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And the Pursuit of Happiness

Can money really buy happiness—or at least rent it?

   Simon Kuznets, the 1971 economics Nobel laureate, was the godfather of national income accounting, or what we refer to in shorthand as GDP. Gross Domestic Product is the most frequently employed measure of economic activity, but it has also been credited with having a direct correlation with an individual’s—or a country’s—“well-being.”
   Although most authors of economics texts have long cautioned that GDP is an imperfect gauge even of economic activity—for not including the value of production within the home or of leisure time, ignoring illegal transactions like prostitution and drugs, and not considering environmental degradation and depletion—they have nevertheless assumed that it is better than other measures.
    To be sure, there have been efforts to take different approaches. The United Nations’ Human Development Index (HDI) and the Genuine Progress Indicator (GPI) offer alternatives. These metrics rely more heavily on ecological variables, infant mortality rates, life expectancy, crime, income inequality, and literacy. Some are more subjective and try to capture cultural and spiritual values. The Gross National Happiness (GNH) index, created in Bhutan, and the interest by French President Nicolas Sarkozy in producing a more touchy-feely index, are two such attempts (though one has to wonder if being 5’ 5” and married to Carla Bruni could warp one’s perspective). 
   A complementary quality-of-life research path has been to study the link between income (or material well-being) and happiness. In the 1970s the demographer Richard Easterlin discovered—now known as the Easterlin Paradox—that within countries there was a direct correlation between a person’s income level and his or her self-reported well-being, but over time and across countries there was no such association. The explanation was that one’s satisfaction is relative, not based on some absolute standard of living. So keeping up with the Joneses or suffering along with them are equivalent.  Since then other researchers have found the expected positive relationship between income and well-being across countries.
   (Apart from the matter of fairness, though, what constitutes fairness is a highly charged issue, the case for progressive taxation and taking from the rich to give to the poor hinges in large part on the assumption that such redistributions enhance overall societal welfare, a shakier case if income and happiness are not highly correlated.)
   At the moment, the measure of subjective well-being is perhaps the hot topic among economists and psychologists (the intersection of the two fields is known as behavioral economics). The development of National Time Accounting (NTA), with a focus on time-use and individuals’ emotional experiences across nations, is one such “happiness research” effort. The State of the USA project contributes many more scientific statistical indicators to help Americans evaluate how they—and we as a nation—are doing. Former Harvard president Derek Bok has also gotten into the fray with his book—The Politics of Happiness—on how governments can implement such findings to improve the lives of their citizens. 
   For a LOL romp through many of these same topics around the globe, I recommend highly The Geography of Bliss by Eric Weiner. For an intriguing, insightful look at well-being in the U.S., try Gross National Happiness by Arthur C. Brooks.
   150 years ago life expectancy in the United States and Western Europe was 40 years; today it’s 80. 100 years ago we were the richest country on earth, yet very few of our citizens had electricity or running water. And certainly no penicillin nor jet travel. The personal computer arrived only 25 years ago, and there was no Internet nor MP3 playstations, flat-screen TVs, GPS, ‘smart phones’ or iPads.  (At the other end of the spectrum, thanks to the miracle of economic growth, in less-developed countries the poverty rate has fallen dramatically in the last 25 years.) Many other considerations—marital happiness, steady employment, and not being socially isolated—loom large, but if you could choose any time in the long sweep of human history to be born, the smart money is clearly on 2011.
   In the end, GDP and average income may still be the best measures of well-being, in part because they correlate so strongly with other quality-of-life variables such as access to basic necessities, better health, and education. And despite their flaws, they are a pretty good ‘North Star’ to follow.  Of course, some people watch Dr. Phil, try to keep up with the Kardashians, are avid fantasy sports league participants, or send 100 text messages a day, exhibiting that even in the midst of plenty you can still have no life.

Published: April 10, 2011
Issue: 2011 Spring Issue


related ideas on happiness
Thank you for this post. I'd like to also recommend Charles Murray's lecture "The Happiness of the People", which can be found at: http://www.aei.org/speech/100023
G, Apr-10-2011
Quite insightful, but...
