23/04/2012 05:39 BST | Updated 20/06/2012 06:12 BST

Heard of Genuine Progress Indicator? It's the Measure of True Economic Growth

It is time for Policy Makers to wake up to the fact that a rich economy does not necessarily guarantee that its people will be happy. In the UK, which has been overall, economically progressive, except for the years of recession, people do not feel that they are flourishing.

Conventionally, economics and politics are applied to measure a country's growth, where the GDP serves as a numeric evaluation. Over the years, quality of living has emerged as an indicator too. Despite the major Western economies ranking favorably on these factors, the overall happiness of their people seems to be deteriorating. This dwindling sense of happiness and satisfaction has led to the questioning of the definition of growth as we know it. Largely, public policy is designed to stimulate growth. However, an increasing number of sociologists and social observers are beginning to question whether GDP can really be used to measure happiness. In fact, if it can be equated to happiness at all. If economic figures cannot accurately reflect the happiness of a population, what then could be used to denote or measure happiness?

Experts have been in search of one or more defining concepts or methods that can be used to measure happiness. Well-being has emerged as one of the leading factors. The idea of well-being as a measure of happiness has been most famously described by Prof. Seligman. Seligman's authentic happiness has found many takers. But the big question is, does it really hold water? Even Prof. Seligman seems to be a bit wary of the enthusiasm that his theory has generated.

Many critics of his book, Flourish: A new understanding of happiness and wellbeing-and how to achieve them , have said that it is an oversimplification of happiness. However, discussing happiness in the context of its failure to be measured in terms of economic calculation like the GDP and also the tendency of many expert to oversimplify it, must be discussed to understand why an alternative measuring factor, like the Genuine Progress Indicator (GPI) must be used to arrive at a more wholesome understanding of economic growth and happiness. However, like many experts have suggested, discarding GDP may not be the answer to measuring happiness meaningfully. The GDP of a nation provides us with a mechanism to measure economic growth and progress in a way that wasn't possible before. Perhaps, adding a few elements to the system, could lead to a more wholesome measure, that takes into account the happiness or well-being factor. Take the GPI for instance, which has been largely ignored. When the factors that are intrinsic to the GDP, which cause misery to people, are brought to the forefront, policy makers may be able to make the adequate policy changes, in areas like resource allocation, welfare schemes, to boost happiness or well-being.

At present since purely social and economic factors are taken into consideration, policies are geared towards improving those factors. Which, as year-on-year surveys prove, does not lead to a boost in overall happiness. In this context Prof.Seligman's simplistic view that the absence of misery brings happiness, must also be noted. Again, misery can be said to be absent when poverty does not exist, but does not being poor guarantee happiness? Supplementing the traditional GDP with Genuine Progress Indicator can create a far superior and effective metric system.

It is time for Policy Makers to wake up to the fact that a rich economy does not necessarily guarantee that its people will be happy. In the UK, which has been overall, economically progressive, except for the years of recession, people do not feel that they are flourishing. Had GDP been the sole indicator of happiness, people in the UK should have been supremely happy. Neither does a steady GDP growth guarantee economic stability. Would the United States be grappling with the 'debt ceiling' debate if it did? Or would the European dream of establishing a single currency be unraveling in the face of the crisis, in countries like Portugal and Greece? The GDP then, can said to be unreliable, not just in measuring happiness but also in predicting growth.

In fact the current state of financial affairs and metrics system for economic progress had caused millions of people to walk straight into the debt trap. This has caused further misery to people. Budget cuts, ominous future predictions and other conditions add to the crisis. The over reliance of numbers to predict growth could be one of the causes of the crisis. A climbing GDP made experts and policy makers feel a sense of false while in fact, the lives of people were crumbling all around them. When numbers belie reality, the growth seems to be not holistic, it's not even part-growth; it seems to be a form of deception. Which is why, experts are in pursuit of that perfect metric system that can measure happiness; that Holy Grail of happiness measurement if you will.

The Genuine Progress Index could be used to supplement the concept of the GDP. Contributions of Prof.Seligman and his School of thought, however valuable, may not be sufficient to measure happiness. To justify the implementation of the GPI, we must understand clearly why does not work. What are the factors that, while leading to economic growth, constrain the growth of happiness? GDP is a macro measure of a country's economic status. It tallies the sale and purchase of products and services, uses conventional accounting and then attempts to indicate how a country fares. The major flaw, of course, is the current assumption that every profitable financial transaction of the country contributes to the well being of its people. The exclusion of non-financial transactions and it affects happiness makes GDP an inherently failed metric system, as far as happiness is concerned. The additional costs incurred by social decay, in terms of divorces, crimes and lifestyle diseases, among others are included in the GDP. Not only to do these factors burden the exchequer they are also an indicator of the fact that there is growing unhappiness.

Taking these factors into account, one can only say that the Genuine Progress Indictor could lead to a more accurate reflection of a nation's happiness. As an extension of the GDP, it takes into account the economic factors that contribute to the happiness of a nation's citizens. GPI successfully differentiates the economic transactions that cause happiness of people and the factors that act against it; the GPI then gives importance to positively contributing economic factors. A composite metric system, of the GDP and the GPI is important given the growing economic and unhappiness crisis. The policy changes resulting from the new metric system could lead to more wholesome and sustainable economic and 'happiness' growth of a nation.