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Measuring What Counts

Morgan Housel
December 31, 2010

In the early 1970s, the tiny nation of Bhutan stopped focusing on gross domestic product, or GDP. This wasn't because the country was trying to hide its economic progress. It was because King Jigme Singye Wangchuck thought GDP measured the wrong things.

"Why are we so obsessed and focused with gross domestic product?" he asked a journalist inquiring about the country's economy. "Why don't we care more about gross national happiness?"

And so began the birth of Bhutan's Gross National Happiness index, or GNH.

The idea behind GNH is that traditional GDP is flawed in two ways. One, GDP measures parts of the economy that some would say represent the opposite of progress, such as money spent on war, health care for preventable disease, malpractice settlements, or the cleanup after a hurricane. Two, increased wealth doesn't necessarily mean increased happiness.

The first idea echoed a famous 1968 speech by Robert F. Kennedy, in which Kennedy said:

Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product ... counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning,