GDP :Both the measure and goal are flawed. High time to revisit Buddhist Economics- case in Bhutan

Image source

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MeasurementGross domestic product = quantity x price of

FINAL G/S soldGross National Product Simon Kuznets

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“The welfare of a nation can scarcely be inferred from a measurement of national

income”- S. Kuznets, 1934

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What Counts?PollutionCrimeHealth damageFamily breakdownDebt, foreclosure, bankruptcyIncreasing scarcity

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Image source: Maria Juncos

Economic Growth as a PriorityGDP as a measurements of “progress”800% increase in throughput in 20th CenturyGrowth as a policy priorityInequality as a resultBoth the measure and the goal

are flawed

Image source: Victor, 2010

SO…WHAT’S MISSING?

What are the Alternatives?G. Pinchot (1905)The Greatest GoodFor the Greatest

NumberOver Longest Run

J. DeGraaf (2011)High Quality of LifeSocial Justice or

FairnessSustainability

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Wellbeing, Quality of Life….HappinessOrigins: foundational to conventional

economicsA modern experiment..

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The Gross National Happiness Index (GNH)

The Centre for Bhutan Studies2011

.

Bhutanat a glance

• Size: 38,394 km2. (close to the size of Switzerland)• Population: 768,084 (population density: 20 p. per sq. km.)• Poverty: 12%• Language: Dzongkha• Capital: Thimpu (10-15% of the population)• Government: Constitutional Monarchy since July 2008 (7 yrs. ago!) Divided in 20 Dzongkhags (administrative and judicial districts)• Religion: Buddhism • School: 72% secondary school /youth literacy rate 74%• Economy: Agriculture, forestry, hydroelectric power (largest export

product) and now tourism (ecotourism).

Also called Druk Yul or the “land of the thunder dragon”. They call

themselves the Drukpa people.

Eastern Himalayas, between China (Tibet) and India.

.

1. GNH concept2. 9 GNH domains3. 33 indicators4. Weighting5. GNH thresholds-sufficiency &

happiness6. GNH Index methodology

Legal code of 1629* “if the government cannot

create happiness for its people, then there is no

purpose for government to exist.”

.

*Provided laws for government administration and for social and moral conduct.

Zhabdrung Rinpoche (Ngawang Namgyal) , Tibetan Buddhist lama and the unifier and funder of Bhutan as a nation-state in the 17 th century.

GNH concept

Buddhism and happiness in a nutshell: For Buddha, THE PATH TO HAPPINESS starts from understanding the root of suffering.

Four Noble Truths, which are the basic conceptual framework for Buddhism:1.The Truth of suffering (dukkha): Life, existence is unsatisfactory.

2. The Truth of the cause of suffering: That craving for and clinging to what is pleasurable and the aversion to what is not pleasurable result in long term suffering, unhappiness (rebirth, dissatisfaction, and redeath)

3. The truth of the end of suffering: Putting an end to this craving and clinging is the end of suffering.

4. The truth of the path that frees us from suffering: The Noble Eightfold Path, which is the MENTAL STATE OF HAPPINESS in order to achieve enlightenment. Is the AWAKENING AND LIBERATION of the Buddha.

The Noble Eightfold Path for HAPPINESS in a nutshell:

1. Right View Wisdom : Perceiving the true2. Right Intention nature of ourselves and the world

around us…and our intention toperceive this (practice of Buddhism)

3. Right Speech Ethical Conduct: Take care of  4. Right Action our speech, our actions and our daily5. Right Livelihood lives to do no harm to other and cultivate wholesomeness in ourselves.6. Right Effort7. Right Mindfulness Concentration: To develop the mental discipline to cut8. Right Concentration through delusion to be able to perceive our true nature.

Right Livelihood = Buddhist Economics

4th King of Bhutan, 1972 Jigme Singye Wangchuck, at

age 17

.

http://ecooptimism.com/?p=506

“Gross National Happiness is more important than Gross National Product.”

Noble Eightfold Path for HAPPINESS: Right Livelihood

Buddhist Economics (Chapter 4)Right Livelihood (work), finding the right path for human development (the real purpose of the economy).

• Give a human being a chance to utilize and develop his/her faculties (to be productive in society).

• Enable him/her to overcome ego-centeredness by joining with other people in a common task.

