Gross National Happiness: On Alternatives to GDP and the Easterlin Paradox

For going on two decades there has been talk of using measures other than GDP to gauge the well being of societies, with the term Gross National Happiness having an even longer (and royal) pedigree dating to the early 1970's when the term was used by Bhutan's Dragon King, Jigme Singye Wangchuck.

In 2009 the concept became a bit of a meme and could be seen in worldwide media and heard in the swankest salons. In November of '09 Oxford's Practical Ethics blog said:

Happiness and the Dragon King

As so often, I’m with King Wangchuck.  The former King of Bhutan, the fourth ‘Dragon King’, coined the term, Gross National Happiness (GNH).   Governments, he thought, should aim to boost the nation’s well-being, rather than target Gross National Product (GNP).   He used the phrase after his coronation, an event which, unfortunately, his citizens couldn’t follow on the box  – because, until a decade ago,  Bhutan didn’t have TV.   The erstwhile King appears a happy man himself – which may, or may not, be connected to his being married to four queens.  
 

Once a country has achieved a certain level of income per head, there is no straightforward correlation between economic growth and happiness.  Professor Richard Layard, a Labour Peer, sometimes called Britain’s happiness Tsar – puts the threshold at a little over £10,000 – the amount at which basic needs can be satisfied.   Above that level nations can become richer without necessarily becoming happier....

By March 2012 the folks at the United Nations were institutionalizing the concept. From the NYT: 

The U.N. Happiness Project

Next Monday, the United Nations will implement Resolution 65/309, adopted unanimously by the General Assembly in July 2011, placing “happiness” on the global agenda.  

“Conscious that the pursuit of happiness is a fundamental human goal” and “recognizing that the gross domestic product [...] does not adequately reflect the happiness and well-being of people,” Resolution 65/309 empowers the Kingdom of Bhutan to convene a high-level meeting on happiness as part of next week’s 66th session of the U.N. General Assembly in New York. 

An impressive array of luminaries will be speaking for this remote Himalayan kingdom. His Royal Highness the Prince of Wales will open the meeting via a prerecorded video missive. The Nobel laureate Joseph Stiglitz will speak on “happiness indicators,” as will the economist Jeffrey Sachs. The Bhutanese prime minister will represent King Jigme Khesar Namgyel, the reigning Dragon King of the Bhutanese House of Wangchuck. (The kingdom became a constitutional monarchy in 2007.) 

For the 32-year-old Dragon King — Bhutan means “land of dragons” in the local Dzongkha language — U.N. Resolution 65/309 represents a global public relations triumph and the realization of a hereditary ambition, initiated by his grandfather 40 years ago, to establish Gross National Happiness (G.N.H.) as an alternate model to Gross National Product (G.N.P.) as a measure of national progress. 

“A family should have a good house, have sufficient land if one is a farmer, and have a modest level of labor-saving devices to save precious time used up by excessive physical work,” explains Karma Ura, a leading public intellectual and artist who serves both as adviser to the king at home and as a G.N.H. ambassador abroad. 

He has designed the country’s bank notes, denominated in the local currency known as ngultrum or nu, which is tied to the Indian rupee. He has promoted Gross National Happiness at the European Commission in Brussels and will do so again on Monday at the United Nations in New York. 

For his services, Karma Ura received a knighthood from the king, which includes the ancient honorific title, dasho, and a sword that Ura bears as proudly as his G.N.H. patriotism. The “true forms of wealth,” he says, are being blessed with a “ravishing environment,” “vibrant health,” “strong communal relationships” and “meaning in life and freedom to free time.”...

That's where things stood or so I thought. 

Here's The Atlantic, Jan 10, 2013:

Yes, Money Does Buy Happiness: 6 Lessons from the Newest Research on Income and Well-Being

For a long time, we knew that there was a happiness plateau, a point where more money basically stopped buying greater satisfaction. Maybe we were wrong.

Reuters

Fittingly or ironically, the dismal science has a lot to say about happiness. 

The classic economic story about money and well-being goes something like this. Money buys happiness, sure, but only up to a point. Once basic needs are taken care of, extra money has diminishing (or non-existent) returns. Perhaps richer people use their money to move to richer areas, where they no longer feel rich. Perhaps relative income -- how much you have compared to your friends -- is matters much more than absolute income -- how much money you have, period. 

Economists call it the "Easterlin Paradox." You call it the "Keeping Up With the Jones' Principle."

And a new research paper calls it total bunk. Or, in the economists' parlance, "based on empirical claims which are simply false." People with more money have higher reported well-being, they say, all the way up to the top 10 percent of earners. Here are the 6 most interesting observations from "The New Stylized Facts about Income and Subjective Well-Being," a discussion paper by Daniel W. Sacks, Betsey Stevenson, and Justin Wolfers.

(1) Richer countries are happier. Here's a simple graph to make a simple point. The researchers plotted 122 countries' responses to a Gallup World Poll on well-being against each nation's real GDP per capita (adjusted for purchasing power) and found a strong correlation.
Upshot: Well-being rises with income at all levels of income, across countries.

(2) ... But every next dollar won't buy the same amount of happiness. The straight line can be deceptive at first blush. The graph is *not* telling you that every next $1,000 on your paycheck is worth the same gains in satisfaction. Instead, the relationship is logarithmic. That means doubling your income from $1000 to $2000 raises satisfaction by the same amount as doubling your income from $10,000 to $20,000. Not that these findings are as binding as the law of gravity, but this would suggest that, to equal the happiness boost you felt from getting raise from $30,000 to $60,000, another $30,000 wouldn't do the trick: You would have to double your income again, to $120,000.

(3) Richer countries get happier as they get richer. That first graph answers the question: Do countries with more income report more happiness? The answer seems to be yes. But what about a different question: Do individual countries report more happiness as their incomes rise? Also, yes. The next graph looks the 25 biggest countries in the world and shows the linear relationship between well-being and household income.

(4) There is no "happiness plateau" (or it's much higher than we thought). Those lines tell us three important things. First, the lines go up. More money, more happiness. Second, the lines go up in parallel, more or less. Across language, culture, religion, ethnic background, the same amount of extra money seems to buy the similar amount of extra happiness. Third, the lines go up in parallel and they don't flatten out. There is no "Easterlin plateau", no satiation point, no bright line where money suddenly loses the ability to improve well-being....MORE

In March 2012 Sir Samuel Brittan pitched the conservative view in his Financial Times column:

The pursuit of happiness is no job for government  

The pursuit of happiness has a venerable tradition in British political economy. Jeremy Bentham, the late 18th century founder of utilitarianism, defined it thus: "By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the party whose interest is in question if that party be the community in general, then the happiness of the community; if a particular individual then the happiness of that individual. The interest of the community then, is what? - the sum of the interest of the several members who compose it."

This principle is not as obvious as it may sound. In Bentham's time it was challenged by many rival principles; for instance, judging actions by their contribution to French glory or the furthering of the Prussian state. Nearer to home it was challenged by the Aristotelian eudemonia, which valued happiness only so far as it contributed to the philosophical idea of a good life....MORE

Sir Sam got his knighthood "for services to economic journalism".
Me, I'll go with Robertson Davies:

Happiness is always a by-product.  It is probably a matter of temperament, and for anything I know it may be glandular.  But it is not something that can be demanded from life, and if you are not happy you had better stop worrying about it and see what treasures you can pluck from your own brand of unhappiness.