I would suggest that 2011 is not the year you would want to be born. More likely it was sometime in the mid to late 1930's. Being born at that time means you missed WWII for all intents and purposes, likely too young for Korea, too old to get drafted to Viet Nam and got to live out your life in the ever improving state of the US during it's global dominance in the second half of the 20th Century. Likewise, such folks are now well into retirement and will more than likely be exempted from any austerity plans or cuts to Medicare. Granted the downside of this lifespan would be the fear of Soviet nuclear destruction for a few decades and having to see your grandchildren be mind-numbed Tweeters. Being born in 2011 means facing the potential of a greatly diminished global role of your nation and its currency in your lifetime; the likelihood of drastically higher taxes and fewer government services due to the crushing debt left by your ancestors; the potential for (perhaps) a peak oil event leading to a shockingly reduced standard of living than your grandparents; the inevitability of your generation's illiteracy in terms of what was once called English but haz bn chopd 2 wat fits 140chars meaning most classic literature will be unintelligible to you. I could go on, but the future just doesn't seem as bright as it once did. The iToyOfTheMonth and MP3s of Lady Gaga's "Music" seems like an insufficient consolation prize... Now get off my lawn!
hawks5999, Apr-10-2011
Life is good...
@hawks5999... Yes, its easy to list why things will get worse -- people have always been able to do so. There are thousands of reasons the economy is "only a house of cards". However, that house of cards has proven to be surprisingly resilient. The smart money is on quality of life continuing to improve.
happyhappyhappy, Apr-10-2011
U hate GDP. It lies. Horribly. The US was in a recession for much of George Bush's 8 years. Many quarters when taking into account inflation had negative growth rates. So it is a horrible measure and truly deceitful as a benchmark. As for the rest I think increase per capita using real values and taking into account proper factors can help determine progress. But happiness is tough. I find that poor people and rich people are miserable way more than middle class. But now that the Middle Class is disappearing the US will be one miserable place. Trust me the level of Pysch Meds being taken by depressed rich people is off the charts.
Howie at Sky Pulse Media, Apr-11-2011
Personal computers
If you consider the Apple II the first personal computer, then personal computers have been around for 34 years, not 25. Even if you start counting from the IBM PC, personal computers have been around 30 years.
Rick, Apr-11-2011
Howie you're wrong
Im sorry, but your just flat out wrong. There were only two recessions under George bush, the 01 dotcom bubble and the financial collapse, even when accounting for inflation (real GDP). I have never seen such figures you state. Would you mind referencing where you have seen this?
andy, Apr-11-2011
kind of a meaningless article
blah blah blah...GDP is still the best indicator, not!
Michael Xue, Apr-14-2011
GDP is black and white
GDP as an indicator is inherently flawed not because it doesn't take into account happiness or well-being. It is flawed simply because it does not give an accurate image of what money means in a respective country. For instance, countries in Africa have seen a steady increase in education, literacy levels and the sort but have only gained a $100 dollar increase in GDP from the 80's to the 00's. Many economists argue that this increase in GDP does not reflect the progress Africa has gone through. But is that really the case? How much is $100 dollars in Africa? What can $100 dollars buy? Maybe, a $100 increase in GDP in African countries does make that big of a difference. GDP should be changed to give a more thorough picture of what a dollar can buy in different countries.
CLAUDIO MIT Professor Emeritus , Jun-06-2011
-Welfare should be measured through HDI, as it stands as the most compendious. Others are too one-sided. It is vital to get the quality of life in these countries through indicators such as literacy, amount of prostitution and drug trafficking in the country. Something else that should be considered is the disparity in currencies. Gaps between the rich and the poor should be detrimental to one's rating. -Sarcozy is short. Disagree with the comment that perhaps GDP is a good indicator. -To Karaoke's Master's Master: your arguments lack substance. How can you argue that GDP is the best? You must have a very skewed view on the world. -To CLAUDIO MIT: I disagree.
