Beyond GDP: happiness and well-being measures

Detail

1. Why look beyond GDP?

• GDP (Gross Domestic Product) is the market value of all final goods and services produced inside a country in one year. It measures output, not welfare.
• NCERT (Class 12, National Income Accounting) warns that GDP is a poor welfare index for three reasons:
• Distribution: GDP can rise while most income goes to a few people.
• Non-monetary exchanges: unpaid housework and barter are not counted.

• Externalities: harm such as pollution is not subtracted.

• NCERT (Class 10, Development) makes a related point. People want more than income: equal treatment, freedom, security, respect, and a clean environment.

• So the measures below all track outcomes people actually experience (health, trust, freedom, satisfaction, livability) rather than output produced. This is the same idea behind HDI (Section 3).

2. Gross National Happiness (GNH), Bhutan

• GNH is both a development philosophy and an index. It says a country should aim for its people's happiness and well-being, not just more production.
• Origin: in the 1970s, the 4th King, Jigme Singye Wangchuck, said that "Gross National Happiness is more important than Gross National Product."
• Constitutional status: it is written into Article 9 of Bhutan's 2008 Constitution. The State must promote conditions for the pursuit of GNH.

• The UN notes that in 2008 Bhutan put GNH into its constitution as the government's main goal, in place of economic indicators like GNP [4].

• GNH Index, built by the Centre for Bhutan Studies & GNH Research:

• 4 pillars:
  1. sustainable and fair (equitable) socio-economic development
  2. environmental conservation
  3. preservation and promotion of culture
  4. good governance
• 9 domains: psychological well-being, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, living standards.
• 33 indicators.

• Memory aid: 4 pillars → 9 domains → 33 indicators.

• Global influence: Bhutan initiated the UN resolution on the International Day of Happiness [4].

3. Happiness economics

• Happiness economics is the study of subjective well-being (how good people say their lives are) and life satisfaction, and of what drives them. Main drivers: income, health, social support, trust and freedom.
• Cantril ladder: the standard survey question. Imagine a ladder with steps from 0 (worst possible life) to 10 (best possible life). Which step are you on now?
• Worked example (illustrative): a sample of 5 people answer 3, 5, 6, 7, 9.
  • Country score = (3+5+6+7+9) ÷ 5 = 30 ÷ 5 = 6.0.
  • Rankings compare these national averages.

World Happiness Report (WHR)

• Published since 2012. It is now published by Oxford's Wellbeing Research Centre together with Gallup and the UN SDSN (Sustainable Development Solutions Network).
• Ranking basis: the Cantril ladder score only.

• Explaining the score: the report uses six variables: 1. GDP per capita 2. social support (having someone to count on) 3. healthy life expectancy 4. freedom to make life choices 5. generosity 6. perceived corruption

• Trap: these six variables explain the score. They do not build the score. The ranking itself comes from people's own ladder answers.

• Finland tops the ranking.
• India: 118th in WHR 2025 (check against WHR 2026 before the exam).

UN recognition

• UNGA resolution 65/309 (2011), "Happiness: towards a holistic approach to development", was sponsored by Bhutan.
• UNGA resolution 66/281, adopted 12 July 2012, declared 20 March the International Day of Happiness [4].
• It recognised happiness and well-being as universal goals that matter for public policy [4].
• It called for a more inclusive, equitable and balanced approach to economic growth that promotes sustainable development, poverty eradication and well-being [4].

Easterlin paradox (Richard Easterlin, 1974)

• What it says:
• Within a country at a given time, richer people report more happiness.

• Over time, average happiness in a country barely rises even as national income grows.

• Why this happens:

• Relative income: people judge themselves against others. If everyone gets richer, nobody feels ahead.

• Adaptation (the "hedonic treadmill"): people get used to a higher income, and their extra joy fades.

• Illustrative example:

• Income per head doubles from ₹1 lakh to ₹2 lakh over 30 years.
• The average Cantril score moves only from 5.8 to 5.9.

• At the same time, in any one year, the top income group scores about 7 and the bottom group about 4.

• Contested: Stevenson and Wolfers (2008) found that happiness does rise with income, both across countries and within them.

• Policy lesson: growth alone may not raise well-being. Health, trust, social support and freedom also matter.

4. Other "beyond GDP" dashboards

Social Progress Index (SPI)

• Created by the Social Progress Imperative in 2013.
• Key feature: it measures only social and environmental outcomes. It uses no economic inputs such as GDP or spending. This means you can compare it directly with GDP.
• Three dimensions: Basic Human Needs, Foundations of Wellbeing, Opportunity.
• India's SPI for states and districts:
• Released by the EAC-PM (Economic Advisory Council to the Prime Minister) on 20 December 2022 [2].
• Prepared by the Institute for Competitiveness and the Social Progress Imperative, on a mandate from the EAC-PM [2].
• Structure: 12 components across the 3 dimensions [2].
• Uses 89 indicators at state level and 49 at district level [2].
• Has a special section on the Aspirational Districts (the most backward districts, picked out for fast improvement) [2].

