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Happiness and wellbeing trump material growth

Report supported by former cabinet secretary Gus O'Donnell, calls for new policy direction that prioritises wellbeing and happiness over GDP growth

Happiness is more important than GDP. This will not be a surprising statement for many, but what is surprising is that the statement comes from the former head of the civil service, permanent secretary to the Treasury and UK member of the IMF, Lord Gus O'Donnell. The statement coincided with the launch of the Wellbeing and Policy Report, commissioned by the Legatum Institute.

The idea of putting happiness at the heart of our economy is not new, but is not the focus of mainstream policy or culture in western economies. We have long been led to believe that GDP growth is ultimately the measure of a country's progress, creating jobs, investment and production of goods and services. However, our focus on spending our way to happiness is not borne out either by people's experience or by the statistical evidence.

The Legatum Report calls for a new policy direction that puts wellbeing at the core of economy and society. It shows that people are much happier in strong communities where trust is high and that mental health is the single biggest factor explaining cross sectional variation in life satisfaction. The core message that money does not buy happiness is borne out by many other studies. For example, a YouGov poll recently commissioned by Action for Happiness revealed that the majority of British people (87%) would choose happiness for their society rather than money (chosen by only 8%).

According to the same poll, when asked to choose the three most important factors for personal happiness, "relationships with my partner/family" came out top (80%), with "my health" in second place (71%) and "money" third (42%). "My possessions" polled a mere 4% of votes.

This is not a purely a British phenomena. Richard Wilkinson and Kate Pickett in their highly acclaimed book, The Spirit Level found that behind the economic growth statistics lies a more important trend. We now know that "economic growth and increases in average incomes have ceased to contribute much to wellbeing in rich countries". What is far more important in indicating level of happiness is the level of income inequality. Across countries and over time, they revealed a consistent finding that reducing inequality is the best way of improving the real quality of life in developed economies.

This shift in focus from material growth to equality and wellbeing goes to the heart of the concept of Gross National Happiness (GNH). GNH is more than a concept, it is a living experiment in an alternative development path pursued by Bhutan. Dr Tho Ha Vinh, programme director of the Centre of Gross National Happiness in Bhutan was invited to share the country's experience in GNH with participants at a recent course in the economics of happiness at Schumacher College in South Devon.

The definition of GNH from the first elected prime minster of Bhutan is clearly different from our popular understanding of "happiness", in our popular culture linked to feeling good, leisure and pleasure.

"We have now clearly distinguished the 'happiness'… in GNH from the fleeting, pleasurable, 'feel good' moods so often associated with that term. We know that true abiding happiness cannot exist while others suffer, and comes only from serving others, living in harmony with nature, and realising our innate wisdom and the true and brilliant nature of our own minds."

So, what is the Gross National Happiness Framework initially developed in Bhutan that is now having influence all over the globe? The Framework is based on the four pillars of preservation of the environment, preservation and promotion of culture, sustainable and equitable socio-economic development and good governance. The pillars are further refined into nine domains and a weighted index of 33 indicators.

This may seem familiar territory to many, with the growth of alternative socio-economic indicators. But what is different, is that in Bhutan the framework is also the country's development strategy and is actively used as a policy screening tool and as a guide to allocating government resources. For example, the government recently based its decision not to join the World Trade Organisation using the screening tool.

It is also about a shift of consciousness. When the king of Bhutan announced that growth in Gross National Happiness is more important than growth in Gross National Product, this represented a shift in consciousness beyond seeking satisfaction in material goods and services, towards finding happiness and wellbeing in our inner world. This wasn't taken seriously in the 70s, but now there is an explosion of interest in alternative development models – and GNH in Bhutan in particular. For example, the UN General Assembly's resolution 65/309 was initiated by Bhutan, entitled Happiness: Towards a Holistic Approach to Development, July 2011.

Let's hope that this renewed focus on the primary importance of psychological health and social wellbeing will shift the trajectory of our economies towards greater prosperity and wealth beyond material growth.

Julie Richardson is a senior lecturer in economics for transition, a postgraduate programme run in partnership between Schumacher College and Plymouth University

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The Commission on Wellbeing and Policy
(L-R) Gus O'Donnell and David Halpern

It is widely agreed that GDP is an important yet insufficient measure of national success. In an attempt to broaden the scope for public policy analysis, a lot of progress has been made on developing the measurement of individual wellbeing, but a lot remains to be done on how best to apply these data to policymaking. The Commission on Wellbeing and Policy works to fill this gap and explore how wellbeing analysis can be usefully applied to policy.

