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Gross National Happiness

Article  in  Asian-Pacific Economic Literature · November 2009

DOI: 10.1111/j.1467-8411.2009.01235.x · Source: RePEc

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 doi: 10.1111/j.1467-8411.2009.01235.x

Gross national happiness apel_1235 1..16

Winton Bates*

This article considers the concept of gross national happinesss, as it has

evolved in Bhutan, against the background of literature on the pursuit of
happiness as a government objective and the problems associated with
different approaches to measuring well-being. It concludes that since all
measures of well-being are imperfect, including the measure of gross
national happiness currently being applied in Bhutan, the best approach is
to use a range of different measures, including conventional national
accounting indicators.

Some critics, including the present author,

Introduction
The statement ‘Gross National Happiness is
more important that Gross National Product’
has been attributed to the former king of
Bhutan, Jigme Singye Wangchuck. The former
monarch is said to have made gross national
happiness (GNH) the guiding philosophy of
Bhutan’s development process soon after his
enthronement in 1972 (Thinley 2007). It was not
until the late 1980s, however, that the king
began to use the GNH concept explicitly in an
attempt to ensure that economic development
was in harmony with Bhutan’s culture, insti-
tutions and spiritual values (Ura and Galay
2004:viii).
Opening Bhutan to outside ideas and insti-
tutions began in the early 1960s, and appar-
ently picked up pace in the 1970s (Ura and
Galay 2004:viii). In that context, the GNH
concept probably evolved as a good-humoured
play on words to make the point that the devel-
opment process ought not be directed toward
increasing gross national product (GNP) if this
is at the expense of traditional values.
have had difficulty in viewing the GNH
concept as more than a play on words. This is
because the word ‘gross’ in GNH does not
appear to have any meaning, and certainly
does not have a meaning corresponding to that
in national income accounting.1
Such semantic quibbles have not prevented
the GNH concept from becoming a national
objective in Bhutan. Article 9 of the Constitu-
tion of this new democracy states: ‘The State
shall strive to promote those conditions that
will enable the pursuit of Gross National
Happiness’. The government of Bhutan has
recently initiated efforts to measure GNH. In
addition, GNH is widely discussed interna-
tionally. At least four international conferences
have been held specifically on GNH, attract-
ing participation by scholars from different
disciplines and different parts of the world.
In preparing this article the author has
viewed the recent evolution of GNH in
Bhutan against the background of literature
relating to the pursuit of happiness as a gov-
ernment objective and the problems associated
with different approaches to measurement of

* Independent researcher on issues relating to well-being and liberty. Prior to his retirement from full-time work he was an
economic consultant and, before that, First Assistant Commissioner for the Australian Industry Commission.
1 In national income accounting, ‘gross’ refers to the fact that depreciation of capital has not been deducted from the value
of production.

© 2009 The Author

Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
 ASIAN-PACIFIC ECONOMIC LITERATURE

happiness. The first question considered is
whether aggregate happiness is the right objec-
tive. This is followed by a consideration of
national accounting approaches, indicators
of subjective well-being, summary measures of
national progress and human development,
and the measurement of GNH in Bhutan.
Is aggregate happiness the right
objective?
There is evidence that happiness has been
widely viewed as of fundamental importance
for many centuries in Bhutan. According to
Jigmi Thinley, the 1729 legal code of Bhutan
‘stressed that laws should promote happiness
of the sentient beings’ (Thinley 2007:4). This
long history of emphasis on the goal of happi-
ness is consistent with the view that it is central
to Buddhist teaching.2 In writing about the
history of Bhutan, John Ardussi notes that as
in other Himalayan states where traditional
Tibetan cultural values held sway, ‘it was the
declared obligation of the civil head of state to
maintain law and order so that its subjects
could devote themselves to leading a moral
life and strive for a better rebirth in the
next’ (Ardussi 2005). Similar sentiments about
ensuring necessary conditions for a moral
life have also been influential in European
history. Darrin McMahon notes that St Thomas
Aquinas ‘recognized the necessity of means
to promote higher ends. It was difficult to do
good in the world when one was starving or
sick, difficult to give alms without alms to give,
difficult to live a life of contemplation without
the basic necessities of life fulfilled’ (McMahon
2006:132).
The modern view that the state should strive
to promote conditions that will promote hap-
piness of citizens is based on a widely shared
value judgement that what promotes human
happiness is good and what promotes human
misery is evil. The 18th-century philosopher,
David Hume, based this judgement on the
observation that ‘. . . it is impossible for such a
creature as man to be totally indifferent to the
well or ill-being of his fellow creatures’ (Hume
1777:45).3
Jeremy Bentham is the historical figure most
closely associated with the view that the objec-
tive of society should be to maximize aggre-
gate happiness. Although Bentham did not
claim authorship of the phrase, ‘the greatest
happiness of the greatest number’, he certainly
endorsed that objective. He also argued that an
action ‘may be said to be conformable to the
principle of utility . . . when the tendency it has
to augment the happiness of the community is
greater than any it has to diminish it’ (Bentham
1789:I.7).
Richard Layard, a modern-day Benthamite
—also an eminent economist and member of
the British House of Lords—argues in favour
of maximizing aggregate happiness as follows:
People are calling out for a concept of the
common good—and that is exactly what
the Enlightenment ideal provides. It defines the
common good as the greatest happiness of all,
requiring us to care for others as well as for our-
selves. And it advocates the kind of fellow-feeling
for others that in itself increases our happiness
and reduces our isolation. (Layard 2005:5–6)
Should the objective of enabling the pursuit of
GNH be pursued by seeking to maximise
aggregate happiness? Leaving aside the ques-
tion of whether it is possible with known tech-
nology to add the happiness of different
individuals together to measure the sum of
their happiness, what objections could anyone
have to maximisation of aggregate happiness?
One reason why some people object to
maximisation of aggregate happiness has to do
with what Derek Parfit describes as the ‘repug-
nant conclusion’. It is likely that the sum total

