The Salopian Summer 2023

SCHOOL NEWS 23
Income level is recognised as a factor contributing to
happiness in our analysis, but it is only one of many factors.
GDP is concerned with income levels and income levels
alone. Traditional economics implies a direct and endless
correlation between material wealth and happiness and
therefore welfare.
If economics professes to be a discipline that seeks to establish
how best to use limited resources to meet unlimited needs and
wants (which it does), surely it needs to consider all needs and
wants … not just income-related needs and wants?
In October 2002 Dr Daniel Kahneman was awarded the Nobel
Memorial Prize in Economic Sciences. The significance of
this event is that Dr Kahneman is not an economist. He is a
psychologist.
Daniel Kahneman’s work challenged the traditional economic
theory of markets. He argued that where traditional economists
went wrong was in assuming that people and organisations are,
or seek to be, “rational decision makers”, that they made fully
objective decisions after considering all the costs and benefits,
motivated entirely by self-interest, to maximise their own material
benefit. Indeed, to make decisions based on any other factor is
considered irrational. Daniel Kahneman’s work concluded that
this was a false premise.
Deep in the eastern Himalayan mountains, a tiny state with
a population approaching one million people has taken this
thinking to rethink the drivers of economic policy. That country
is Bhutan. It borders powerful neighbours, China and India,
both of which are entirely committed to the traditional economic
objective of growing their economies and average incomes
almost, many would argue, to the exclusion of all else.
Bhutan however has chosen a different path. It has chosen
instead to pursue economic happiness. Instead of using
Gross National Product, Bhutan’s government uses the Gross
National Happiness index (GNH) as its main macroeconomic
indicator of economic success. This informs economic policy.
The GNH’s construction is simple: rather than measuring the
aggregate spending from a country’s population, Bhutan’s GNH
seeks to measure their total happiness. In order to measure this
as objectively as possible, the indicators for GNH are based on
tangible statistics of measures on factors ranging from economic
development to environmental protection levels.
The idea of a GNH index stretches back to 1972, when one
of the founders of the European Union, Sicco Mansholt, first
came up with the idea. He did this because it was recognised
that the world’s traditional budget reliance on Gross Domestic
Product (GDP) was criticized for ignoring crucial aspects of
people’s lives, including life-satisfaction and environmental
degradation etc.
Compared to GDP’s technical measures of spending and
output, Bhutan’s own GNH index takes a more holistic
approach to measuring a country’s growth. It gives equal
weighting to ‘economic’ and ‘non-economic’ aspects of the
country, as exemplified by the four pillars that the GNH index
encompasses:
1. sustainable and equitable development,
2. conservation of the environment,
3. preservation and promotion of culture, and
4. good governance.
While other countries, including the UK and New Zealand,
have shifted macroeconomic analysis towards more holistic
social indicators to incorporate wellness goals, only Bhutan
has put the ideas of happiness as central to their public policy
decisions.
So, how successful has Bhutan been? Here are some of the
outcomes:
1. While the rest of the world struggles to achieve carbon
neutrality, Bhutan is the first and only carbon-negative
country in the world.
2. Bhutan has also recently prevented the COVID-19 pandemic
from overwhelming its population, with only one Bhutanese
citizen passing away from the virus to date.
3. According to a World Bank report, Bhutan has been able to
cut poverty from 36 to 12 per cent between the years 2007
and 2017: the steepest decline in poverty of any of its
neighbouring South Asian countries over that time.
4. Enrolment in both primary and secondary education has
significantly increased, with the former jumping up by 30
percentage points between 2007 and 2017.
5. 91 per cent of the Bhutanese population now lives within a
one-hour distance from a health facility, compared with just
73 per cent in 2007
6. Increased public investment has led to farm road networks
jumping from 1700 km to 11200 km between 2008
and 2017.
There are valid criticisms of some of these numbers that may
question the direct cause and effect relationship. For example,
while educational attainment certainly increased over the past
decade in Bhutan, it is easy to see that the trend extends back
to the 1990s. Also, many of the World Bank report statistics, in
fact, show positive trends that already follow from before the
GNH index was first used.
While there is value in constructive scepticism, I would
suggest that perhaps Bhutan has demonstrated sufficient
success to encourage others to think again about their use
of GDP alone to inform economic policy. Perhaps Bhutan
and the use of GNH has gone some way to explaining the
Easterlin Paradox.
Perhaps the time has come for us to rethink the traditional
approach to economics espoused by Adam Smith. Perhaps
it is time to recognise that the work of Richard Easterlin, of
Daniel Kahneman, and the Bhutan experiment, all prove
conclusively that economics is not just about money.
Perhaps it is time for a new parent of modern economics
– and why shouldn’t that person come from one of those
students embarking on their course to superhumanity at
Shrewsbury School?