In 1972 the small kingdom of Bhutan in Asia developed a meas

In 1972 the small kingdom of Bhutan, in Asia, developed a measure of output that included “Happiness.” In class we also saw that former Senator Robert F. Kennedy criticized GDP for its inability to take into account the quality of life of a nation’s citizens. In 2013, President Obama has appointed you to look into developing a new measure of the nation’s overall economic well-being called the Gross Domestic Happiness Indicator (GDHI). What would you include in this new measure and how will you incorporate existing measures of GDP into the GDHI?

Solution

The Gross Domestic Product (GDP) is a quantitative measure of the level of national income in an economy that an indicator of economic growth, but not of economic development. The GDP only gives a measure of how much economic activity has increased or reduced in an economy, but says nothing about the quality of that economic activity. Development on the other hand is a holistic approach that requires more detailing and delving into the quality of life rather than just looking at how much income of a person has increased or reduces.

For example, if every person’s income has doubled, but the income is being spent by visiting doctors due to constant suffering from pollution, then there is only economic growth in the economy, but not economic development.

Keeping in mind the goal of development and aiming to measure the nation’s overall economic well-being, the following indicators components can be included in the new indicator called Gross Domestic Happiness Indicator (GDHI):

Thus, in addition to the already existing measures of GDP that help to measure the standard of living, the above components need to be included while calculating the GDHI to measure how ‘happy’ the citizens of America are and how developed the nation actually is.