As Buddhists, our economic policies should aim to reduce suffering. As economists we know that if we want to reduce something, we need to measure it first. But how do we measure national suffering? Can we find the Gross Domestic Suffering of a country?
The opposite term, Gross Domestic Happiness, was coined in 1972 by Bhutan’s fourth Dragon King, Jigme Singye Wangchuck. Jigme made the term up off the cuff in conversations with western economists while discussing Bhutan’s economic progress and goals. By making this half joke he did something very dramatic.
The dragon king asserted his Buddhist identity in a room of “experts” who did not value it, he put a spark to a powder keg of latent dissatisfaction with assessment of economic welfare in rich countries, and he showed the economists that they were like the Zen scholar when the Zen master poured the scholar’s cup of tea to overflowing said:
Like this cup, your mind is already full with thoughts and opinions and have no space for new learning.
The term Gross Domestic Product or GDP was coined by Simon Kuznets for a US Congress report about forty years earlier in 1934. In the same report Kuznets warned that this measure was a poor measurement for economic welfare. It ignores economic inequality and as well as any psychological and social dynamics of welfare. Nevertheless, GDP per capita (total production divided by the number of people) became the dominate measurement for economic welfare, wellbeing, and progress the world over.
Let’s look at why GDP was adopted so broadly, and why no it seems to no longer makes much sense in advanced economies. Is the GDH a good alternative? Could there be other alternatives? I will present my own alternative, a new Buddhist Economics metric: Gross Domestic Suffering or GDS.
By looking at the reasons why GDP came to prominence will give us a better understanding of how to replace it with something better.
- GDP is much easier to calculate than GDH. A room of economists can simply tabulate one of the three statistical aggregates: total production, total income, or total expenditure. The GDH on the other hand is a survey of seven wellness factors including physical, workplace, environmental, etc that takes 7 hours to complete measuring the “happiness” of a single person.
- The GDP is easy to interpret; its just one number. However the results the GDH are tabulated into a complex and multifaceted report.
- GDP might seem sort of irrelevant for advanced economies, but was not a terrible measure of economic growth and even a decent proxy for wellbeing when it was created.
The term Gross Domestic Production suited its purpose when it was created and still largely works for poor countries. In 1934 when Kuznets coined the term the US was recovering from a terrible economic depression and needed metrics to quantify the impacts of centralized economic programs like the New Deal. The New Deal was very expensive, and it was very important to understand if it was working. Moreover “increased wellbeing” was pretty straightforward back then. A slew of wonderful mechanical and electrical machines including household appliances, lights, telephones, washing machines, refrigerators, water heaters, etc had been invented and just needed to be spread around. The faster these appliances were distributed and wired up to an electrical grid, the better.
Developing and third world countries today are in a similar situation. Their governments generally need a measuring rod for their modernization efforts. Also, just like America in the 1930's all the appliances, electricity, and now telecommunications are invented and economic development really is just distributing them to people. Anyone who wants to argue that this “doesn’t really increase their welfare” should consider among many other examples that laundry machines allow a new generation of women around the world go to school instead of hand washing clothes.
Developing countries today universally use a more modern form of the GDP called the Human Development Index or HDI which is published by the UN and is slightly better than the GDP since it measures roughly wealth, education, and health.
HDI = GDP + Literacy + Life expectancy
HDI is easy to calculate with standard national statistics, but it does not provide substantially more insight into psychological or social wellbeing like the GDH.
GDP (or even the HDI) no longer seem to measure economic wellbeing in advanced economies. Why is this? Remember that in poor underdeveloped countries economic growth boils down to distributing existing appliances and building out access to education, healthcare, and telecommunications. In advanced economies these things are already (largely) built out and (more or less) distributed. Hence, in advanced economies, no one knows what the next step in our economic development will be, whether its artificial intelligence algorithms or personal robots or something we can’t predict, and we know that in advanced economies wellbeing increases dramatically when there is a better distribution of the wealth we already have.
Gross Domestic Happiness presents itself as an alternative, but it has problems. I mentioned before that GDH is hard to scale to a national level because it would take tens of thousands of hours to survey a sample.
What GDH reveals is hard to translate into concrete improvements. If you find out that people are socially unhappy because they are not forming and maintaining meaningful relationships, now what? How do you translate that into an improvement? You have to research why people are not forming and maintaining relationships. What if you find that its because people move a lot. Are you going to make moving illegal or tax it? Or what if you find its because they are on their cell phones too much? Are you going to ban or tax cell phone usage in some way? No.
