Most countries currently measure performance and growth through their Gross Domestic Product (GDP). While useful, GDP provides limited insight into happiness and wellbeing, so new measures of national success that consider these factors are being explored.Summary by The World of Work Project
Wellbeing can be defined as a state of feeling healthy and happy. As a concept, it brings together both physical and mental wellness and has connotations of peacefulness, contentedness, harmony, connectedness and a lack of negativity or disruption.
Wellbeing at a national level
How important is wellbeing at a national level though? Is wellbeing something that’s taken into consideration when nations and societies measure their progress and decide on how to invest their resources at a policy level? The answer is yes, and no.
Measuring national success
National success, both in terms of achievement and growth, is typically measured through a nation’s Gross Domestic Product (GDP), which is a measure of the sum of all the goods and services produced in a country.
This is essentially a measure of all the things that are produced and which are also transacted. A standard formula for calculating GDP is C + I + G + (X – M). In this formula GDP is deemed to be equal to all the personal Consumption in the economy, plus all business Investment, plus all Government spending, plus the value of eXports less the value of iMports.
While GDP is a useful measure in many ways, it also has significant drawbacks, or simply fails to account for certain things. For example, GDP doesn’t include recognition of things like caring for family members, unless that services is paid for. What this means is that if I provide care for my parents, and my neighbor provides care for their parents, then neither of us are contributing to GDP. If, however, I pay my neighbor $100 to provide care for my parents and she in turn pays me $100 to provide care for her parents, then we are collectively contributing $200 to “the economy”. Though nothing has materially changed between these two examples (except for the introduction of transactions), these two scenarios have different implications for our measured national wealth.
Alternative measures of national success
So where does happiness and wellbeing come into measures of national success? Perhaps there are some indications that GDP correlates with increased wellbeing and happiness, or that GDP per person does. It’s certainly the case that changes in wealth below certain levels material change the quality of life for individuals.
However, GDP may not accurately capture sufficient information to allow assessment of wellbeing and happiness. In addition, there are several factors that have a greater impact on wellbeing and happiness than wealth. For example, positive mental health and good relationships with others are typically more positively correlated with self assessments of happiness than income. From a policy perspective, this might imply that governments could improve the overall happiness of their countries by focusing on mental health as opposed to wealth creation. Of course, nothing is ever quite that simple.
Given these challenges though, there have been some efforts to introduce new measures of national success which are focused more on wellbeing and happiness. There’s no standardization in relation to these measures, but there is increased interest in them. The UN have included “good health and wellbeing” as one of their 17 sustainable development goals for the year 2030, demonstrating the increased focus on this area. Other interesting examples of efforts to identify new ways to measure national success through this lens include Bhutan’s “Gross National Happiness” measure and the Canadian “Index of Wellbeing”.
Whatever political direction your government is heading in, there is almost certainly an effort to broaden the factors that are considered when formulating policy decisions to include measures of wellbeing and happiness.
The World of Work Project View
We’re not experts in policy, nor in economics (though we do have economics degrees). We do, though, think that GDP on its own appears to be a fairly unhelpful measure of national progress and achievement.
We know that most decision making and policy formulation isn’t based on GDP alone, or anywhere near alone, but we still think that there would be benefit to developing and harmonizing new measures of national success that took into consideration more human factors.
Sources and further reading
Where possible we always recommend that people read up on the original sources of information and ideas.
This post has been informed by information from a range of sources. To learn more, please follow any of these links: GDP, UN Sustainable development goals, Bhutan’s gross national happiness, Canadian index of wellbeing, world happiness reports.
If you see any errors on this page or have any feedback, please contact us.