How can a disaster like the BP oil spill be seen as a good thing? Consider that it had a positive effect on the US GDP because of all the necessary recovery work. Perhaps incongruities like this are what spurred several western countries to explore defining their prosperity in ways other than GDP, weighing factors such as wealth, crime, housing, and inequality. This new "happiness index" could more accurately measure a nation's growth and economy, and, more importantly, how stable and sustainable it is.

Written by
Simon Rogers
September 2011

Teaching British civil servants how to be happy is not what you’d expect from a Pennsylvania professor of psychology. But helping Whitehall understand well-being is precisely what Marty Seligman was doing this summer in London.

Seligman has a history of getting into tricky places. The expert in positive psychology was hired by the US Army to develop a ‘resilience program’ to help soldiers cope better with the stress of combat. Now he’s trying to help the rest of the world become content. And governments are listening.

As recession bites hard in the major economies, governments are trying to find new ways of judging their societies – not by the amount of money they generate, but by the happiness of their citizens. In February 2012, experts from the world’s most developed countries will gather in Paris for a key summit on the issue. The brightest minds are spending time, money, and effort trying to make something they don’t fully understand yet actually work. “You cannot capture happiness on a spreadsheet,” said British Prime Minister David Cameron. So why bother at all?

Until now, our lives have been ruled by one measure: Gross domestic product, or GDP. A recession, for instance, is defined as two consecutive quarterly falls in GDP – but what does that actually mean?

The idea of a single number to show a country’s economic power came from US economist Simon Kuznets. It was 1937, and the US was emerging from the Great Depression. Kuznets’ idea, presented to Congress that year, was simple: Measure all production by companies, people, and government. That would give a big number that represented everything the economy produced. It would go up in good times, and down in bad.

What GDP misses, however, is arguably more important than what it includes. Robert Kennedy argued that GDP “does not allow for the health of our children, the quality of their education, or the joy of their play. It measures neither our wisdom nor our learning; neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.” Even Kuznets agreed that “the welfare of a nation can scarcely be inferred from a measure of national income.”

And it is a perverse measure. Because GDP is all about production, it doesn’t take account of the state of the environment, inequality between rich and poor, the value of an individual economy’s assets, and how sustainable the growth actually is. If you have a major disaster, such as the BP oil spill in the Gulf of Mexico for instance, it will actually have a positive effect on GDP as the economy works to recover.

It is the baleful influence of GDP that motivates the godfather of well-being, Professor Joseph Stiglitz. The Nobel Prize-winning former World Bank Chief Economist and Columbia professor points out that an obsession with GDP actually helped push the US into the housing bubble that burst so spectacularly. “In the years before the crisis, many people in Europe were saying they ought to follow the American model as GDP growth was greater. As an American, I was a little bit sensitive to some of the weak points – the fact that most Americans were worse off year by year, our growth was based on a bubble, and prices were distorted,” he says.

The answer is to measure something else – but something broader than ‘happiness.’ Happiness is intangible; well-being, on the other hand, is measurable in the same way that our economy is.

It was French president Nicolas Sarkozy who asked Stiglitz to look at other ways to measure how well a nation was doing as part of the country’s presidency of the Organisation for Economic Co-operation and Development (OECD). Well-being is now being examined in the US, Canada, Australia, France, Italy, and Spain. There are parliamentary commissions looking into the issue in Germany, Norway, and Denmark. The OECD has also launched its Better Life Index, where users can go online to compare countries across a range of indicators from wealth and crime to housing and inequality.

In the UK, David Cameron has taken a personal interest in the issue, ordering national statistician Jill Matheson of the Office for National Statistics to organize a $3.2 million-a-year project to work out how to measure well-being. The UK project is led by policy wonk David Halpern, a key part of Cameron’s Downing Street brain trust and head of the Behavioural Insight Team. Halpern previously worked for Tony Blair’s Labour administration.

Happiness is intangible; well-being, on the other hand, is measurable in the same way that our economy is.

While Blair debated the issue and ordered research, very little actually happened. But Cameron, watching from the Opposition benches, took it all in. Halpern says the project “has a profoundly democratic element to it because it’s driven by what people really want. Only a small part of your life is spent in paid employment,” he adds. “When we spend time with our friends or watch TV, those things are very consequential but we don’t measure them.”

For Jill Matheson, it’s a chance to make a difference. The ONS has already started surveying 200,000 people about their level of fulfillment, anxiety, and stress – the so-called ‘subjective’ measures – in its annual Integrated Household Survey. She has also produced a major report into how to look at ‘objective’ measures – wealth, income, childhood, and inequality. In October this year, the ONS will produce a detailed report on how it proposes to measure these factors.

Matheson dismisses the media’s verdict that this subject is ‘woolly,’ giving results that will be ill-defined compared to the hard data gathered by GDP. “It puzzles me,” she says. “I don’t know what is woolly about asking people about their lives; you can measure these things. When people start seeing results, that label will disappear.” Marty Seligman agrees that it can be measured “about as well as schizophrenia, depression, and alcoholism. [It’s] far from perfect, but psychometrically respectable.”

But it seems unlikely that we will ever get a single ‘happiness index’ – one number that shows how happy we all are in the way GDP shows our wealth. Not least because the international community could never agree on one. “We’re a long way off a single indicator,” says Matheson.

Stiglitz agrees, and doesn’t believe there should ever be one. “No single indicator would be adequate to describe what’s going on,” he says. “If you were driving you might want to know two things: How fast you’re going, say 50 miles per hour; and how far you can go without running out of gas, say 150 miles. While each of those two numbers is individually very meaningful, if you add them together you would have a figure that was totally meaningless.”

But how can you get politicians and – more importantly – their treasuries to take notice? According to David Halpern, having a well-being measure could have a powerful influence on policy. For example, take moves by central government in the UK to cut costs by closing post offices. “Post offices are expensive, so the answer has been to shut them down. But do they do something else, which we don’t capture?” Halpern asks.

Confounding the suggestion that the well-being debate is an idea for the rich West, Stiglitz argues that it is even more important for developing nations. For instance, a company destroying a country’s environment could pump up that country’s GDP, leaving very little money going back into the economy, and thus damaging national well-being. “Some of the biggest disparities between GDP and well-being occur in developing countries,” he says.

Marty Seligman, whose positive psychology theories are being trialed in both US and UK schools, says the moves are encouraging but may not go far enough. Talking about the UK in particular, he says: “Number 10 is seriously interested in the measurement of well-being and the possibility of judging public policy by its effect. It is scientifically informed, which is a good first step. But well-being for a nation, or flourishing for an individual, is more than just the subjective judgment of life satisfaction.” This is Seligman’s PERMA theory: Positive Emotion; Engagement; Relationships; Meaning; and Accomplishment.

Ask the well-being experts what makes them happy and the answers are diverse. For Jill Matheson, it’s seeing her soccer team, Derby County, win (“Which probably implies that I’m a pretty miserable bugger”). For Marty Seligman, it’s the fact that he’s about to watch The Sound of Music at home with his family and then play internet bridge.

And Joseph Stiglitz? Family, of course, and work – he’s just back from a high-level visit to crisis-ridden Greece, Egypt, and Spain. “One of the things that money contributes most to my well-being is the security that it gives me,” he says, “especially when I compare myself to people who are at the margin and I see their constant struggle to make ends meet, and how absorbing it is of their energies.”

But what does he do to relax? Photography, it turns out. “I like taking pictures,” he says. Then he laughs. “But I don’t have time.”