Economics, Bhutan's Gross National Happiness: An Economic Reality Or Wishful Thinking?

 

Free Case Study

Case Code: MEBE0005
Themes: Economics

Pub Date : 2010
Country : Bhutan

"It (The GNP) does not include the beauty of our poetry or the strength of our marriage or the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country." ¹

-Robert F. Kennedy (the then US Presidential Hopeful) at University of Kansas, March 18th 1968

"Happiness is the ultimate end desired. All else for which we labour are but means to fulfilling this wish. Yet it is ironic that human society is susceptible to confusion between this simple end and the complexity of its means."²

- Jigmi Y. Thinley, Prime Minister of Bhutan

"Happiness is not achieved by the conscious pursuit of happiness; it is generally the by-product of other activities."³

- Aldous L. Huxley, English Critic and Novelist

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Introduction

In 1972, when Jigme Singye Wangchuck was crowned as the fourth king of Bhutan, a foreign journalist made a pointed query about Bhutan's rank near the bottom of the world's development scale. The king was, however, unfazed. He grandly proclaimed that he was more concerned with its Gross National Happiness (GNH) than its Gross National Product (GNP). The GNH is a balanced and holistic approach to development. It is based on the premise that human beings, by nature, seek happiness as their ultimate goal. The advocates of GNH argue that countries' progress should be measured in terms of the end (happiness) and not the means (GNP). Thus the small country Bhutan has come out with a big message for the whole world. Its shift in language from ‘product' to ‘happiness' – in gauging development – has spawned profound interest and pervasive impact pushing researchers and policymakers to design measuring techniques that can capture the well-being of human beings. However, no country other than Bhutan has adopted the GNH measure. This has understandably raised a powerful debate.

Logic for the Traditional Yardstick Right from the days of Jeremy Bentham, the 18th century British philosopher and economist, the greatest happiness of the human society was recognised as the goal of a country. However, happiness or well-being was not cardinally measurable to make itself additive. Hence, individuals' well-being could not be aggregated to arrive at social well-being. Alfred Marshall tried to quantify well-being, euphemistically called utility, in terms of the amount of money people were willing to pay for the goods. His argument was met with the criticism that money - itself being subject to the Law of Diminishing Marginal Utility - could not be used to measure utility. Hicks-Allen's ordinal measurement of utility was relied upon to indicate movement of social well-being. However, that was possible only in the practically limited case where some individuals' happiness increased but no one else's happiness decreased - thus moving the society to an optimal position, called Pareto optimality.4 Kaldor's and Hicks' compensation criteria and later Scitovsky's double compensation criterion were attempts to identify the direction of social welfare in the case where some individuals were better off and some individuals were worse off.

These criteria were, however, criticised by Prof. W.J. Baumol as they involved interpersonal comparisons, though concealed in money terms.⁵ Even the limited case of Pareto optimality did not serve much as pointed out by Prof. Amartya Sen. For instance, a situation with some people wallowing in abject misery while others rolling in super luxury can as well be called Pareto optimal "so long as the miserable cannot be made better off without cutting into the luxury of the rich".⁶ Therefore, social welfare is to be a matter of explicit value judgments

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1] Krueger Alan B., et al., “National Time Accounting: The Currency of Life”, http://www.krueger.princeton.edu/nta2.pdf, March 31st 2008
2] Thinley Jigmi Y., “What Does Gross National Happiness (GNH) Mean?”, http://www.gpiatlantic.org/conference/proceedings/ thinley.htm, June 20th–June 24th 2005
3] Moncur M., “(Cynical) Quotations”, http://www.quotationspage.com/quote/30725.html
4] Salvatore D., “General Equilibrium and Welfare Economics”, Microeconomics Theory and Applications, 4th Edition (ISBN 13:978-0-19-568616-6), Oxford University, 2003, page 593,
5] Baumol William J., “General Equilibrium and Welfare Economics”, Economic Theory and Operations Analysis, 2nd Edition, Prentice-Hall of India, New Delhi, 1970, page 379
6] Sen A.K., “Economic Judgements and Moral Philosophy”, On Ethics and Economics, 2nd Edition (ISBN 0 19 562761 X), Oxford University Press, 1999, pages 31–32

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