Will Davies, Professor of Political Economy at Goldsmiths University of London, explores happiness vs. economic growth.

About Will Davies

"I’m a Professor in Political Economy at Goldsmiths, University of London and Co-Director of the Political Economy Research Centre.
In my work, I explore the way in which economics influences our understanding of politics, society and ourselves."

Measuring what is valuable

Our idea of economic growth derives from a particular view of the world that privileges the market as the basis on which to distribute goods and on which we decide what’s valuable. In a market, the extent to which something is valued depends on how much someone is prepared to pay for it. Although we know that there are certain things that are far more valuable than anything that you can buy in a market, such as friendship, family and the experience of nature, the way that GDP – gross domestic product – is calculated is as an aggregate of all of the different prices of things that are paid for in a particular national economy.
That means that there are various absurdities that have developed within the calculation of GDP that many environmental economists, feminists and other critics of GDP have pointed out. For instance, if I pay someone to drive something up the length of the country and back, then that counts as a contribution to GDP, even if it’s polluting the atmosphere and even if it wasn’t a worthwhile journey to make. Nevertheless, the fact that I paid for it to happen means that it will count as a positive benefit to GDP. Meanwhile, caring for my own children or going for a walk in the countryside – things that might be of far greater value – don’t make any kind of contribution to GDP one way or the other because they are not associated with a market value.
Believing that gross domestic product is the most important economic indicator in our society has always had this limitation that it excludes lots of things that most people believe are valuable and includes lots of things that many people believe are not valuable. But the problem is, what do we use instead?

Key Points

• Gross Domestic Product is a very imperfect measure of what is valuable and could be replaced by more holistic indicators of what people care about.
• We could measure value with indicators of happiness, such as objective well-being measures or subjective well-being measures.
• The issue with measuring happiness is that it is a subjective and personal concept, so it is hard to decide how to collect this data and how to use it comparatively.