Components of GDP
February 12, 2025
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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.
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.
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 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:
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.
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.
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