Usus magister est optimus
What is Needed for a Happy
Future?
Part 7
Living in today’s reality, we rejoice at the existing,
albeit very limited, opportunities to fulfil ourselves, to satisfy our vital
interests of survival, to improve our personality. At the same time, we lament
the evil world and severe social inequality, the selfishness of our fellow
citizens, the politics full of intrigues and the widespread prevalence of
corruption and violence, unforgivably often admitting our seeming powerlessness
to change anything and without actually taking targeted, effective actions to eradicate
the roots of these negations.
It has to be stated that the majority of the society
are not any better, not more spiritual and not morally stronger than previous
generations. Rather, they have become even more refined in the culture of their
speech, richer in fabrications regarding the reasoning of their actions. And at
the same time endowed with an incomparably more powerful potential for their development
(or possible destruction) than our fathers and grandfathers.
08.08.2017
GDP Is Not a
Measure of Human Well-Being
Meaning
in Life and Its Relationship With Physical, Mental, and Cognitive Functioning
Objective: To examine the relationship of presence and
search for meaning in life with age, physical and mental well-being, and
cognitive functioning across the adult lifespan….
Conclusions: Presence and search for meaning in life are
important for health and well-being, though the relationships differ in adults
younger and older than 60 years. Better understanding of the longitudinal
relationships of meaning of life with well-being is warranted to design
interventions to increase meaning of life and improve health and functioning.
OCTOBER 04, 2019
Economic growth has raised living standards around
the world. However, modern economies have lost sight of the fact that the
standard metric of economic growth, gross domestic product (GDP), merely
measures the size of a nation’s economy and doesn’t reflect a nation’s welfare.
Yet policymakers and economists often treat GDP, or GDP per capita in some
cases, as an all-encompassing unit to signify a nation’s development, combining
its economic prosperity and societal well-being. As a result, policies that
result in economic growth are seen to be beneficial for society.
We know now that the story is not so simple – that
focusing exclusively on GDP and economic gain to measure development ignores
the negative effects of economic growth on society, such as climate change and
income inequality. It’s time to acknowledge the limitations of GDP and expand
our measure development so that it takes into account a society’s quality of life.
A number of countries are starting to do this.
India, for instance, where we both work advising the government, is developing
an Ease of Living Index, which measures quality of life, economic ability and
sustainability.
When our measures of development go beyond an
inimical fixation towards higher production, our policy interventions will
become more aligned with the aspects of life that citizens truly value, and
society will be better served. But before we attempt to improve upon the
concept of GDP, it is instructive to understand its roots.
The
origins of GDP
Like many of the ubiquitous inventions that
surround us, the modern conception of GDP was a product of war. While Simon
Kuznets is often credited with the invention of GDP (since he attempted to estimate
the national income of the United States in 1932 to understand the full extent
of the Great Depression), the modern definition of GDP was developed by John
Maynard Keynes during the second world war.
In 1940, one year into the war with Germany, Keynes,
who was working in the UK Treasury, published an essay complaining
about the inadequacy of economic statistics to calculate what the British
economy could produce with the available resources. He argued that such data
paucity made it difficult to estimate Britain’s capacity for mobilization and
conflict.
According to him, the estimate of national income
should be the sum of private consumption, investment and government spending.
He rejected Kuznets’ version, which included government income, but not
spending, in his calculation. Keynes realized that if the government’s wartime
procurement was not considered as demand in calculating national income, GDP
would fall despite actual economic growth taking place. His method of
calculating GDP, including government spending into a country’s income, which
was driven by wartime necessities, soon found acceptance around the world even
after the war was over. It continues to this day.
How
GDP falls short
But a measure created to assess wartime production
capabilities of a nation has obvious drawbacks in peacetime. For one, GDP by
definition is an aggregate measure that includes the value of goods and
services produced in an economy over a certain period of time. There is no
scope for the positive or negative effects created in the process of production
and development.
For example, GDP takes a positive count of the cars
we produce but does not account for the emissions they generate; it adds the
value of the sugar-laced beverages we sell but fails to subtract the health
problems they cause; it includes the value of building new cities but does not
discount for the vital forests they replace. As Robert Kennedy put it in his
famous election speech in 1968, “it [GDP] measures everything in short, except
that which makes life worthwhile.”
Environmental degradation is a significant
externality that the measure of GDP has failed to reflect. The production of
more goods adds to an economy’s GDP irrespective of the environmental damage
suffered because of it. So, according to GDP, a country like India is
considered to be on the growth path, even though Delhi’s winters are
increasingly filled with smog and Bengaluru’s lakes are more prone to fires. Modern
economies need a better measure of welfare that takes these externalities into
account to obtain a truer reflection of development. Broadening the scope of
assessment to include externalities would help in creating a policy focus on
addressing them.
GDP also fails to capture the distribution of
income across society – something that is becoming more pertinent in today’s
world with rising inequality levels in the developed and developing world
alike. It cannot differentiate between an unequal and an egalitarian society if
they have similar economic sizes. As rising inequality is resulting in a rise
in societal
discontentment and increased polarization, policymakers will need to
account for these issues when assessing development.
Another aspect of modern economies that makes GDP
anachronistic is its disproportionate focus on what is produced. Today’s
societies are increasingly driven by the growing service economy – from the
grocery shopping on Amazon to the cabs booked on Uber. As the quality of
experience is superseding relentless production, the notion of GDP is quickly
falling out of place. We live in a world where social media delivers troves of
information and entertainment at no price at all, the value for which cannot be
encapsulated by simplistic figures. Our measure of economic growth and
development also needs to adapt to these changes in order to give a more
accurate picture of the modern economy.
How
we’re redefining development in India
We need alternative metrics to complement GDP in
order to get a more comprehensive view of development and ensure informed
policy making that doesn’t exclusively prioritize economic growth. We’re seeing
some efforts already, such as Bhutan’s attempt to measure Gross National
Happiness, which considers factors like equitable socio-economic development
and good governance, and UNDP’s Human Development Index (HDI), which
encapsulates health and knowledge apart from economic prosperity.
As a step in this direction, India is also
beginning to focus on the ease of living of its citizens. Ease of living is the
next step in the development strategy for India, following the push towards
ease of doing business that the country has achieved over the last few years.
The Ministry of Housing and Urban Affairs has developed the Ease of Living
Index to measuring quality of life of its citizens across Indian cities, as
well as economic ability and sustainability. It is as well expected to evolve
into a measurement tool to be adopted across districts. We believe that this
more holistic measure will provide more accurate insights into the state of
development of the Indian economy.
The end goal is to have a more just and equitable
society that is economically thriving and offering citizens a meaningful
quality of life. With a change in what we measure and perceive as a barometer
of development, how we frame our policies will also catch up. In an economy
with well-being at its heart, economic growth will simply be another tool to
guide it in the direction that the society chooses. In such an economy, the
percentage points of GDP, which are rarely connected with the lives of average
citizens, will cease to take the center stage. The focus would instead shift
towards more desirable and actual determinants of welfare.
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April 25, 2018
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