• So he/she can produce the good and service needed to maximize well-being with: the minimum consumption, from local resource (sovereignty), with appropriate local-scale technology and with reverence and non-violent attitude towards nature and

sentient being.

1973

Ernst Friedrich Shumacher

Noble Eightfold Path for HAPPINESS

Constitution of Bhutan 2008 Article 9: “The State shall strive to promote those conditions that will enable the pursuit of Gross National Happiness.”

.

The 5th King of Bhutan, is committed to GNH.Jigme Khesar Namgyel Wangchuck

2008- A Constitutional Monarchy

.

1. GNH concept2. 9 GNH domains3. 33 indicators4. Weighting5. GNH thresholds-

sufficiency & happiness6. GNH Index

methodology

The domains, the 33 GNH indicators and weight were selected for the GNH Index according to:1) Their values (survey *)and reliable published research on well-being2) Statistical properties (can be measured)3) Accuracy across time4) Policy relevance5) Clarity of interpretation* Over 120 questions from a survey done in Bhutan.

.

Nine Domains of GNH1. Living Standard2. Health3. Education4. Time Use5. Good Governance6. Ecological Diversity &

Resilience7. Psychological Well-being8. Community Vitality9. Culture Diversity &

Resilience.

GNH

Psychological Wellbeing•Life satisfaction•Positive emotions•Negative emotions•Spirituality

Health•Mental health•Self reported health status•Healthy days•Disability

Time Use• Work• Sleep

Education•Literacy•Schooling•Knowledge•Value

Cultural Diversity and Resilience•Speak native Language•Cultural Participation•Artistic Skills•Driglam Namzha

Good Governance•Gov’t performance•Fundamental rights•Services•Political Participation

Community Vitality•Donations (time & money)•Community relationship•Family•Safety

Ecological Diversity and Resilience•Ecological Issues•Responsibility towards environment•Wildlife damage (Rural)•Urbanization issues

Living Standards•Assets•Housing•Household per capita income

.

.

Domain Indicators Weight Domain Indicators WeightPsychological wellbeing Life satisfaction 33% Good Governance Political participation 40%

Positive emotions 17% Services 40%Negative emotions 17% Governance performance 10%Spirituality 33% Fundamental rights 10%

Health Self reported health status10% Community vitality Donation (time & money) 30%Healthy days 30% Safety 30%Disability 30% Community relationship 20%Mental health 30% Family 20%

Time use Work 50% Ecological diversity Wildlife damage 40%Sleep 50% & resilience Urban issues 40%

Education Literacy 30% Responsibility towards environment10%Schooling 30% Ecological issues 10%Knowledge 20% Living Standard Per capita income 33%Value 20% Assets 33%

Cultural diversity Zorig chusum skills (Artisan)30% Housing 33%& resilience Cultural participation 30%

Speak native language 20%Driglam Namzha (Etiquette20%

Weights on the 33 Indicators

.

Part I:1. GNH concept2. GNH domains3. GNH survey4. 33 indicators5. Weighting6. GNH thresholds-

sufficiency & happiness

7. GNH Index methodology

.

How much is enough?The GNH Index uses two kinds of thresholds:

1. Sufficiency thresholds 2. Happiness threshold

Sufficiency thresholds:• Shows how much a person needs in order to enjoy ‘sufficiency”’

• How much is enough to create a happiness condition.

• Each of the 33 GNH indicators has a sufficiency threshold.

Sufficiency thresholds were set by:

International standards (based on studies of well-being)National standards (based on studies done in Bhutan) Normative judgments (based on their history, culture,

values and common sense= relevant to Bhutanese context) Participatory meetings

.

.

Indicator Sub-indicator QuestionResponse range Sufficiency

Life satisfactio

n Health How satisfied are you with your

health? 5 (Low-worst)To25 (High satisfaction)

 20-25   Standard of living…with your standard of living?

Occupation …with your major occupation?Family relationship …with your family relationship?Work life balance …with your work life balance?

Spirituality Spirituality How spiritual do you consider yourself?

1 (Not at all)- 4 (Very spiritual)

4 (Very spiritual)

Karma Do you consider Karma in the course of your daily life?

1 (Not at all)-4 (Always)

4 (Always)

Prayer recitation How often do you recite prayers?

1 (Not at all)- 4 (Regularly)

4 (Regularly)

Meditation How often do you meditate?

