Recently, I was fascinated to read that the United Arab Emirates (UAE) has a Ministry of Happiness. And I thought, “how appropriate”, when it is something we are continually striving for in life. Yet most nations, including Australia, tend to measure progress and wellbeing using proxy measures such as GDP per capita. And I couldn’t help thinking, are we barking up the wrong tree?
The UAE created the Ministry in 2016, signalling that governments should not just seek to optimise economic output, but also life satisfaction. The responsibility of the Minister of State for Happiness and Wellbeing is to “align and drive government policy to create social good and satisfaction”.
Being quantifiable and available, GDP has long been a proxy for progress and, by extension, wellbeing. But it is more a measure of production than lived experience.
Robert F. Kennedy once said in 1968 that GDP measures everything “except that which makes life worthwhile”, drawing a distinction between production and the wellbeing of citizens. And while strong GDP growth might be considered a prerequisite for happiness, in reality it can provide a basis for it, but doesn’t guarantee it.
Happiness is a subjective experience that typically involves a positive effect. It makes us feel good, content. We don’t fully understand the mechanism, but there appears to be a biological grounding, evidenced by neurochemical processes involving substances such as serotonin and endorphins, when we ‘feel’ happy.
There is also the set-point theory of happiness that suggests people have a baseline level of subjective wellbeing, influenced by genetics. Major life events may move us from our individual position on a spectrum with, say, a lottery win or a serious health setback, but we then trend back to our baseline with time. While no single ‘happiness gene’ has been identified, many genes do influence temperament which can shape long-term wellbeing.
This doesn’t mean that public policy has no role to play in influencing happiness, but rather that it must factor in biological underpinnings.
Estimates suggest that around 30% to 50% of the variation in long-term wellbeing may be attributable to genetic factors, with the remainder influenced by environment, culture, and life experiences. So there is certainly scope to lift a population up with strong economic and social institutions, even if individual variance persists due to biology.
Returning to the economic question, American economist Richard Easterlin observed in the 1970s that as countries grow richer over time, average happiness does not rise proportionally. If so, economic growth may not matter as much to average wellbeing as is often assumed. For example, in the last 100 years, GDP per capita has increased dramatically in modern economies, but I often wonder, are we as a people that much happier than we were 100 years ago?
Consider technological advances over the last century. In the 1920s, we didn't have a lot of life's luxuries of today, like air conditioning in homes, and it is easy to look back and think people of yesteryear had it so tough, they couldn't possibly be as happy as we are today. But in reality, people don't ruminate on what has not been imagined. 100 years ago, people would have accepted heat as normal. They were probably just as content with their lives in the moment as we are today with technology that didn’t exist back then. I wonder what things people in 2126 will be referring to when they say, “How did they possibly live without that back in 2026?”
That’s not to say technological advances add zero to wellbeing, rather that gains may be temporary before a new normal is settled into. Technology can raise living standards, but happiness may not necessarily rise by as much. GDP is therefore not the be-all and end-all.
This is partly due to happiness depending not just on current conditions, but also future expectations. We spend much of our lives in pursuit of upgrading our existence, whether it be the next job promotion, a bigger house, or better health. Yet when we attain our goals, the hit is short-lived as we then switch focus to the next ‘big thing’. Happiness is not everlasting, and in fact the relentless pursuit of it can actually make us unhappy.
This is where Buddhist teachings step into the discussion. They suggest that to break the cycle of misery, the chasing of happiness must be emptied from our minds. I often watch my little grandchildren playing and am struck by how happy they are living in the moment, oblivious to what their future might hold. Their minds are more accepting of current conditions and are far less focused on future expectations.
Therein lies a tension in the pursuit of happiness. Can we achieve better wellbeing by going down a path of an ever-expanding supply of comforts via eternal upgrades in technology, health, and wealth? Or do we subdue demand for future upgrades by emptying our minds of the pursuit of happiness? The answer probably lies somewhere in between. In that sense, GDP growth is not necessarily the wrong focus, just an incomplete one. And that the UAE is probably onto something.
Tony Dillon is a freelance writer and former actuary. This article is general information and does not consider the circumstances of any investor.