2 Darrin McMahon, author of a widely acclaimed history of ideas about happiness, has suggested that it seems incongruous
for Buddhism to be associated with the art of happiness, as Buddhists believe that all life is suffering (McMahon
2006:471). However, Buddhists maintain that suffering can be overcome. Buddhism sets up nirvana as the final liberation
from the suffering of repeated embodiment (Honderlich, 1995:107).
3 I leave aside the question of whether the judgement that what promotes human happiness is good is the ultimate value
judgement. Rival considerations that are claimed by some to be of more fundamental importance include individual
liberty, human capability, a just society and conformity to God’s will (Yeager 2001:229).

© 2009 The Author

Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
 BATES — GROSS NATIONAL HAPPINESS
of human happiness would be higher than at
present if the human population increased
massively, even though the members of that
population might have lives ‘that are barely
worth living’ (Parfit 1984:388).
This implication of aggregate happiness
maximisation had previously been recognized
by Henry Sidgwick, who did not regard it as
repugnant. He argued that:
Strictly conceived, the point up to which, on Utili-
tarian principles, population ought to be encour-
aged to increase, is not that at which average
happiness is the greatest possible . . . but that
at which the produce formed by multiplying
the number of persons living into the amount
of average happiness reaches its maximum.
(Sidgwick 1874/1907:415–6)
The most obvious solution to the problem
identified by Parfit, namely maximising aver-
age levels of happiness, would be viewed by
some as having implications that are even more
repugnant. Assuming that it is possible to
choose between a future in which a tiny popu-
lation live wonderfully happy lives and one in
which a much larger population live moder-
ately happy lives, who is to say which outcome
should be preferred? Value judgements are
clearly involved here, and different people can
obviously make different judgements. Many
would argue that collective choices about such
matters are repugnant because decisions about
family size are best left to the people who are
most intimately involved in producing chil-
dren and caring for them.
This brings us to another set of objections
related to the fact that maximisation of aggre-
gate happiness can only take into account
rights, ideas of justice and decision-making
processes insofar as such matters influence the
perceived happiness of individuals. Amartya
Sen comments: ‘It is sensible enough to take
note of happiness, but we do not necessarily
want to be happy slaves or delirious vassals’
(Sen 1999:62). Bruno Frey and Alois Stutzer
point to evidence from happiness research that
‘people have preferences for processes over
and above outcomes’ (Frey and Stutzer 2007:9).
Robert Sugden suggests how some of our
ideas about rights, entitlements and justice are
rooted in conventions that may have evolved
3
© 2009 The Author
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
spontaneously. In the light of this he argues
that ‘a benevolent government may find that it
cannot maximize social welfare, evaluated
from some impartial viewpoint, without violat-
ing conventions that its citizens regard as prin-
ciples of justice’ (Sugden 2004:8).
A further set of objections to maximisa-
tion of aggregate happiness arises because it
implies that governments should adopt poli-
cies that take into account the capacities of
people to adapt to the circumstances in which
they find themselves. Amartya Sen suggests
that a focus on happiness rather than indi-
vidual well-being can be ‘deeply unfair’, as it
may lead us to be unconcerned about people
who claim to be happy even though they are
suffering adverse circumstances. He notes:
‘desires and pleasure-taking abilities adjust to
circumstances, especially to make life bearable
in adverse situations’ (Sen 1999:62–3).
Bruno Frey and Alois Stutzer note other
undesirable implications of taking into account
different capacities for adaptation of different
individuals. For example, if materialists with
high-income aspirations suffer a great deal
from personal income tax, does this mean that
they should be exempted from the tax? Should
courts award lower compensation to victims
of accidents who can more readily adapt to
disabilities sustained, and higher damages to
those who cannot adapt so easily? (Frey and
Stutzer 2007:8).
None of these objections to maximisation of
aggregate happiness rule out the desirability
of the kind of utilitarian approach that, to use
the words of Leland Yeager, ‘invokes facts and
logic to appraise institutions, policies, rules,
character traits and dispositions according
to how well they serve peaceful cooperation
among individuals pursuing their own diverse
goals in life’ (Yeager 2001:299).
Following Henry Hazlitt, social cooperation
may be viewed as ‘the great means by which
we all help each other to attain our individual
ends, and so to attain the ends of “society” ’
(Hazlitt 1998:14). Along similar lines, Friedrich
Hayek suggested that rules of conduct ‘can do
no more than to increase the opportunities for
unknown people’. He wrote: ‘If we do the best
we can to improve the opportunities for any
 ASIAN-PACIFIC ECONOMIC LITERATURE
unknown person picked at random, we will
achieve the most we can, but certainly not
because we have any idea of the sum of utility
which we have produced’ (Hayek 1982:vol. 2,
23).
It is common to see Hayek’s views associ-
ated with an extreme form of individualism
that he explicitly rejected (Hayek 1984:146).
For example, Ross McDonald argued at a
recent GNH conference that the ‘end result’ of
Hayek’s views (and those of Adam Smith) is
‘an encouragement towards a form of self-
centredness’ in which individuals believe that
they ‘can legitimately seek their own fulfilment
without taking into account the corresponding
interest of others—a dynamic that clearly vio-
lates the basic grounding of ethical maturity’
(McDonald 2008).
Robert Nozick has observed that the ethics
of social cooperation has four levels or layers.
The most fundamental level, the ethics of
respect—mandating among other things
respect for the rights of others, as emphasised
by Hayek among others—is the level at which
people help each other to attain individual
ends. But this is also ‘the ground’ from which
higher levels of ethics may grow. The full
development of Nozick’s third level of ethics,
the ethics of caring, involves ‘love to all people,
perhaps to all living creatures’ (Nozick
2001:280).4
Such considerations seem particularly rel-