Karaoke Sage, Jun-06-2011
Karaoke Sage is a philistine
I find your comment mildly amusing in the way that you do not back up your disgreement with rhetoric or substance. *chuckles*
CLAUDIO MIT Professor Emeritus , Jun-06-2011
GDP is fine
To me, measuring happiness and measuring GDP do not have to be mutually exclusive. We don't need to throw out GDP to measure the general happiness and standard of living of the citizens of a country. If we get rid of GDP to implement GNH or something similar, we're getting rid of a consistent unit that allows us to measure the real progress of a nation. It's not worth it to sacrifice the betterment of our future to fix the problems of today. The undeniable truth is that as the GDP of a country improves, people are generally happy. Look at the United States in the 1920s or the 1950s or the 1990s. No matter how you put it, GDP will always correlate with general happiness. People are greedy.
Daniel , Jun-06-2011
Midly Amusing?!
MILDLY AMUSING?! No SUBSTANCE?! What kind of MIT Professor are you? All I can say to you is "LOL ROM."
Karaoke Sage, Jun-06-2011
Karaoke Sage is mad
U mad karaoke sage? He's simply finding holes in your argument. You're arguing that HDI, a measure that is not a real figure but is in fact based on worldwide RANKINGS is better than a tried and true measure (GDP). Be more mad
Daniel, Jun-06-2011
In my opinion, the suggestion that GDP is the best possible method to measure development is a flawed one. While it does link to basic indicators of welfare, such as one's ability to invest in healthcare and education, it is not the only factor that contributes to a country's development. For instance, Cuba is an extremely poor nation but has one of the best healthcare systems in the world. Hence, the majority of the population has access to proper healthcare even though they don't have a lot of money. Similarly, a nation may have a very high GDP but may not use it efficiently due to corruption or poor planning. Thus, development shouldn’t really be measured by GDP, but how the nation’s funds are used to increase the welfare of its citizens. However, it remains to be seen as to how this will be done because, as the article states, it is difficult to measure such a subjective thing accurately as one’s welfare is relative and the things that are important in one country are not as important in another. Therefore, while GDP may be the best measure for the time being, another measure of welfare should be developed so that a more accurate indicator of welfare can be used in the future.
Dictator of Maheksico, Jun-06-2011
Overall, GDP is still the best
While taking into account sustainability and happiness as indicators to track a country's development may seem noble and perhaps morally correct, ultimately the economic health of a country is at the center of the country's development. Taking education as an example, if we draw from the BBC's statistics (http://www.bbc.co.uk/schools/gcsebitesize/geography/development/contrast_develrev5.shtml) we can see a correlation between education and GDP and the reason for this is obvious. At the end of the day, increased health or education can only be built upon a strong resource base. One must also consider the limitations that statistics such as GPI have. Quantifying sustainability is no easy task, nor is it cheap to monitor and gather data about. GDP, while not "touchy feely", gives an accurate statistic that is widely understood and globally comparable. I defy anyone to say that countries that have a healthy GDP trend have a poor education or literacy rate.
Alonzo Sharan, PHD, Jun-06-2011
good job guys, you're all arguing over the internet http://www.trwheeler.com/images/coolguy.jpg
Claudio Wilson, Jun-06-2011
Banal Internet Chatter
The problem with democracy as a form of government is the way that even people like Karaoke Sage are allowed to voice their own weakly inflated ideas. I propose that inherently superior individuals such as myself be given special privileges such as a gold plating around my comment that can herd the sheep masses to the most correct opinion. Please, your intellectual level cannot match mine. Just accept my opinion as the right one.
CLAUDIO MIT Professor Emeritus , Jun-06-2011
GDP or not to be?