Finally, the GDH is really not that Buddhist. Strange as it may sound, Buddha teaches the reduction of suffering, and only as a consequence thereby the increase of happiness. Trying to define happiness objectively and then cultivating it is not what the Buddha proscribed. He did exactly the opposite by defining suffering and trying to reduce it.
As Buddhists our economic policies should aim to reduce suffering.
So what would Gross Domestic Suffering look like? Can we build one right here and now? Let’s start with a baseline of suffering.
HDI is a rough indicator of wealth, health, and education, so if we’re interested in suffering, we can take the inverse of the HDI times 1000 to get a baseline of the total poverty, sickness, and ignorance of a country.
IHDI = 1/Human Development Index * 1000
This strikes me as a good first step, especially since Siddhartha’s first encounter with suffering was sickness, old age and death. Here we have the three that perhaps a modern Siddhartha would encounter in the world: poverty, sickness, and ignorance.
Next we’ll use a measure of inequality called the 20:20, 20/20, or Quintile Ratio that represents ratio between the incomes of the bottom 20% and the top 20% of income earners. So Japan and Sweden (very equal countries) the incomes of the rich are only 3–4x those of the poor, where the UK and US the incomes of the rich are 8–9x larger. The special thing about the 20:20 ratio is it correlates very strongly with many modern social evils like teen pregnancy, infant mortality, and crime. To understand the 20:20 Ratio’s relationship to misery better watch this TED talk by Richard Wilkinson:
Next we will include the suitably appellated Misery Index like a bitter cherry on top of our suffering sundae. The Misery Index is simply the inflation rate plus the unemployment rate. When it’s high, things are expensive and no one has jobs, when its low, things are cheap and everyone is employed. The index was created by Arthur Okun in the 1940's to better quantify the psychological misery caused by the economics of the Great Depression. We will use the current (but rarely reported) U6 measurement of unemployment that includes all able-bodied but under- or unemployed people. The U6 number is still a bit of an optimistic number though because it does not include folks forced into early retirement or who opt for disability.
Finally, since gender inequality is a widespread cause of economic suffering for women, we must include the Gender Inequality Index. The index has three parts: reproductive health, empowerment, and labor market participation. It comes as a number between 0 and 1 so to get a good multiplier of suffering, we subtract 1 and take its inverse. This means that if your country scores a .5 then your country’s total suffering doubles because half the population is being repressed.
IGII = 1/(1-Gender Inequality Index)
So now we start with the inverse of the HDI, multiply that by our GII variable, then mutiply that by the 20:20 Ratio, and then multiply all that by the Misery Index, voilà, we get what I think is a nice number for Gross Domestic Suffering or GDS.
HDI * GII * 20:20 Ratio * Misery Index
A few observations about this index:
Unexpected Outliers—The wonderful thing about data is when you slice it a new way you see something new, like when you see a star when you cut an apple across the middle. Likewise, this new index reveals some interesting insights and confirm common sense intuitions about the economic suffering in various countries:
“America is experiencing more economic suffering than usually reported because although we are a rich country, and have moderate inflation and unemployment, our gender equality is not in the top 25 and and we suffer from relatively high economic inequality. We should make a commitment to get into the top 10 of the GII and face our problem of economic inequality.”
“African and many South American countries are experiencing enormous economic suffering.”
“Sweden is a country that experiences a low amount of economic suffering largely because they are a rich country, with excellent gender equality, low inflation, and extremely good equality, nevertheless they do experience economic some economic suffering since they have high unemployment. They could make policies to increase employment, innovation, and entrepreneurship.”
“Qatar is experiencing more economic suffering than normally reported since even though the economy is growing like crazy and unemployment is near zero, gender inequality issues are huge (.540 on GII), and they have extremely high economic inequality (13.3). Along with their economy growth, they should make a commitment to gender and economic equality”
I am pleased with this the new Gross Domestic Suffering index. It seems to me to be a rough-and-ready number for economic welfare. I hope it is used by development agencies, governments, and politicians in Buddhist and non-Buddhist countries around the world.
Data Sources:
HDI: http://hdr.undp.org/en/content/table-3-inequality-adjusted-human-development-index
Quintile Ratio: http://hdr.undp.org/en/content/income-quintile-ratio Gender Inequality Index: http://hdr.undp.org/en/content/gender-inequality-index-gii
Inflation: http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG/countries/1W?display=default
Unemployment: http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS
