The Economics of Well-Being - 0 views
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Money isn’t everything. But for measuring national success, it has long been pretty much the only thing
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And the era of GNP and GDP has been characterized by a huge global rise in living standards and in wealth.
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At the moment, though, GDP is embattled. Economists and national leaders are increasingly talking about measuring a country’s status with other metrics and even with a squishy-seeming concept like “happiness.”
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As everyone in business knows, you manage what you measure. So although the replacing-GDP discussion may seem a little airy, its growing credibility in important circles could give it a real impact on economic policy
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The story usually begins with Jeremy Bentham, an Englishman who in 1781 outlined a philosophy of utility that assessed the merits of an action according to how much happiness it produced. This was during the Enlightenment, when thinkers sought to replace religion-based rules with rational, scientific guides to decision making and life.
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It’s true that the challenges of tracking energy use or pollution aren’t huge. But the politics are extremely tricky. In its early days the Clinton administration pushed the Bureau of Economic Analysis—the agency that measures U.S. GDP—to develop a green GDP
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For its original purpose—measuring short-term economic fluctuations—GDP is not likely to be supplanted anytime soon. It may even be gaining ground: A major discussion is under way concerning whether the U.S. Federal Reserve and other central banks should in times of crisis focus not on inflation but on GDP growth.
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Compiling GDP involves making a lot of choices, and even reasonable choices can lead to skewed results. Statisticians understandably favor goods and services that are bought and sold—and thus easily valued by market price—over economic activities whose value must be estimated
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Developing nations with lots of foreign direct investment saw GDP grow much faster than GNP would have—but didn’t necessarily reap the benefits, because the investments’ profits went mostly to multinational corporations.
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Economists, the most enthusiastic adopters of the concept, came to focus instead on the tangible expression of people’s needs and desires: what they were willing to spend money on.
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Many things of value in life cannot be fully captured by GDP, but they can be measured by metrics of health, education, political freedom, and the like
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The idea that economic and other data can be better presented with a dashboard of indicators than as a single number or ranked list is very much in the air among experts and policy makers.
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In Sarkozy’s 2009 report on alternatives to GDP, the word “dashboard” appears 78 times. But the notion of dashboards hasn’t captured the public’s imagination. What has is a word that shows up just 29 times in the Sarkozy report (mostly in the bibliography): “happiness.”
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In the 1950s and 1960s psychologists and sociologists reopened the question of whether it could be quantified. Opinion polls, then entering their heyday as measurers (and in some cases determiners) of the public mood, were an obvious vehicle for the attempt.
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The economist Richard Easterlin imported the happiness discussion to his discipline with a 1974 paper pointing out that the results of national happiness polls did not correlate all that well with per capita income.
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The interest in happiness surveys has also led to critical scrutiny of the Easterlin paradox. After reevaluating decades’ worth of polling data, the economists Betsey Stevenson and Justin Wolfers made headlines in 2008 by refuting the paradox—at least the part that said people in wealthy nations weren’t happier than those in poor nations
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They were unable to conclusively debunk the argument that rises in income over time fail to deliver increased happiness, but the evidence they marshaled certainly muddied the waters