Friday, 21 January 2011

The happiness index


A new metric of human well-being should capture areas such as job security, health and education

ARE we happy with our quality of life? GDP seems to be growing, but most people feel that the quality of life has become a rat race.

In 2008, just as the financial crisis deepened, French President Sarkozy asked Nobel laureate Joseph Stigliz to form the Commission on the Measure of Economic Performance and Social Progress, comprising well known social thinkers and philosophers, such as Indian Nobel laureates Amartya Sen and Kenneth Arrow, Turkish economist Kemal Dervis, former World Bank chief economist Francois Bourguignon and other leading Western professors to come up with fresh thinking on measuring the quality of life.

The commission report came out in late 2008, but its important conclusions and messages were perhaps overshadowed by the financial crisis.

Nevertheless, as governments and companies prepare for the recovery, it is more timely than ever to think beyond GDP (gross domestic product), namely not the quantity of how much we produce or consume, but its quality.

It is interesting that a French President has commissioned such a study, not the British, American or Japanese.
The French don't have the macho precision engineering of the German car nor Japanese technical perfection, but you know a French car when you see one for its individualistic and sometimes idiosyncratic design, but more for its comfortable ride.

You only have to look at the way Asia has rushed head long at full speed on pushing growth to realise that this may not be what the new middle class (and indeed everyone) would be caring about.

I was impressed when one senior Asian professional economist started to talk about beauty and happiness as one measure of economic aspiration.

The Stiglitz Commission started with the premise that GDP has increasingly become an inadequate measure to gauge the human sense of well-being over time in respect of its economic, environmental, and social dimensions, particularly sustainability.

Thus a new metric of human well-being should capture these dimensions economic and job security, health, education, personal and work environment, a sense of equality and respect, connectivity with family and friends, a pleasant natural environment, and physical security.

There is of course a whole generation who seems to care more and more about Chanel handbags, iPhones, Chateau Lafite and all the icons of material wealth. Others are going into yoga, qigong or religion.

There is the digital generation who communicate to their parents through Facebook, Youtube and Twitter, rather than talking face to face.

Social change is happening when governments shake when SMSes start flying with news of another piece of social agitation. But the bulk of Asian society is still struggling with making ends meet.

In many parts of Asia, we are struggling with crumbling social infrastructure, overcrowding, environmental pollution and social disquiet.

Social injustice is being expressed even in very wealthy and successful Asian cities.

This month, we were stunned by the random and violent shooting of politicians and the crowd in Arizona.
All of a sudden, we are reminded that in addition to our material living standards, such as income, most of us care a lot about our personal and physical security. What can governments and civil societies do?

The Stiglitz Report is a very useful reminder that we should begin by measuring what people care about, not just in terms of the quantity of production or consumption, but the quality of well-being.

The report reminds us that GDP is a very narrow concept and does not measure many qualitative issues that human beings care about.

For example, most people feel that official statistics, such as CPI, do not reflect their own perception of inflation.

The GDP as a concept does not measure or under-count what households and civil society produce.

They certainly do not incorporate any measure of inequalities, since the average per capita GDP can disguise the sense of growing disparity.

Most of all, GDP statistics do not measure at all environmental degradation or the decay of physical infrastructure around us.

As Asia is going through rapid changes in demographics, urbanisation and social change, it is not surprising that the metrics that we are using to measure our economic success or failure is not up-to-date.

It is as if we are driving a car whose speedometer shows that we are accelerating at 70 miles per hour, but there is no indication that we may be going into a bad neighbourhood or that the car may be falling apart.
Indeed, if we focus on speed, we may neglect the direction that we are heading towards. Speed comes before a crash.

Globalisation has created huge opportunities as well as threats. Governments need to appreciate that in the global competition for talent, people can easily walk with their feet.

But they will not walk if they love the city or country-side they live in. We all want a sense of liveability clean air, good health, great culture, nice people, no fear of physical security.

Well-being is a sense of community that people care for each other, a feeling of being more equal and mutual respect.

We should not see strangers as another mugger, nor a policeman as a person to be feared.

We want good governance in our society, most of all a caring community that looks after the poor, the weak and the under-privileged.

As governments struggle with how to deliver better governance, we need to begin with better measures of social well-being than GDP.

Unfortunately, the Stiglitz Report is only a beginning, by pointing out the weaknesses of GDP; but it has not operationalised how we arrive at a better measure.

Now that Asia has reached the head table, one Asian government or statesperson should take the leadership of chairing a roundtable of statistical experts to arrive at a better measure of social well-being than just GDP.
We need Stiglitz Report 2.0, with more Asian input. Welcome back, Joe.

Andrew Sheng teaches at Tsinghua University and is author of the book “From Asian to Global Financial Crisis”.

1 comment:

  1. Prof. Andrew Sheng rightly pointed out human happiness change, as social, market and world change.

    If you cannot change , the world will change you. That will be miserable!