OECD Better Life Index (BLI), 2011

• An interactive online tool. Users set their own weights across 11 dimensions of the OECD well-being framework [5].
• The 11 dimensions: Housing, Income, Jobs, Community, Education, Environment, Civic Engagement, Health, Life Satisfaction, Safety, Work-Life Balance [5].
• Framework behind it, the OECD "How's Life?" reports:
• Material conditions: things linked to markets, such as income, wealth and housing [6].
• Quality of life: things outside markets, such as health, education and security [6].

• Sustainability of well-being over time depends on four capitals: natural, economic, human and social [6].

• Worked example of user weights (illustrative):

• Country A scores 8 on Income and 4 on Environment.
• User 1 gives weights of 0.7 to Income and 0.3 to Environment: 0.7×8 + 0.3×4 = 5.6 + 1.2 = 6.8.
• User 2 gives weights of 0.3 and 0.7: 0.3×8 + 0.7×4 = 2.4 + 2.8 = 5.2.
• Same data, different ranking. That is the point of the BLI: the user's own values decide the result.

Wellbeing economy

• Definition: an economy designed to serve human and ecological well-being first, not GDP growth for its own sake.
• New Zealand's Wellbeing Budget (2019): spending priorities are chosen by their effect on well-being.
• Wellbeing Economy Governments (WEGo): Scotland, Iceland, New Zealand, Wales, Finland.

Ease of Living (India)

• Ease of living means a better everyday quality of life that comes from infrastructure and services: housing, water, transport, safety and communication.
• MoHUA Ease of Living Index (EoLI) for cities has 2018 and 2020 editions. Its pillars include quality of life, economic ability, sustainability and citizen perception.
• EoLI 2020 results:
• 111 cities took part [3].

• In the Million+ category, Bengaluru ranked first, then Pune, Ahmedabad, Chennai, Surat, Navi Mumbai and Coimbatore [3].

• Companion index, the Municipal Performance Index (MPI) 2020:

• Covers 111 municipalities, with 5 verticals (Services, Finance, Policy, Technology, Governance), 20 sectors and 100 indicators [3].

• Top ranks: Indore in Million+, then Surat and Bhopal. NDMC in Less-than-Million, then Tirupati and Gandhinagar [3].

• Key distinction: EoLI measures outcome indicators (life as citizens live it). MPI measures enabling inputs (how well the city body performs) [3].

5. Common thread

• Output measures (GDP/GNP): answer the question "how much was produced?"
• Outcome measures (GNH, WHR, SPI, BLI, EoLI, and HDI in Section 3): answer the question "how well do people actually live?"
• Two kinds of outcome measure:
• Subjective: people's own rating (WHR's Cantril ladder).
• Objective: measured conditions (SPI, EoLI).
• GNH and BLI use both kinds.

Prelims Hooks

• GNH is in Article 9 of Bhutan's 2008 Constitution. The index has 4 pillars, 9 domains, 33 indicators.
• UNGA 66/281 (12 July 2012) declared 20 March the International Day of Happiness. Bhutan initiated it. Separately, UNGA 65/309 (2011) was Bhutan's "holistic approach to development" resolution.
• WHR ranks countries by the Cantril ladder (0–10). Its six variables only explain the score and are not part of its formula. Trap: "WHR is computed from GDP, social support…" is wrong.
• WHR publishers: Oxford Wellbeing Research Centre + Gallup + UN SDSN. Not UNDP (UNDP publishes the HDR).
• Easterlin paradox (1974): richer people are happier within a country, but average happiness stays flat as a country grows. Stevenson and Wolfers (2008) contested it.
• SPI uses no economic indicators. India's state and district SPI came from the EAC-PM (Dec 2022), with 12 components, 89 state indicators and 49 district indicators.
• OECD Better Life Index (2011): 11 dimensions, and users set their own weights.
• EoLI measures outcomes, MPI measures inputs. EoLI 2020 top Million+ city: Bengaluru. MPI 2020 top Million+: Indore.
• WEGo members: Scotland, Iceland, New Zealand, Wales, Finland. NZ's Wellbeing Budget was in 2019.

Mains Points

• GDP vs welfare:
• GDP ignores how income is shared, unpaid work and pollution (NCERT Class 12).
• Outcome dashboards such as SPI and EoLI show where growth has not turned into better lives.

• Example: India's SPI measures this at district level, including the Aspirational Districts [2].

• Easterlin paradox and policy:

• If people's comparisons with others and adaptation cancel out gains from income, growth alone will not raise well-being.
• Policy should also invest in health, trust, social support and freedom, which are the drivers WHR identifies.

• This supports inclusive growth and SDG-linked budgeting.

• Limits of happiness indices:

• Cantril-ladder answers depend on culture and on how people read the question.
• Small samples reduce reliability.
• Rankings such as India at 118 (WHR 2025) should be read beside objective data (HDI, NFHS-5), not in place of it.

• The BLI's user-set weights show that any composite index hides a value judgement.

• Cities and governance:

• Linking EoLI (outcomes) with MPI (municipal inputs) holds urban local bodies accountable [3].
• This connects to 74th Amendment debates on the finances and capacity of municipalities.