To answer the question posed under the title - No, it can't. This is exactly why GDP is good only for an overall sort of general view, just like the author says a good “North Star” to follow. For example, take Africa. Consider the fact that between 1970 and 1999 the percentage of sub-Saharan Africans who can read and write doubled, from less than one-third of the adult population to two-thirds. Or that in northern Africa, life expectancy rose from forty-eight years in 1962 to sixty-nine in 2002. Across the continent, enrollment in primary education has surged, while infant mortality has fallen. Despite these improvements, the range of GDP (PPP) per capita is from Equatorial Guinea at $16,507 to Malawi at $596, definitely still low. This is why I believe that the primary indicator should switch from GDP to something like HDI. The index is a combination of three sub-indices covering wealth, health and education. Although it still misses out on stuff like gender inequality or environmental stability it provides a pretty good picture of the overall state of affairs in a country more accurately than the GDP. The best solution however, is to just use all the indicators available. Gathering data is expensive, obviously, and so each year a country can research different measures and provide an estimate which can then be used for policy making and all the other good stuff. Alternatively we can count the wealth of a country by the average amount of cattle owned by the people. In Valhalla a man is poor when he owns one or no cows, sort of poor when he owns less than 5, medium when he owns less than 10, and rich when he owns more than 10. It works and everyone’s happy. Personally, I don’t own any cows but that doesn’t mean I am poor. Thor needs no cattle, which again shows that all measures are flawed.
Thor, Jun-06-2011
Claudio MIT
Your ego clouds your judgement young one.
Alonzo Sharan, PHD, Jun-06-2011
Gabby Sy, Jun-06-2011
All your mothers
Developmental indicators solely dependant upon economic indicators such as GDP are flawed in that they do not consider the relativistic manner of happiness, in that a country with a high GDP or some other economic means can have gender or class inequality as well as additional flaws which cause the indexs to be imprecise. More holistic assesment criteria such as HDI also fall to the relativistic flaw in that they presume to define happiness, when it's pretty much impossible. Furthermore, a government should not aim to force upon it citizens happiness, or any form of belief and individualisticly defined criteria, as trumped by the almost global move to keep religion and the state seperated. Having any means of defining happiness will always mean that the measurment is weak and imprecise. A government should aim to develop and measure a freedom index of some sort as these would measure the capability for a citizen to achieve individual goals such as education and healthcare whilst not impinging on the ability of others.
Paydro (Dr. Fill) Thor'manstein, Jun-06-2011
Oh wait.
In retrospect, I find that a majority of the arguments I had intended to install into this conversation have already been put forth by Claudio. As a professor, we have to trust his expertise on the issue. His ability, not only to answer the question of Macroeconomic indicators, but also to handle the Karaoke Sage, are inspiring.
Gabriel Sy, Jun-06-2011
I'm wrong
I've decided to retract my statements in the face of a superior adversary. I would also like to apologize for my pretentious language. Go GDP!
CLAUDIO MIT Professor Emeritus , Jun-06-2011
I disagree. GDP, although proportional, is not a good enough or accurate enough measure of development. It is superb that the world is now starting to take into account facts that matter in development, such as education and life expectancy, instead on being solely reliant on numbers of economic growth such as GDP. Sarkozy in on the right track by backing GPI, which offers a much more holistic measurement of development, and other countries should definitely follow suit. If we started measuring development in a more accurate manner, instead of using GDP, the world would see greater economic change and welfare increases from smarter economic policies in no time. Yes, developing countries may face some costs in the short-run, but in the long-run they will benefit from the superior policies. Jonathan Momo South Harmon Institute of Technology
Dr. Momo, Jun-06-2011
In my opinion,GDP is a flawed as an Economic indicator. It doesn't take in account for the distribution of income. It overlooks the disadvantages of financing the economy through debt.For example, the collapse of the Greece economy, it was funded by several countries, however this may not show up in the GDP. Hence it can be said it is flawed. It is not the best indicator. Not only that, but it doesn't take in account for health, as well as education.
Simon says
Stop spamming this article
Simon, Jun-06-2011
Stolen Identity
Once again, random pseudo internet "intellectuals" have tried to steal my identity online in a weak attempt to sabotage my stance on this issue. It's quite obvious that the language used in the other comments are not my own. Please, try harder.
CLAUDIO MIT Professor Emeritus , Jun-06-2011
The final argument
Guys, guys, guys. What we have here are a couple of people on the internet arguing. Claudio it appears is out of commission as he has failed to stand with his point. THUS, WE MUST ARGUE FOR GNH! GROSS NATIONAL HAPPINESS! BHUTAN HAS PAVED THE WAY FOR THE FUTURE! WE CAN ONLY FOLLOW!