Chaired by former UK Cabinet Secretary Lord O’Donnell, the Commission, which ran for approximately one year, produced a final report that illustrates the strengths and limitations of wellbeing analysis and provides original and authoritative guidance on the implications for public policy.

Wellbeing and Policy - Full Report

March 2014

Wellbeing and Policy - Full Report [Download PDF]

Published by the Legatum Institute

Wellbeing and Policy - Executive Summary

March 2014

Wellbeing and Policy - Executive Summary [Download PDF]

Published by the Legatum Institute

The final report was launched in Berlin on Thursday, 20 March 2014 (summary), followed by a livestreamed London launch on Friday, 21 March 2014 (summary).

The Commission was politically independent, and includes an international perspective in its work.

“The Commission on Wellbeing and Policy looks at how wellbeing can have real and practical policy implications on the individual level, the community and regional level, and at the national and global level. Wellbeing research is a fantastic new growth area. Together with the Legatum Institute, we are going to make this the driver of policy and governments.”

-Lord O'Donnell, Chair of the Commission on Wellbeing and Policy

The Commissioners

   Gus O'Donnell (Chair)

Lord O’Donnell, currently Chair of Frontier Economics, was the Head of the Civil Service and Cabinet Secretary between 2005 and 2011. Prior to that he served as Permanent Secretary to the Treasury between 2002 and 2005. Additionally he undertook the position as the United Kingdom’s Executive Director at the International Monetary Fund and the World Bank, and has served as Managing Director of Macroeconomic Policy and International Finance at HM Treasury. In January of 2012 he received a peerage and took his seat in the House of Lords. Lord O’Donnell was a Lecturer at the University of Glasgow before joining the civil service and received his M.Phil from Nuffield College, Oxford and his Bachelor’s degree from the University of Warwick.

   Angus Deaton

Angus Deaton is the Dwight D. Eisenhower Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs and the Economics Department at Princeton University. He has published numerous papers which examine the relationship between income and wellbeing and how best to measure wellbeing. Most recently, he is the author of The Great Escape: Health, Wealth and the Origins of Inequality. He is a fellow of the Econometric Society, the British Academy, the Royal Society of Edinburgh and the American Academy of Arts and Sciences. He holds honorary degrees from the Universities of Rome, London, Edinburgh, and St. Andrews. Prior to Princeton he was Professor of Econometrics at the University of Bristol.

   David Halpern

David Halpern is the Chief Executive of Behavioural Insights and Board Director. He has led the team since its inception in 2010. Prior to that,
David was the founding Director of the Institute for Government and between 2001 and 2007 was the Chief Analyst at the Prime Minister’s Strategy Unit. Before entering government, David held tenure at Cambridge, Oxford and Harvard and has written several books and papers on areas relating to behavioural insights and wellbeing, including as a co-author of the MINDSPACE report and the Hidden Wealth of Nations.

   Martine Durand

Ms. Durand is the Chief Statistician and Director of the OECD Statistics Directorate. She oversees the organisation’s statistical activities and is responsible for the work on the measurement of wellbeing and societal progress and the biennial flagship report How’s Life? Measuring Well-Being, as part of the OECD Better Life Initiative. Prior to this position she was Deputy-Director of Employment, Labour, and Social Affairs at the OECD. She has authored numerous papers on wellbeing, labour markets, social policies, and international migration. She studied
mathematics, statistics, and economics from Paris VI University, École Nationale de la Statistique et de l’Administration Économique and the
University of Wisconsin-Madison.

   Richard Layard

Lord Layard is the Director of the Wellbeing Programme in the Centre for Economic Performance at the London School of Economics. He is the author of the influential book titled Happiness, which argued that social progress should be judged by the extent of happiness and misery. He is a leading authority in the growing debate on happiness and economics. He is also well known for his earlier work on unemployment and inequality. He was educated at King’s College, Cambridge, and the London School of Economics and Political Science.


Video - Panel Discussion (21 March 2014)

Video Interview - Lord O'Donnell

Video Interview - Martine Durand


Video Interview - Angus Deaton

Video Interview - David Halpern

Video Interview - Lord Layard

Further Reading

[Report Calls for Wellbeing to Be At the Heart of Public Policy Design - Press Release]

Below are links to a series of short videos filmed at the start of the Commission, outlining the scope and objectives of the Commission on Wellbeing and Policy.


Photo: Monks play volleyball in Bhutan, where the Gross National Happiness Framework was developed.
Photograph: Str/REUTERS