evant in considering the goals of GNH in
Bhutan. In stating the goals of GNH, Karma
Ura, president of the Centre for Bhutan Studies,
expresses the view that ‘any government con-
cerned with happiness must create conducive
conditions for happiness in which individual
strivings can succeed’. He also expresses the
view that the ‘perception of happiness that
doesn’t take into account the needs of others’
happiness is irresponsible and egocentric, and
the pursuit of such happiness is likely to be
unethical’ (Ura 2008). Applying Nozick’s per-
spective, those statements may correspond to
different levels of an inter-related system of
4 Nozick’s second level of ethics, ‘the ethics of Responsiveness’, mandates acting in a way that enhances and supports the
inherent value of individuals. His fourth level, ‘the ethics of Light’, encompasses being a vessel and vehicle of truth,
beauty, goodness and holiness.
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
ethics, in which conditions that enable indi-
vidual strivings to succeed correspond to the
ethics of respect while taking account of the
needs of others corresponds to the ethics of
caring.
National accounting measures
Was GNP ever intended to be a well-being
measure? Steve Dowrick and John Quiggin
assert: ‘The original motivation for the devel-
opment of national accounts . . . was the need
for accurate measures of aggregate economic
activity as a basis for Keynesian macro-
economic stabilisation policy’ (Dowrick and
Quiggin 1998:94).
Simon Kuznets—who was given the task of
developing estimates of the national income of
the USA—warned that the ‘welfare of a nation’
can ‘scarcely be inferred from a measurement
of national income’ in his first report to the US
Congress in 1934 (Cobb et al. 1995).
Prominent economist and former Chairman
of the US Council of Economic Advisers,
Arthur Okun, saw virtue in the fact that
national accounting conventions did not seek
to measure welfare:
National accountants . . . would not assist by
compromising on the proposition that [national
income] is not a measure of total social welfare.
The beauty of [the present] practice is that no
sensible person could seriously mistake [national
income] for such a measure. (Okun 1971:132–3)
By contrast, Colin Clark, a pioneer of national
income accounting, seems to have been in-
spired by A.C. Pigou’s view that the national
dividend (national income) and economic
welfare were closely related, as he quoted at
length many passages on this subject written
by Pigou (Clark 1957:7). Pigou argued:
Just as economic welfare is that part of total
welfare which can be brought directly or indi-
rectly into relation with a money measure, so the
national dividend is that part of the objective
© 2009 The Author
 BATES — GROSS NATIONAL HAPPINESS
income of the community . . . which can be mea-
sured in money. The two concepts, economic
welfare and the national dividend, are thus
co-ordinate, in such wise that any description of
the content of one of them implies a correspond-
ing description of the content of the other. (Pigou
1932:I.III.I)
Economists have expressed a wide variety of
views about national income and its relation-
ship to well-being. Some economists, such
as Amartya Sen, have emphasised that an
adequate conception of development must go
much beyond the accumulation of wealth and
the growth of GNP (Sen 1999:14). W. Arthur
Lewis suggested that economic growth is
important primarily because it increases the
range of human choice (Lewis 1955:420). Some
economists, such as Ezra Mishan, have sug-
gested that as a result of negative externalities
—such as environmental degradation—growth
of national income may reduce social welfare
rather than increase it (Mishan 1967:171).
Benjamin Friedman has recently advanced
the opposite view: that economic growth is
associated with positive externalities—such as
tolerance of diversity, social mobility, commit-
ment to fairness and dedication to democracy
(Friedman 2006:4).
There has been a long-running discussion
among economists about the relevance of
income distribution considerations. One influ-
ential contributor, I.M.D. Little, argued that
there can be no welfare significance in national
income comparisons unless a value judgement
about changes in distribution is presupposed
(Little 1957:227).
At a practical level, however, economists
have made widespread use of estimates of
per capita income in drawing inferences about
material well-being. Writing in the 1950s,
Gerald Meier and Robert Baldwin claimed:
‘almost everyone would agree that real national
income and real per capita income are highly
significant for economic welfare’ (Meier and
Baldwin 1957:6).
How far can the problems in use of per
capita income as a well-being measure be
5 GDP is defined as the value of all final goods and services produced in a country in one year. GNP equals GDP plus
income earned by citizens living abroad minus income earned by foreigners in the country concerned.
© 2009 The Author
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
overcome within a national accounting frame-
work? A more accurate picture of well-being
may be provided in moving from the most
commonly used national accounting concepts
to concepts such as household disposable
income. A study by Boarini, Johansson and
Mira d’Ercole suggests that the difference
between gross domestic product (GDP) and
GNP is relatively small in OECD countries, but
this is not likely to be so in countries where
substantial remittances are obtained from citi-
zens who are working abroad (Boarini et al.
2006:7–14).5 These authors also show that sub-
traction of depreciation to obtain net national
product does not make much difference to
country rankings for OECD countries, if offi-
cial statistics are taken at face value. However,
adjusting for tax payments, etc., to obtain
household disposable income substantially
changes the ranking of OECD countries by per
capita income levels. It seems likely that even
larger differences would have been observed if
more low-income countries had been included
in the study.
The main problems with the use of per
capita GDP as a well-being measure arise from
the limitations of the information available
in standard national accounting systems.
These include failure to account for changes
in natural resources and intangible capital
(including human capital), nonmarket house-
hold production (with some exceptions),
leisure, external costs and benefits associated
with production and consumption, income dis-
tribution, economies of household size, social
costs of unemployment, threats to national
security, democratic rights, and restrictions
