Robert Skildesky has an interesting piece on the limits of using Gross Domestic Product (national income or output) as a measure of social wellbeing (or welfare). There has been a renewed push following the credit crisis for alternative measures to underpin policy direction of governments. For many years many governments have focused on increasing GDP but many a calling for a shift in think – wealth is proving not to be enough. Part of the problem is not only that money can’t buy happiness but also that how money is distributed affects many people’s happiness:
Another finding has...started to influence the current debate on growth: poor people within a country are less happy than rich people. In other words, above a low level of sufficiency, peoples’ happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.Put another way, what matters for life satisfaction is the growth not of mean income but of median income – the income of the typical person. Consider a population of ten people (say, a factory) in which the managing director earns $150,000 a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $25,000, but 90% earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person’s sense of well-being.That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority – a very small minority in countries like the United States and Britain – has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.More equality would not only produce the contentment that flows from more security and better health, but also the satisfaction that flows from having more leisure, more time with family and friends, more respect from one’s fellows, and more lifestyle choices. Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and “tiger” mothers, constantly goading themselves and their children to “get ahead.”The nineteenth-century philosopher John Stuart Mill had a more civilised view: “I confess I am not charmed with the ideal of life held out by those who think…that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life, are the most desirable lot of human kind….The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back, by the efforts of others to push themselves forward.” That lesson has been lost on most economists today, but not on the king of Bhutan – or on the many people who have come to recognise the limits of quantifiable wealth.
The problem of course is that given technological progress inequalities will always persist unless people are forced to share all the gains from technological progress. Then of course someone will ask – who will invent? Indeed it seems that inequality is actually necessary in some economic models e.g. Kuznets hypothesis which argues that it is the rich that save and invest, thereby increasing the size of the national cake. More income equality means less cake overall, so the argument goes. Jesus said, “the poor you will always have”, not to approve of inequalities but as an empirical fact that has remained true for two millennia. If inequalities are here to stay, so is the inadequacy of human striving for quantifiable wealth. Mill’s idea of a “best state for human nature” where “no one is poor, no one desires to be richer” is not a contentment that fallen man can not produce. On this the Christian and the Darwinian are in agreement. The Darwinist believes that without human striving there’s no evolutionary progress. The Christian holds that the heart of man is utterly depraved. At the fundamental level there's nothing in man that immediately inevitably and forever gravitates him towards contentment without a deeper work of divine engineered grace.