Macroeconomics Case Study

Bhutan’s Gross National Happiness: An Economic Reality Or Wishful Thinking?

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Abstract:
In the 18th century, British philosopher and economist Jeremy Bentham advocated that the ultimate goal of state policy ought to be maximisation of happiness of its citizens. But measurement of happiness has remained elusive for the welfare economists and government establishments alike. The shortcomings of Marshallian cardinal measure of well-being and the illegitimacy of interpersonal comparison of well-being led to surrogate measurement of a country’s development in terms of GDP which was believed to be the obvious means of happiness. When disconnect between GDP and happiness became manifest in available data of various countries across space and time, it was realised that GDP is merely one among the many means and loses its relevance in happiness matrix after a certain threshold level. This is because GDP addresses mere physical or material needs of human beings while people do have other important needs as well, such as spiritual and emotional. Confronted with this outward experience and conditioned by its own Buddhist impulse, Bhutan has embarked upon designing a new measure of development, called Gross National Happiness (GNH). Aided and encouraged by the recent progress in happiness research, Bhutan attempts to track happiness directly instead of sticking to the imperfect proxy route of GDP. And in the process, the Bhutanese experiment sparks debates on the issue involving various concepts pertaining to National Income Accounting and Welfare Economics.

This case helps analyse the shortcomings of conventional measures such as GNP, GDP, NNP, NDP and other relevant variants. The case also helps in understanding the difficulties in measuring happiness and also appreciating the relevance of concepts such as Easterlin’s Paradox, MEW, HDI, externalities, Pareto optimality, aspiration treadmill and relative income hypothesis.

Pedagogical Objectives:

• To understand the various concepts of national income and their interconnectedness and to analyse the shortcomings in national income accounting
• To understand the concept of national well-being and debate on its constituents
• To analyse the difficulties in the measurement of a nation’s well-being
• To study the various concepts underpinning income and well-being relationship.

Keywords : Gross National Product, Gross National Happiness, Wellness Matri, Human Development Index, Diener's Happiness Formula, Income-Happiness Correlation, Aspiration Treadmill, Relative Income Hypothesis, Paradox of Thrift, Five Pillars of Happiness, Well-being Mandalas Easterlin's Paradox, Impossibility Theorem

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