on liberty. There are also problems associated
with the measurement of government services,
such as education and health, at the cost of
provision.
Economists have made various attempts to
correct for the deficiencies of national income
aggregates as measures of well-being. In the
early 1970s, Nordhaus and Tobin sought to
correct for the most obvious deficiencies of
national income aggregates and concluded
 ASIAN-PACIFIC ECONOMIC LITERATURE
that ‘the broad picture of secular progress
which they convey remains after correction’
(Nordhaus and Tobin 1972:532). These conclu-
sions were subsequently questioned by John
Cobb, Clifford Cobb, and Herman Daly, who
developed the Index of Sustainable Welfare
(ISEW) (Mathews 2006:12). The ISEW was sub-
sequently modified slightly by an organisation
called Redefining Progress in order to develop
the genuine progress indicator (GPI). Although
estimates of ISEW and GPI have been made for
many countries, there is as yet no standard
methodology. The experimental nature of GPI
estimation is evident, for example, in the seven
case studies in a recent book discussing sus-
tainable welfare in the Asian-Pacific region
(Lawn and Clarke 2008).
In general terms, estimations of GPI use
aggregate consumption as a starting point—as
this is the aggregate in the national accounts
most closely related to immediate well-being—
and then make allowance for other factors
believed to contribute positively or negatively
to well-being. For example, amounts are added
to account for the value of unpaid house-
hold labour and services provided by con-
sumer durables, and amounts are subtracted
to account for defensive and rehabilitative
expenditure (such as costs of crime prevention
and road accidents) depreciation of human-
made capital, the cost of depletion of natural
resources, and environmental effects.
Apart from the obvious difficulties in
placing an appropriate monetary value on
many of the factors allowed for in GPI estima-
tions, acceptance of the results can also be
adversely affected by such factors as the inclu-
sion of contentious adjustments for changes in
income distribution and foreign debt, as well
as failure to allow for changes in human capital
(Bates 2009).
The World Bank’s efforts to measure wealth
and changes in wealth suggest that failure to
account for changes in natural resources and
intangible capital can seriously limit the extent
to which economic growth, as conventionally
measured, reflects changes in well-being. This
is particularly so in the case of low-income
countries that rely heavily on natural resources
for economic growth. Using estimates for 2003,
6
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
the World Bank shows that some countries
(for example, Nigeria and Azerbaijan) with
high GDP growth rates had negative ‘genuine
savings rates’. In other words, despite the
apparent high growth rates of these countries,
their net savings rates were negative after
taking account of estimates of the value of
depletion of minerals, energy, and forest
resources, damages from air pollutants, and
investments in human capital (World Bank
2006:45).
There seems to be a limit to how far the
deficiencies of national accounting indicators
of well-being can be overcome within a
national accounting framework. Few econo-
mists would advocate attempting to incorpo-
rate indicators such as measures of democracy
or liberty in measures of national income. As
Dowrick and Quiggin note: ‘Such attempts will
always be subject to the criticism that the
scaling and weighting of the composite index
is arbitrary or represents a particular political
and value position’ (Dowrick and Quiggin
1998:106).
How much do the deficiencies of per capita
income measures actually matter? The World
Bank noted in the World Development Report for
2000/2001 that as countries become richer, on
average, the incidence of poverty falls, and
other indicators of well-being, such as average
levels of education and health, tend to improve
as well (World Bank 2000:45). Dollar and Kraay
showed, using data for a large number of coun-
tries, that average incomes of the poorest fifth
of society rise proportionately with average
incomes (Dollar and Kraay 2002). Pritchett and
Summers showed that infant mortality and life
expectancy outcomes were much worse on
average in countries with low per capita
incomes than in other countries (Pritchett and
Summers 1996).
However, a study by Easterly has shown
that even though there is a great deal of evi-
dence that indicators of quality of life tend
to be positively associated with high per capita
incomes, there is no consistent pattern of
improvement in quality of life indicators
while countries are experiencing economic
growth (Easterly 1999). The author reached this
conclusion using a panel data set of 81 indica-
© 2009 The Author
 BATES — GROSS NATIONAL HAPPINESS
tors (covering individual rights and democ-
racy, political instability and war, education,
health, transport and communications, inequa-
lity, and a range of other factors, including
crime and environmental pollution) for a
large number of countries, for four time
periods (from 1960 to 1990). He suggests
several possible reasons for this result, includ-
ing the possibility that there may be long lags
between income growth and quality of life
improvements.
Summing up, although there is strong evi-
dence that higher per capita income is gener-
ally associated with higher life expectancy and
improved quality of life, the deficiencies of per
capita GDP may sometimes matter a great deal
when it is used to make comparative assess-
ments of well-being. Even so, there is little
evidence to support the view that GDP is
so fundamentally misleading that it should be
abolished, as one commentator has suggested
(van den Bergh 2007). Despite all its limita-
tions, per capita income provides information
that is relevant to assessing the material well-
being of people at different times and in differ-
ent countries.
Indicators of subjective well-being
Surveys in which respondents are asked to
provide a numerical rating of their happiness
or satisfaction with life (sometimes referred to
as global well-being reports) are the most
common method used to measure subjective
well-being (Frey 2008:18). What are the main
limitations of this data? The most important
limitation for many purposes has to do with
the potential for responses to survey ques-
tions to vary according to the context in
which the question is asked. Schwartz and
Strack have argued that ‘what is being
assessed, and how, seems too context depen-
dent to provide reliable information about a
