A "HAPPINESS INDEX" NEEDS TO BE FLEXIBLE IN COMPOSITION

       In this second of a three-part e-mail interview with The Nation, US-based historian Eric Zencey discusses the composition of a more inclusive economic development index to replace GDP. The topic will be discussed at the Friday Nation Conference on "Asia: Road to New Economy" with Prime Minister Abhisit Vejjajiva as the keynote speaker.
       What in your view should be included in a new index? What should the composition be?
       At a minimum - a minimum - the metric that replaces GDP ought to fix its obvious economic problems. Currently GDP measures gross domestic transactions, the amount of economic activity there is in a given economy in a given time period. But some of that activity is defensive and remedial - we spend money to repair things, to put things back the way they were, or to keep things from going bad. These are expenses that don't make us better off than we were before we had to undertake them. Thus, expenditures on such things as crime prevention, pollution abatement and re-mediation, repair of storm damage, even health care, are a cost, not a benefit.
       The new index needs to subtract all such costs from the ledger, in order to tell us whether we're economically better off than we were before. And among the costs that need to be subtracted are the costs of lost ecosystem services. When an upland forest is cut, the ability of the ecosystem to moderate rainfall runoff is compromised, and you have flooding; the woodcutter imposes the loss of this ecosystem service on people who live downstream. That loss ought to be part of the calculation that economic decision-makers make about whether a particular course of action is economically beneficial or not. And of course, global climate change is one huge cost that is being imposed on all of us by activity that is economic in essence - activity whose price does not reflect this cost.
       But beyond these problems with GDP as a measure of economic well-being lies that second order of problems: How well does economic well-being serve as a measure of overall well-being? Economists of the old school can become splenetic when you get near this topic; neo-classical economics prides itself on being objective and scientific, and efforts to measure well-being are inescapably subjective at some level. Economists don't care about the amount of grief and sorrow in a community. Most of them don't yet care about loss of ecosystem services, so things like grief and sorrow or work satisfaction are completely off their map. But civic-minded people can and must and do care about such things.
       I think we need to move beyond economics as it is practiced today and return to the concept of an integrated discipline of political economy. These "subjective" issues were sliced off from political economy back in the nineteenth century and handed over to the study of politics, in order to give economics the appearance of being a science; economics focused only on maximising production without worrying about what the production was of or for. I think this limitation of our economic thinking to technical, objective, "scientific" questions is now clearly part of the problem rather than part of the solution.
       So, what kind of index would you like to see? What should go into it?
       Rather than propose what should or shouldn't be included in a given country's measure of its own well-being, I'd propose instead something else: Every polity ought to decide for itself what the constituent elements of its citizen's well-being are, and establish metrics to measure them; those metrics could be weighted (again, according to each polity's preference) to produce a single, easily digestible number that might be called Gross National Happiness, or the Genuine Progress Indicator, or the National Progress Index, or Net Economic Welfare, or whatever seems appropriate. And the process of coming up with these metrics could be an open, participatory one - the relevant subjective decisions could emerge (or at least be supported by) input from town meetings and city councils, from national referenda or polling, from any and all participatory processes you care to imagine.
       That said, I think the Bhutanese model is a very good one. It seems to register and evaluate the elements that Bhutanese themselves feel are important to life satisfaction.
       What would you do if you could tinker with it?
       Well, the Bhutanese index relies heavily on survey data: "Is pollution of rivers [and] streams an environmental concern in your area?" You could go with hard, scientific data there and in some of the other categories the index cumulates. Ultimately the question of whether a river is or isn't healthy enough to sustain its constituent ecosystems and deliver ecosystem services at the same rate from year to year is a technical question, not something you get from surveying people.
       One criticism of the Bhutanese approach is that the various elements of happiness are subjective and are likely to change, and that this undercuts the ability of such a measure to guide policy over time. What makes people happy today isn't what made them happy a generation ago, and isn't likely to be what makes them happy a generation from now.
       How do you respond to such criticism?
       For years economists have put together a Consumer Price Index, and it offers useful comparison over years and decades and generations, even though what people choose to consume has changed dramatically from when the CPI was first calculated. (There were no I Phones or fast food back in the 1930s.) The market basket of goods on which CPI is calculated is revised regularly to reflect innovation and changes in tastes and habits. There's no reason to say that a Gross Happiness Index can't be treated similarly. With this approach, the GHI would track changes in a society's level of well-being by offering a snapshot of the level of well-being at any given point - measured each year in terms of the constituent elements of well-being that the society valued that year. I don't see any major problem with that.
       Eric Zencey is associate professor of historical and political inquiry at Empire State College, State University of New York. He is the author of "Virgin Forest: Meditations on History, Ecology and Culture" and a novel, "Panama". This is part two of a three-part series.