Introduction
One of the most common philosophical questions asked by the general population and thinkers alike is the age-old “Does money buy happiness?”. While this has puzzled many for generations and has manufactured many different views on work and consumerism, the query itself may yield some form of result if placed under a macroeconomic lens.
Often, stepping back and observing from a wider perspective can and has led to varying theory and provided contrast from the usual arguments provided by the proposition and opposition. Alternatively, it can also, at times, generalise too much, and not provide a specific enough outlook which may pertain to multiple flaws of logic, so this article will try to strike a balance between the two to yield a helpful macroeconomic view of the question “Does Money buy Happiness?”.
GDP vs Satisfaction
GDP per capita measures the total value of goods and services provided by an economy divided evenly between the population. Irrefutably, this can be considered one way to measure general level of fulfilment in a country, with long life expectancy and low unemployment rate being the other key methods of measuring human contentment. The directly proportional relation between a high GDP and high level of happiness can be ostensibly observed in “The World Happiness Report” – a document compiled by the United Nations beginning in 2012. However, the correlation strays far from perfect. Finland placed first on the satisfaction scale, with an average income of £49,000. While this may seem to stay accurate to the original hypothesis, the US, which has 25% more annual output than Finland, ranked far behind in 18th.
To further delve into the staggering rankings of one of the largest GDPs compared to a significantly smaller economy, it is imperative to look further into what happens at higher levels of GDP per capita. As real output per person increases, the amount of satisfaction gained from the increasing income decreases (see graph to the right). In addition, past $70,000 per capita, happiness plateaus. This displays thorough parallels between the basic microeconomic rule of “Diminishing Marginal Utility”. This principle refers to the phenomenon that each additional unit of gain leads to a smaller increase in satisfaction, much like a buffet.
Bhutan - Gross National Happiness
To discuss this question at greater length, specific, extraordinary examples contradicting the base conjecture must be dissected. This perhaps could be a nation such as Bhutan. Bhutan (2005) had a GDP per capita of $5650 and was classified as a low-income country. Quizzically, in a survey taken in 2005, 45% Bhutanese adults reported they were very happy, 52% reported they were happy and just 3% reported unhappiness. In contrast, 12% of adults from the USA reported they were not happy. Upon initial reflection this may seem a meagre increase from Bhutan, but in perspective, that is 4 times more proportion of the American population reported sadness in comparison to Bhutan. This is also shown in the rankings given to each country. Bhutan ranked 8th, 15 places ahead of the USA. This extremely juxtaposes our initial hypothesis that high income countries are happier.
In 1972, the King of Bhutan established a new set of principles to define the economic growth and direction he wanted Bhutan itself to take – “Gross National Happiness”. This relied on four basic pillars, which were considered by the monarch to be integral for a “happy” Bhutan. Firstly, stood socio-economic development. Like many governments, improvement of goods and services supplied was crucial for the leader. Second was the conservation of the environment, which remains very prevalent in this current day and age. Thirdly towered the preservation and protection of Bhutanese Culture, which the late King considered to be fading from Western Influences. Lastly, a pillar for good governance, constitutional monarchy in Bhutan. This outlined the theory used by the 8th happiest country to achieve its high-ranking position even as a low-income country.
Conversely, it is irrefutable that Bhutan is not at the top of the list. Ranked 1st place is Denmark. Denmark holds a high GDP per capita and is classified as a high-income country, which provides fertile ground for the roots of the initial theory. Through this lens, perhaps the first pillar of “Gross National Happiness” of socio-economic development remains more prevalent than the other principles; this is the idea that the most government expenditure ergo requires more GDP.
Conclusion
In essence, the initial conjecture made – “higher GDP means higher levels of happiness” remains largely true, however it is not the only contributing factor. Other components may be preservation of culture or the environment, or perhaps good governance as mentioned in the theory of “Gross National Happiness”.
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