population’s well-being, let alone information
that can guide public policy’ (Schwartz and
Strack 1999:80). Schwartz and Strack (1999)
cite evidence that:
• People base global well-being assessments
on information that is most accessible at the
7
© 2009 The Author
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
time they make their judgements rather
than on all relevant factors. This means, for
example, that answers to survey questions
can be sensitive to the order in which ques-
tions are asked (p. 63).
• The way accessible information is used to
make global assessments depends on
judgements about how it relates to the
question that is asked. For example, if an
extremely positive event that occurred last
year comes to mind, it could be judged to
impact either positively or negatively on
my assessment of ‘my life now’, depending
on whether I am comparing my life now
with my life 20 years ago or with my life
last year (p. 65).
• Individuals often draw on comparison
information that is made temporarily acces-
sible by the context in which they form
their judgements rather than determined
by relatively stable attributes of the respon-
dent. For example, respondents tend to
assume that the ‘average’ response is rep-
resented by values in the middle range of
the scale of responses that they are asked to
choose from (p. 73).
• Judgements of subjective well-being are
influenced by mood states at the time of
judgement (p. 75).
• Respondents may edit their private judge-
ments of subjective well-being before
they communicate them, for example by
overstating their satisfaction with life in
order to avoid appearing to be negative
(p. 77).
Comparisons of happiness ratings over time
may also be affected by problems that people
have in relating their subjective states to rating
scales. Yew-Kwang Ng makes the point that an
apparently unchanged happiness rating could
hide a very large change in happiness if people
change their descriptions of their subjective
states over time (Ng 2008:254). For example, a
person rating herself initially as ‘very happy’
—at the top of the rating scale—who subse-
quently experienced a large increase in happi-
ness would still have to describe herself as
‘very happy’. With the benefit of hindsight, she
might describe her previous state as ‘not too
happy’.
 ASIAN-PACIFIC ECONOMIC LITERATURE
International comparisons of happiness
ratings may be biased if the words used in
other languages to translate the English words
happy and satisfied do not have exactly the
same meaning. Anna Wierzbicka suggests
that such linguistic considerations pose a
substantial problem. She also suggests that
the reliability of international comparisons of
happiness levels is affected by differences in
cultural norms, for example, relating to the
extent to which people are willing to express
happiness and good feelings (Wierzbicka
2004). However, John Helliwell and others
have found, as a result of their research using
an extensive international database, that (with
the exception of an unexplained boost to
life satisfaction ratings in South and Central
America) international differences in life satis-
faction ratings can be attributed to the social,
institutional and economic circumstances of
life rather than to cultural differences (Helli-
well et al. 2009:11).
More fundamentally, there is the question of
whether interpersonal comparisons of happi-
ness levels are meaningful. The subjective feel-
ings that different individuals associate with
being ‘happy’ or ‘very happy’ might vary a
great deal. But as Bruno Frey suggests, it is
possible that ‘interpersonal comparability may
be less problematic on a practical level than on
a theoretical level’ (Frey 2008:163).
Another possible limitation of the useful-
ness of survey data on happiness and life sat-
isfaction arises because of the potential for
survey results to be biased if respondents
answer questions strategically with a view to
the way information may be used. For example,
if they think survey results will be used to
judge the performance of the government,
some respondents are likely to use their
responses to send messages to the government
about its performance rather than about their
own well-being.
So, in view of these limitations, why does
anyone believe that data on happiness and
life satisfaction is anything more than noise?
Gilbert suggests that the law of large numbers
tends to cancel out the imperfections of
individual reports of subjective well-being.
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
He argues that ‘we can be confident that if we
ask enough people the same question, the
average answer will be a roughly accurate
index of the average experience’ (Gilbert
2006:77).
Gilbert is not impressed by the defence of
the survey measures on the grounds that they
tend to be strongly correlated with more objec-
tive measures of happiness (see, for example,
Brooks 2008:8–9; Layard 2005:17–20). Gilbert
argues that:
The only reason why we take any of these bodily
events—from muscle movements to cerebral
blood flow—as indices of happiness is that
people tell us they are. If everyone claimed to feel
raging anger or thick, black depression when
their zygomatic muscle contracted, their eyeblink
slowed, and the left anterior brain region filled
with blood, then we would have to revise our
interpretations of these physiological changes
and take them as indices of unhappiness instead.
(Gilbert 2006:72)
Some economists take comfort from correla-
tions between happiness ratings and other
variables that can plausibly be claimed to be
associated with well-being. For example, Di
Tella and MacCulloch cite research repor-
ting that unemployed individuals tend to
report relatively low happiness scores. They
comment: ‘This outcome seems reasonable
given that other “bads” like divorce, addic-
tion, depression and violence are correlated
with unemployment. The findings also sug-
gest that happiness surveys are capturing
something meaningful about true utility’ (Di
Tella and MacCulloch 2006:28). Similarly,
Kahneman and Krueger discuss several dif-
ferent kinds of evidence in support of the
validity of life satisfaction data, including evi-
dence that life satisfaction typically increases
immediately following positive changes in
circumstances and decreases immediately
following negative changes. In addition, they
note that a person’s subjective evaluation
of his or her well-being is, to a significant
extent, a personality trait. Identical twins
separated immediately after birth show the
same concordance on happiness, as on other
traits for which a genetic basis is well
© 2009 The Author
 BATES — GROSS NATIONAL HAPPINESS

