Gross Domestic Product
Components of GDP
February 12, 2025
The fact that GDP is a broken system is well known. Many countries across the world have attempted to create an alternate index. The idea has always been to correct the flaws of the GDP system and provide a better metric to measure progress. However, none of the countries have ventured out as far as Bhutan. Bhutan does not believe in isolating and measuring economic progress. Instead it believes in measuring the progress of the society as a whole. It is for this reason they have created an economic measure called the Gross Happiness Index. In this article, we will learn about this innovation from Bhutan in detail.
Spirituality Meets Economics
Bhutan has a largely Buddhist population and believes deeply in spirituality. Since Buddhism is all about living in harmony with the environment, Bhutan has created their economic metric which reflects this philosophy. They however believe is not a pre-requisite to follow Buddhism in order to adopt the economic metric.
The thought process behind the Gross Happiness Index is that economic success should not be the only metric for success. Success should be defined in holistic terms. These holistic terms have been collectively referred to as happiness in the Gross Happiness Index.
Definition of Happiness
The main challenge in creating the Gross Happiness Index was take something as abstract as the concept of happiness and define in quantitatively. The metric had to be complete i.e. it should not miss out on any aspect of happiness or else the entire activity of creating the index becomes pointless.
Hence the Bhutanese government has created a Gross Happiness Index which measures happiness across 9 domains. The measurement of each of these domains is objective and quantitative.
A person is said to be happy if they are performing above a certain level in at least 6 of these 9 domains. The idea is that a person must score at least 66% weighted average points on a 100% scale to be qualified as being happy.
The concept of happiness is therefore defined in purely objective terms instead of the survey being muddled in a sea of opinions and bias.
The Nine Domains of the Happiness Index
The Gross Happiness Index is based on human performance in nine chosen domains. These 9 domains are comprehensive and reflect the general well being of the Bhutanese people. Let’s have a look at each of these 9 domains:
- Psychological wellbeing: Psychological well being is based on the number of mental health cases being registered in Bhutan. Sale of medicines like anti-depressants is measured and the idea is to ensure that people generate wealth without sacrificing their mental health. The government also keeps a check on the rates of addiction to ensure that wealth is not being gained at the expense of happiness.
- Health: Physical chronic health indicators such as diabetes, blood pressure and obesity are also measured. The Bhutan government expects its citizens to be healthy and devoid of diseases. In developed countries these diseases are found to be in higher proportion. Bhutan wants to embrace development but wants to avoid the perils associated with it.
- Time use: In most developed countries people are usually strapped for time. They do not have any leisure time and are constantly working to achieve some goal or the other. The Bhutan government wants to prevent this from happening. They want to ensure that their citizens have leisure time since leisure is extremely important to reduce stress and create a conducive environment.
- Education: Good quality education must be available to all at affordable prices. In countries like the US, education has become an expensive affair. Hence, the average person is not able to gain the required education and the gap between the “haves” and the “have not’s” widens. The idea is to prevent this gap from widening and ensuring that everyone is provided access to education.
- Cultural diversity and resilience: Bhutan also wants to ensure that people from different religions and sects can live a peaceful life. This metric measures the communal tensions and reports it negatively in the Gross Happiness Index.
- Good Governance: The Bhutan government wants to ensure that corruption does not become commonplace in the Bhutanese way of life. Hence, separate metric called governance measures the instances of corruption being discovered and depicts them in the Gross Happiness Index.
- Community vitality: The Bhutan government measures the participation rate of the citizens in the day to day affairs of the community. A good society is formed on sound democratic principles and the Bhutan government wants to ensure that businesses do not end up running the community affairs. This measure prevents excessive business interference in community affairs.
- Ecological diversity: This domain takes care of the environmental concerns that are being raised worldwide. If any economic development has a negative effect on the environment, then such effects are accounted for. Bhutan is a country with rich ecological diversity and wants to preserve it for a long time.
- Living standard: This domain focuses on ensuring that the people of Bhutan enjoy a higher standard of living. This means that they must have access to facilities such as affordable healthcare, sanitary living conditions, pollution free environment etc. Once again this measure prevents economic growth at the expense of human happiness
These 9 measures cover most of the flaws of the GDP system. The Gross Happiness Index has found appreciation worldwide. However, since Bhutan is a small economy, there has not been widespread adoption of this metric. However, this metric is gaining a foothold as we shall discuss next.
Adoption by Other Countries
Many countries across the world have realized that they are indeed plagued by the problem of economic success at the cost of society. They have therefore worked towards adopting the gross happiness index as an alternative measure.
Countries like Thailand and France have adopted modified versions of the gross happiness index. Even economic superpowers like the United States have adopted a version of the Gross Happiness Index.
Although, in the US, the Gross Happiness Index is not considered a mainstream economic metric, it is gaining a foothold and economists often mention this as a measure of societal progress in their talks.