GDP Isn’t Designed to Measure Happiness

There’s been a movement in recent years to try to calculate what matters most to a country so we can provide an index of overall happiness.  Being able to put a number on such a thing could theoretically help provide policy that improves overall living standards.  That would be a good thing obviously.

I got thinking about this while listening to this piece on NPR which asks “what makes a nation happy?”  The article discusses the OECDs newish “Better Life Index” which measures overall living standards based on the ranking of various topics.  But happiness is a highly subjective thing and surely impossible to quantify so this starts to get messy and very unscientific from the start.

It gets even more tricky when we begin thinking of “happiness” as an economic measure.  After all, as I’ve described repeatedly, we shouldn’t confuse the economy and money with true wealth.  The economy is a potential bridge to happiness, but not necessarily the destination.

I think it’s generally positive to construct indexes that help put living standards in better perspectives.  But we should also be very clear about our current measures.  For instance, GDP is not a measure of the overall living standards of a particular country.  It is simply a measure of our overall output.  Producing more doesn’t necessarily mean we are better off so we shouldn’t confuse production with happiness.  So we should probably all stop measuring the living standards of a country by its economic strength.  Obviously, there’s SOME connection between living standards and economic growth, but it’s important to maintain the right perspective at the same time.