established (Kahneman and Krueger 2006: gratitude or fortitude. Such considerations

7–9).6
Do self-reports of satisfaction with life as a
whole provide a better indication of well-being
that self-reports of happiness? At first sight, it
might appear obvious that self-reports of satis-
faction would be better for this purpose than
self-reports of happiness. When people are
asked to rate how happy they are, the answers
they give are presumed to relate mainly to
emotional states.7 It would seem reasonable to
suggest that in attempting to assess well-being,
researchers would need to use a concept that
involves more than just a positive emotional
state. Indeed, nearly all empirical work so far
undertaken in economic happiness research
has been based on survey respondents’ global
evaluations of their life satisfaction (Frey
2008:20).
However, an examination of the issues
involved by Dan Haybron, a philosopher, sug-
gests that the relationship between life satisfac-
tion and welfare is far more convoluted than
we might tend to expect. Haybron points out
that attitudes about life satisfaction are not
simple assessments of well-being. They have
an ethical dimension as well: ‘such attitudes
embody, not just our view of how well our
lives are going, but also our sense of how it is
appropriate to respond to our lives’ (Haybron
2007:107). For example, you might be satisfied
with your life, not because it is going well for
you, but because you aspire to such virtues as
would clearly affect use of life satisfaction
surveys to make well-being comparisons
where differing emphasis is given to particular
virtues—for example, in making well-being
comparisons between cultures and over long
time periods.
How do measures of subjective well-being
relate to utility, the concept of well-being con-
ventionally used in economics?8
Conflicting views about the relationship
between utility and survey measures of hap-
piness have recently emerged as economists
have sought to make use of this information.
The first view considered is that the happi-
ness surveys measure utility. For example,
Frey and Stutzer assert: ‘Utility can and
should be cardinally measured in the form
of subjective well-being’ (Frey and Stutzer
2002:43). Under this view, any divergence
between revealed preference and changes
in measured happiness—for example, if a
person makes decisions that lead to a reduc-
tion in happiness—must be attributable to
either poor decision making or inaccurate
measurement of happiness. A recent article by
Clark, Frijters and Shields suggests that if
subjective well-being measures are accepted
as a direct proxy for utility, the traditional
utility function can be readily modified to
incorporate relative considerations that may
account for the failure to observe increases in
average happiness with further increases in

6 However, if we accept survey data at face value, we are left with puzzles when it conflicts with other evidence about
human well-being. The most famous of these puzzles, the so-called ‘Easterlin paradox’, arose from Richard Easterlin’s
observation that despite increases in average incomes, there appeared to be no corresponding increase in average
happiness levels (Easterlin 1973, 1974). Additional data and subsequent research, particularly recent work by Betsey
Stevenson and Justin Wolfers, has greatly reduced the extent to which any part of this puzzle remains to be explained
(Stevenson and Wolfers 2008:1).
7 This is explicit in the Fordyce Emotions Questionnaire, used by psychologists, including Martin Seligman, in which
respondents are asked to rate their level of happiness from ‘extremely happy’ to ‘extremely unhappy’, and to indicate the
percentage of time in which they feel ‘happy’, ‘unhappy’ and ‘neutral’ (Seligman 2002:15).
8 Many economists use the terms ‘utility’ and ‘happiness’ interchangeably, as did Jeremy Bentham when he wrote: ‘By
utility is meant that property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness,
(all this in the present case comes to the same thing) or (what comes again to the same thing) to prevent the happening
of mischief, pain, evil, or unhappiness to the party whose interest is considered’ (Bentham 1789:I.III). When economists
speak of an additional unit of good A providing more utility to some person than an additional unit of good B, however,
they are not necessarily making any claims about the psychological states that might result from consumption of
additional units of A or B. The point was made clearly by Irving Fisher in 1892 when he stated: ‘the conception of utility
has its origins in the facts of human preference or decision’. He explained: ‘No-one ever denied that economic acts have
the invariable antecedent, desire. Whether the necessary antecedent of desire is “pleasure” or whether independently of
pleasure it may sometimes be “duty” or “fear” concerns a phenomenon in the second order remove from the economic
act of choice’ (Fisher 1892/1925:11).

