actually a huge hunger in the West to give again. I think it is what people fear had been suppressed. In a way we have become quite individualistic and selfish as a society. I think there is a huge potential there for unlocking that.
Knowledge@Wharton: In an experiment you cite, the individuals in two groups were given money. One group was told, “Spend it on yourself.” The other group was told, “Spend it on others.” There was a big difference in the outcomes.
Marks: Yes. In this classic experiment, people were given money at the beginning of the day. One half was told to go and spend it on themselves. That is sort of retail therapy. And the other half was told to spend it on someone else. That is sort of volunteering-gift therapy. At the end of the day, [the experimenters looked at] happiness and how [people] have enjoyed the day. It was measured. The ones who gave to other people were significantly happier than the ones who spent it on themselves. That is very, very interesting. One of the best ways to spend your money — if you want to spend it for happiness — is to think about giving away a portion of it.