1 (Not at all)- 4 (Regularly)

3 (Occasionally

) or 4 (Regularly)

Positive emotions

Calmness During the past few weeks, how often do you experience __(Emotion)_?

5 (Low )-20 (High positive emotion score)

15-20 (Positive emotion score)

CompassionForgivenessContentmentGenerosity

Psychological wellbeing

.

Indicator Sub-indicator Question Response rangeSufficiency threshold

Donation (time & money)

Donations In the past 12 months, did you donate money?

Amount of donation made in a year

More than 10% of annual household

income

 Days volunteer During the past 12 months, how

many days did you volunteer?Number of days volunteered

National average- More than 17 days

Community relationship

Sense of belonging How would you describe your sense of belonging to your local community?

1 (Weak)-3 (Very strong)

3 (Very strong)

 Trust in neighbours How much do you trust your

neighbours?1 (Trust none of them)-4 (Trust most of them)

4 (Trust most of them)

Family Family members care about each other

Do the members of your family care about each other?

18 (High family index score)-6(Low family Index Score)

 

 Wish you were not part of your family

Do you wish you were not part of your family?

 

 Feel like a stranger in your family

Do you feel like a stranger in your family?

 

 Enough time to spend with your family

Do you get enough time to spend with your family?

 

 Lot of understanding in your family

Is there a lot of understanding in your family?

 

 Family is a real source of comfort to you

Do you think family is a real source of comfort to you?

15-18 (Family index score)

Safety Victim of crime Have you been a victim of crime

in the last 12 months?1 (Yes)-2 (No) 2 (No)

Community vitality

.

Indicator Sub-indicator QuestionResponse range (worst-best) Sufficiency threshold

Ecological issues

Pollution of rivers and streams

Is ___ISSUE________ an environmental issue of concern in your community?

1 (Major concern)-4 (Not a concern)

4 (Not a concern) or 3

(Minor concern) or 2 (Some

concern) in at least 6

ecological issues

  Air pollution  Noise pollution  Absence of waste

disposal sites  Littering  Landslides  Soil erosion  FloodsResponsibility towards environment

Feelings of responsibility towards environment

Do you feel responsible for conserving the natural environment?

1 (Not at all responsible)-4 (Highly responsible)

4 (Highly responsible)

Wildlife damage (Rural) Wildlife problems

Was wildlife a constraint to your crops during the last year?

1 (Major constraint)-4 (Not a constraint)

1 (Major constraint) & 1 (A lot) or 2 (Some)

Crop loss

In the past one year, has your crops been damaged by wild animals?

1 (A lot)-4 (Not at all)

Urbanization issues Traffic congestion

Is ___ISSUE________ an environmental issue of concern in your community?

1 (Major concern)-4 (Not a concern)

4 (Not a concern) or 3 (Minor

concern) or 2 (Some concern)

in at least 3 urbanization

issues

 Absence/inadequate green spaces

 Lack of pedestrian friendly streets

  Urban sprawl

Ecological diversity and resilience

.

2010

Value

Spea

k nati

ve lan

guag

e

Disabili

ty

Urbaniz

ation

issue

s

Life sa

tisfact

ion

Health

y days

Self r

eport

ed he

alth s

tatus

Sleep

Commun

ity re

lation

ship

Artisa

n skill

s

Positi

ve em

otion

s

Politi

cal pa

rticipa

tion

Spirit

uality

Housin

gWork

Schoo

ling

Know

ledge

0%20%40%60%80%

100%120%

Percentage of people enjoying sufficiency

Most Bhutanese enjoy sufficiency in value, safety, native language, family, mental health, urbanization issues, responsibility towards environment, satisfaction in life, government performance, healthy days and assets

.

Value

Spea

k nati

ve lan

guag

e

Disabili

ty

Urbaniz

ation

issue

s

Life sa

tisfact

ion

Health

y days

Self r

eport

ed he

alth s

tatus

Sleep

Commun

ity re

lation

ship

Artisa

n skill

s

Positi

ve em

otion

s

Politi

cal pa

rticipa

tion

Spirit

uality

Housin

gWork

Schoo

ling

Know

ledge

0%20%40%60%80%

100%120%

Percentage of people enjoying sufficiency

50-60% of Bhutanese enjoy sufficiency in ecological issues, negative emotions, community relationship, Artisan skills, Driglam Namzha etc.

2010

.