© 2009 The Author

Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
 ASIAN-PACIFIC ECONOMIC LITERATURE
income in high-income countries (Clark et al.
2008:136–7).
Other researchers are opposed to the view
that any divergence between revealed pre-
ference and changes in happiness must be
attributable to either poor decision making
or inaccurate measurement of happiness. For
example, I have previously suggested that
successful pursuit of personal goals, such as
having children, is not reflected in measures
of life satisfaction, because parents often look
forward to satisfaction for decades to come
when they decide to have children, whereas
immediate sacrifices loom large when parents
appraise their current life satisfaction (Bates
2004:14). Gary Becker and Luis Rayo have
recently presented a more general argument
that it is plausible for people to follow courses
of action that would reduce their happiness but
nevertheless increase their utility. They suggest
that happiness should be viewed as a com-
modity in the utility function in the same way
as health (Becker and Rayo, 2008:89–90).
How can measurement of subjective well-
being be improved? Better measurement
seems likely to require movement beyond the
current practice of reliance on global ratings of
happiness or life satisfaction. For example,
Emma Samman suggests that current practice
‘largely overlooks more robust measures of
psychological well-being’ (Samman 2007:5).
In arguing for a broader approach, she has
proposed that international comparisons of
well-being be based on previously tested
indicators covering psychological well-being
and domain-specific life-satisfaction, as well
as overall life satisfaction and happiness. The
domain-specific questions would cover satis-
faction with material well-being, health, pro-
ductivity, security, community and spiritual
well-being.
Composite indexes of human
well-being
When people want to obtain an overall picture
of well-being, it often makes good sense to
look at a suite of indicators rather than to rely
exclusively on particular indicators, such as
10
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
per capita GDP or average life satisfaction.
This approach can be pursued systematically,
for example, using an approach adopted by
the Australian Bureau of Statistics (ABS 2006).
The ABS has identified three domains of
progress—economy, society and environment
—and has provided indicators for various
dimensions of progress within each of these
domains.
The ABS claims that its approach ‘provides a
digestible selection of statistical evidence that
will allow Australians to make their own
assessment of whether life in Australia is
getting better’ (ABS 2006:6). This approach
avoids imposing a particular set of values
(weights) in order to provide a single compos-
ite indicator of national progress. It is consis-
tent with the view that attempts to develop a
single composite indicator of national progress
are fundamentally misconceived because there
can be no single answer to the question of
whether life in most countries is getting better
or worse (Castles 1998:352).
Such views have not discouraged attempts
to develop composite indexes of the quality of
life and human development. One possible
reason for the development of composite
indexes is a belief that the blending of compo-
nents together makes a statistical feast more
easily digestible. An alternatively possibility,
given some support in remarks by Amartya
Sen, is a desire to compete with the ability of
GDP numbers to grab public attention (Sen
1999:318, n41).
The best known composite indicator of
human well-being is the Human Development
Index (HDI) developed by the United Nations
Development Program (UNDP) and presented
in the Human Development Report, since its
inception in 1990 (UNDP 2006:263). The HDI
gives equal weight to three dimensions of
human development: living a long and healthy
life (measured by life expectancy), being edu-
cated (measured by adult literacy and enrol-
ment at the primary, secondary and tertiary
level) and having a decent standard of living
(measured by per capita GDP at purchasing
power parity). As improvements in life expect-
ancy and education are usually closely asso-
ciated with economic growth, it is hardly
© 2009 The Author
 BATES — GROSS NATIONAL HAPPINESS
surprising that high-income countries tend to
have high HDI ratings.
Sen, who contributed to the development of
this index, has suggested that while it is useful
‘in rough and ready work’, it would be ‘a great
mistake to concentrate too much’ on the HDI
‘or on any other such aggregative index’ (Sen
2000:22).
The major conceptual problem in construct-
ing composite indexes is in deciding what
weight, if any, should be given to various
factors that are relevant to well-being or human
development. Sen has argued strongly that
what weights may emerge ‘is ultimately a
matter for social choice’ supported by ‘enlight-
ened public discussion’ (Sen 2000:21).
Although transparent weights that emerge
from an enlightened social choice process
are likely to be viewed widely as having
greater legitimacy than value judgements of
technicians, the judgements of individuals—
determined using survey techniques—could
be viewed as having even greater legitimacy. In
this context, it is worth noting that the National
Statistical Coordination Board of the Philip-
pines is proposing to ask individuals to iden-
tify domains of happiness from a list and
assign weights to each domain in the process
of deriving a happiness index (Virola and
Encarnacion 2008).
Measurement of GNH in Bhutan
The Centre for Bhutan Studies has recently
constructed a GNH index that is intended to
‘provide appropriate indicators for Bhutanese
development’ (Ura 2008). The way this index
has been constructed reveals a great deal about
the way GNH is now perceived in Bhutan.
Rather than attempting to obtain a measure of
aggregate happiness or average happiness,
researchers have sought to measure the extent
that the attainments of members of the popu-
lation approach a ‘sufficient level’ in a range of
dimensions. The underlying philosophy seems
to be that a range of minimum conditions must
be met before a person can be considered to be
happy.
11
© 2009 The Author
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
The nine dimensions of well-being incorpo-
rated in the index are: psychological well-
being, time use (whether respondents feel that
they have sufficient time for various non-work
activities), community vitality (strengths and
weaknesses of relationships and interactions
within communities), culture (diversity and
resilience of cultural traditions), health, educa-
tion, environment (perceptions and ecological
knowledge), living standards, and governance
(perceptions of equity, honesty, and quality).
These dimensions ‘were selected on normative
grounds, and are equally weighted, because
each dimension is considered to be relatively