Gabriel Sy, Jun-06-2011
Stop Please
Can you please stop this amateur arguing? Your comments are unintelligible and are bringing down the integrity of our website.
Moderator, Jun-06-2011
Sorry guys, I'm sorry. I'm no MIT professor, I lied because I was getting bullied in my econ class. Im still in high school. I apologize for any problem I may have caused
MIT Claudio, Jun-06-2011
MIT professor?
Once again, random pseudo internet "intellectuals" have tried to steal my identity online in a weak attempt to sabotage my stance on this issue. http://www.trwheeler.com/images/coolguy.jpg
ToshiBando, Jun-06-2011
Thor, Jun-06-2011
Thor your argument is invalid
First of all, think about all of the supposedly "unhappy" countries. This includes most of Africa and some parts of the middle east. Aside from exceptions such as South Africa and Saudi Arabia, most, if not all, of these nations are in the bottom half of the GDP rankings. Money buys happiness, to say otherwise is to be naive. Again, look at the United States in the 20s or in the 50s or in the 90s.
Culture Daniel, Jun-06-2011
Moderator? Really? That's your ploy? Stop, Gabriel Sy. It's disgusting! FOR GNH!!!
AYALA1916532, Jun-06-2011
I'm sorry
What are you people doing?
Allen Sanderson, Jun-06-2011
GDP or bust
I think that people have really lost sight of what GDP really means. GDP was never meant to be a measure of a country's well being, it is simply a measure of economic productivity. Just because a country is able to mass produce coal, its people are not necessarily happy about their lives. Along with the idea of using GDP as a measure of well-being comes the idea that money is the best measure of a person's happiness. But this argument is not only flawed, it is simply flat-out wrong. Anywhere you go in the world, the level of a person's income never accurately reflects the person's well being. Perhaps their economic well-being, yes, but people often find other factors, such as health and education, more important than their economic production. Yes, if it is a comparative measure of how well a country can produce goods and make an economic profit you are looking for, GDP is a strong indicator, but as people seek a more holistic approach of development and general well-being, we must move away from deceiving measures such as GDP and toward more holistic approaches such as HDI. Yes, HDI also has its faults, such as the inability to account for inequality among the nation's population, but it is a much more full measure of a country's well being. As an immediate indicator, HDI, as it accounts for increases in education, better measures development. As the effects of increases in education on economic gain take a significant amount of time to take effect, HDI can more quickly measure development, while the economic benefits of increaseing education take a significant amount of time to take effect. While no measure of development can completely encompass the issue, HDI is a much stronger measure of development as a whole than GDP.
JAKE, Jun-06-2011
Culture Daniel
In Valhalla, I would punch you in the face. Out here, I will still punch you in the face.
Thor, Jun-06-2011
IB Economics, Jun-06-2011
Avada Kedavra!!!
Harry Potter, Jun-06-2011
Allen Sanderson
I'm sorry, who are you?
Thor, Jun-06-2011
My opinion...
GDP is not the best way to measure development, because it does not take into account health and education which are crucial to development so therefore HDI should be used as a development indicator. Saudi Arabia is 44th in GDP per capita but 77th in HDI which means that even though the country has a high level of production the standard of living is not very high. This causes confusion as to which is the better development indicator so therefore we should all agree to use HDI.
Tani, Jun-06-2011
I think your brutish comment is indicative of your brutish nature.
Culture Daniel, Jun-06-2011
Culture Daniel
I think you are right, my name is Thor after all.
Thor, Jun-06-2011
Err body
You're all stupids
Super Trollman, Jun-06-2011
You will meet your DOOM!!!!!
Captain Economics, Jun-06-2011
Claudio is a stooped ant
"It's quite obvious that the language used in the other comments are not my own." CLAUDIO MIT, Professor Emeritus. The grammar in this statement is incorrect; it should say that the language used in other comments IS (not are) not his own, as the subject of the phrase is "language" and not "comments." Thus, it can be concluded that Claudio is not a professor from MIT, but an uneducated boor.
Grammar Nazi, Jun-06-2011
interesting article..
Anonymous, Jun-06-2011