Value

Spea

k nati

ve lan

guag

e

Disabili

ty

Urbaniz

ation

issue

s

Life sa

tisfact

ion

Health

y days

Self r

eport

ed he

alth s

tatus

Sleep

Commun

ity re

lation

ship

Artisa

n skill

s

Positi

ve em

otion

s

Politi

cal pa

rticipa

tion

Spirit

uality

Housin

gWork

Schoo

ling

Know

ledge

0%20%40%60%80%

100%120%

Percentage of people enjoying sufficiency

Less than 50% of Bhutanese enjoy sufficiency in literacy, housing, donations, work, services, schooling, cultural participation and knowledge

2010

.

Who is considered Happy?The GNH Index uses two kinds of thresholds:

1. Sufficiency thresholds 2. Happiness threshold Happiness Threshold= 66% of domains A person who enjoys sufficiency in more than six (6) of the nine domains is considered happy.

In 2010 40.8% of Bhutanese enjoy sufficiency in six or more domains

at the same time.According to the GNH Index, they are

‘happy’.

.

.

Part I:1. GNH concept2. GNH domains3. GNH survey4. 33 indicators5. GNH thresholds-sufficiency &

happiness6. Weighting7. GNH Index methodology

.

The GNH Index is based on the Alkire & Foster (2007, 2011) methodology. In this methodology we:1. Choose indicators2. Apply weights for each indicator3. Apply sufficiency thresholds (who has

enough)?4. Apply the happiness threshold5. Identify two groups:

1. Happy people 2. Not-yet happy people (policy

priority)

.

GNH Index: Formulae

The GNH Index Formulae is:

Where = percent of not-yet-happy people= 1- or (100% - % happy people)

= percentage of domains in which not-yet-happy people lack sufficiency

.

GNH Index: FormulaeThe GNH Index Formulae is:

So in Bhutan 2010, the GNH was:GNH = 1-(.591 x .434) = 0.743It ranges from 0 to 1. A higher number is better. It reflects the percentage of Bhutanese who are happy and the percentage of domains in which not-yet-happy people have achieved sufficiency (headcount and intensity).

The Gross National Happiness Index (GNH)

The Centre for Bhutan Studies2011

.

Bhutan Population The total population in Bhutan was last recorded at 770,000 people in 2014 from 200,000 in 1960, changing 235% during the last 50 years. World Bank

The Gross Domestic Product (GDP) per capita in Bhutan

$2,068.37 US in 2014. GDP per capita in Bhutan, World Bank ($2,611.74 according to Bhutan National Statistic Bureau).

Per capita GDP is used as an indicator of standard of living. Higher per capita GDP = higher standard of living. A rise in per capita GDP signals growth in the economy and tends to translate as an increase in productivity.

In just over 5 years, from 2007-2012, poverty in Bhutan was reduced by almost half - from 23% in 2007 to 12 % in 2012. (World Bank, Sept. 2014). Supposedly, it is one of the world’s poorest and least developed countries.

Bhutan Government Debt to GDP Bhutan recorded a Government Debt to GDP of 101.30 % of the country's GDP in 2014. Government Debt to GDP in Bhutan averaged 70.98 percent from 1995 until 2014, reaching an all time high of 101.30 percent in 2014. Royal Monetary Authority of Bhutan.

Low debt-to-GDP ratio indicates an economy that produces and sells goods and services sufficient to pay back debts, without incurring further debt. A debt-to-GDP ratio of 60% is quite often noted as a OK limit for developed countries. Crossing this limit might threaten fiscal sustainability. For developing and emerging economies, 40% is the suggested debt-to-GDP ratio.

ResourcesDe Graaf, J. (2011). What’s the economy for anyway? New York, NY: Bloosmbury Press.

NDP Steering Committee and Secretariat. 2013. Happiness: towards a new development paradigm. Report of the Kingdom of Bhutan.

Schumacher, E.F. (1973). Small is beautiful: Economics as if people mattered. New York, NY: Harper & Row, Publishers, Inc.

United Nations. (2013, 16 January). Happiness: towards a holistic approach to development. General Assembly, Sixty-Seventh session Agenda Item 14

Victor, P. (2010). Questioning economic growth. Nature 486(18).

http://www.kingdomofbhutan.com/

Note: I do not claim any right to this presentation. This is adopted from a presentation made by S. Sannitti and M. Juncos at York University- December 2015. I decided to publish the important sections for the benefit of all.