The economy is measured by gross domestic product. Everything we’ve focused on in terms of stimulus, housing, employment, and even the deficit has been about GDP. What will changes to these things do to GDP? Why do we care about GDP?
There’s an assumption that if the economy is doing well people are happy. So if the economy grows people will be happier. But the economy has grown and people are more productive today than they were 50 years ago. But we’re not happier. Granted, we might have been happier in 2004 than we were in 2008, but no one said there wasn’t a correlation between the economy and happiness. It’s just that the correlation may not be as strong as one might have thought.
A growing number of people are starting to question whether GDP should really be the true measure of quality of life or not. Some of them have focused their efforts on measuring happiness. Instead of maximizing wealth, income, or economic activity, we should just be maximizing happiness.
Well that’s easy enough, legalize marijuana.
Okay it’s not that easy. Happiness can be measure in many ways. It can be based on objective measures (health, education, time spent on leisure activities) or completely subject and self reported. Many researchers have hoped to come up with a good formula and some combine both subjective and objective measures. But none have been embraced by the larger economy community. At least not yet.
It is about time that happiness indexes become more mainstream. Depending on the measurement, a happiness index could give very similar results to GDP. But it might be more accurate of the national climate. Think about it this way, there are two 16 year olds living near by. One is wealthy and grew up that way. On her birthday she was surprised with a new white BMW. The other grew up lower middle class. She was surprised by her parents with a car. She wasn’t’ even expecting it, and it’s a piece of junk.
Who in that example is happier? We can guess or assume but we really don’t know. But say the beater cost $2000 and the Bimmer cost $40,000. Is the BMW girl 2000% happier? Because her car contributed that much more to the economy.
No economic measure or index is ever going to perfectly track us and help us be better off. It’s clearly difficult to stimulate a lagging economy and I doubt we can make significant strides if we were to fall into a depression (get it?). But all the focus on strictly economic activity is starting to feel a bit 20th century. I don’t know if measuring happiness is the answer, but I doubt it would hurt to try.
Read: Happiness Is The Ultimate Economic Indicator (Fast Company)
 By The Weakonomist |
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