equal in terms of equal intrinsic importance as
a component of gross national happiness’ (Ura
2008).
The construction of the index gives greater
weight to large deficits in any dimension than
to small deficits or shortfalls in several dimen-
sions. This means that a large deficit in any
particular dimension has a magnified negative
impact on the GNH index. The sufficiency
cut-off points for particular dimensions could
thus have a substantial impact on the results
obtained. However, current cut-off points
may not be chiselled in stone, as Ura notes
that each cut-off point ‘is a value judgement,
which can be a topic for public discussion’
(Ura 2008).
The method of construction of the GNH
index is an adaptation of one developed by
Sabina Alkire and James Foster for research into
multidimensional aspects of poverty (Alkire
and Foster 2008). Use of this methodology
enables the GNH index to be decomposed in
various ways; for example, to indentify which
dimensions show the highest shortfalls for par-
ticular regions or language groups. Ura com-
ments that this characteristic makes the index ‘a
good tool for tracking changes across time, or
for guiding policies to address specific needs of
different groups efficiently’ (Ura 2008).
Preliminary estimates of the GNH index
have been published using pilot data (Alkire
et al. 2008). The data collection process is
much more thorough than that usually associ-
ated with happiness research. Ura notes that
the pilot survey questionnaire was found to
be too lengthy and was pared down to enable
 ASIAN-PACIFIC ECONOMIC LITERATURE
interviews to be conducted in half a day. He
reports that 950 respondents were interviewed
in 12 districts (Ura 2008).
In my view, Bhutan’s GNH index is an
impressive contribution to measurement of
human well-being. However, it is not yet clear
to what extent the judgements implicit in its
construction reflect the values of the people of
Bhutan: whether they reflect a consensus on
such matters as the dimensions of well-being
that are important and the weighting that
should be given to each dimension, as well
as the determination of the cut-off points for
sufficiency in each dimension. It also unclear
whether there is a consensus view within
Bhutan that if a greater number of people attain
excellence, rather than just sufficiency, in
particular dimensions of well-being that this
makes no contribution to GNH.
Summary and conclusions
Different views have been expressed on
whether maximising the sum total of human
happiness would be an appropriate govern-
ment objective. One of the problems discussed
in the literature is that maximising aggregate
human happiness could involve governments
in encouraging large increases in population,
even if members of this much larger popula-
tion lived lives that were barely worth living.
This suggests that we cannot assume that the
outcomes of government decisions made to
maximise aggregate happiness are necessarily
superior to the outcomes of decisions made by
individuals and families without government
intervention.
Problems associated with adopting maximi-
sation of aggregate happiness as a government
objective do not rule out the goal of promoting
peaceful cooperation among individuals pur-
suing their own diverse goals in life. There is
obviously no consensus about the role of gov-
ernment in society, but the surveyed literature
suggests that recognition of the desirability
for governments to promote conditions in
which individuals can succeed in striving to
achieve worthwhile goals, provided they give
12
Journal compilation © 2009 Crawford School of Economics and Government,
The Australian National University and Blackwell Publishing Asia Pty Ltd.
appropriate consideration to the well-being
of others, is not confined to individualistic
western culture.
Efforts to measure happiness or well-being
do not necessarily presuppose maximisation of
aggregate happiness. Such efforts can be useful
in considering the effects of different institu-
tions or policy approaches wherever happiness
and well-being are valued.
A range of approaches to measurement of
happiness and well-being have been consid-
ered, including national accounting indicators
such as GNP and GDP. Such indicators are the
most commonly used measures of material
well-being, despite claims that they were never
intended to be used in this way.
The problems associated with the con-
ventional national accounting measures have
been widely discussed. They include failure to
account for most nonmarket household pro-
duction, leisure, changes in natural resources
and human capital, external costs and benefits
of production, and income distribution.
We have to learn to live with the fact that the
national accounting measures have important
deficiencies. While progress has been made in
dealing with some measurement deficiencies
in particular studies, attempts to overcome all
problems within a national accounting frame-
work would involve an unacceptable sacrifice
of measurement accuracy to produce results
that are likely to be sensitive to controversial
assumptions.
The deficiencies of per capita income should
not be exaggerated, however. There is strong
evidence that higher per capita income is gen-
erally associated with higher life expectancy
and improved quality of life.
Surveys in which respondents are asked to
provide a numerical rating of their happiness
or satisfaction with life provide an alternative
approach to assessment of well-being. On the
basis of the literature considered, however,
such measures could hardly be viewed as
having greater reliability than those derived
from national income accounting.
If we accept happiness ratings at face value
we are left with the question of how these
ratings relate to the concept of well-being
(utility) used in economics. Some researchers
© 2009 The Author
 BATES — GROSS NATIONAL HAPPINESS
have viewed such ratings as a direct proxy for
utility, whereas others have argued that happi-
ness, as an emotional state, should be viewed
as a commodity in the utility function, in the
same way as health.
Some researchers have suggested that
better measures of subjective well-being can
be obtained through more extensive use of
complex questionnaires that seek to measure
psychological well-being and satisfaction with
various aspects of life including material well-
being, health and relationships.
Various attempts have been made, with
varying levels of success, to develop composite
indicators of human well-being to supplement
or replace conventional national accounting
indicators. All such indicators, including the
widely used HDI, involve judgements about the
items included and the weights given to each
item. There may be merit in an approach being
adopted in the Philippines that allows survey
respondents to identify items affecting their
well-being and to assign weights to those items.
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