Wikinvest Wire

Gross national happiness?

Friday, November 20, 2009

After just spotting the headline of this WSJ story and then reading the first paragraph or two, it seemed a sure target for ridicule, particularly since that's what is done around here most of the time. But, after reading the whole report, that view had to be reconsidered.

Chávez Discounts Accuracy of GDP
President Hugo Chávez wasn't pleased with data released this week that showed the Venezuelan economy tumbling into a recession. So the populist leader came up with a solution: Forget traditional measures of economic growth, and find a new, "Socialist-friendly" gauge.

"We simply can't permit that they continue calculating GDP with the old capitalist method," President Chávez said in a televised speech before members of his Socialist party on Wednesday night. "It's harmful."
The Venezuelan president isn't alone in suggesting traditional economic-output measures are too rigid. French President Nicolas Sarkozy recently said his country, in addition to measuring GDP, would start gauging prosperity by including factors such as vacation time, health care and family relationships.

An economic commission headed by Nobel Prize winner Joseph Stiglitz supports such moves, saying every country should design its own basket of indicators that would include factors such as unemployment, security, and income inequality.

Both France and Venezuela argue their citizens are better off than economic data suggest. French workers have generous social-security benefits and vacations. Mr. Chávez said free health care in Venezuela isn't counted in economic output because money doesn't change hands.

The most famous example of this line of reasoning is the tiny Himalayan kingdom of Bhutan, which has tried to measure gross national happiness instead of GDP.
Food for thought, though, they've got to come up with something better than "gross national happiness" if they really want to be taken seriously.

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PCE said...

The idea of maximizing GDP seems so Leninist !
And its a joke...all those houses built in 2004-2007 show up as rise in GDP, even if they are later revealed as malinvestment

Dan said...

Bhutan used to have a motto of "Gross National Happiness is more important than Gross National Product". I don't think they actually measured "happiness". I believe a tourist visa to Bhutan is $1,200 USD and only lasts 2 weeks. They have managed to survive, seemingly since the beginning of time, with no budget deficit. We introduced them to fractional reserve banking and fiat currency about a decade or so ago, and they went immediately into the red.... they should have stuck to their motto like we should stick to our Constitution.

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