Development Economics

Gross National Product or Gross National Happiness? Inside Bhutan’s Unique Index

In 1972, the Fourth Dragon King of Bhutan, Jigme Singye Wangchuck, made a revolutionary statement: “Gross National Happiness is more important than Gross National Product.” Whereas previously, no other standard other than GDP was used to measure well-being, this declaration sparked a change—not just in Bhutan, but globally. The Bhutanese government believes that the Gross National Happiness (“GNH”) index more accurately and profoundly reports the overall well being of the nation than other methods. Using a method developed by two IIEP affiliates, Sabina Alkire and James Foster, Bhutan is able to calculate the happiness of its citizens and thus form relevant policy.

When calculating gross national happiness, the Bhutanese government faces some difficulties. Happiness is an intricate and complex idea, difficult to measure—what makes one person “happy” might not affect someone else, and there are many factors that determine happiness for each particular person. That is why the government of Bhutan developed the Gross National Happiness index. The index relies on four pillars: good governance, sustainable socioeconomic development, cultural preservation, and economic conservation. These have recently been expanded into nine domains that contribute to the aggregation of happiness: psychological well-being, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. Many of these domains are unique to a Buddhist worldview and would not be present in Western calculations. Altogether, there are 33 happiness indicators within those domains.

From these indicators, a single number is calculated by the index. This year, the index rose from .743 to .756, a change that, while moderate, reflects an overall increase in happiness throughout the country from the last time the survey was conducted five years ago. It was also discovered that 91.2% of the nation’s citizens are either deeply, extensively, or narrowly happy. The Center for Bhutan Studies and Gross National Happiness Research, an organization established by the highest executive body in Bhutan (the Council of Ministers), said in a press release, “The aim is for all Bhutanese to be extensively or deeply happy. Bhutan is closer to achieving that aim in 2015 than it was in 2010.”

Bhutanese children

91.2% of Bhutan’s citizens are deeply, extensively, or narrowly happy.

The GNH Index is constructed based upon the work of two IIEP affiliates, Sabina Alkire and James Foster. Their methodology, the Alkire-Foster method, has previously been used successfully in evaluating multidimensional poverty. The index, through a series of robustness tests, has been proven relevant and effective. Data gathered from the index can be effectively used to generate policy-relevant insights and analyses. The Alkire-Foster method has paved the way for multi-dimensional measurements, which have become increasingly popular in the world of well being statistics; as they take into account more of the factors that can affect poverty and well being.

For both the GNH and the Multi-Dimensional Poverty Index (MPI), the first set of indicator cutoffs reflects sufficiency. It identifies a group (either the poor or the unhappy) by calculating the “sufficiency” they enjoy. Do they have enough to eat? Do they feel well enough about their current cultural situation to be considered “happy”? The second (cross-indicator) cutoffs categorize the population into four levels of GNH, creating a “happiness gradient;” thus, the country discovers who is deeply happy, extensively happy, narrowly happy, and unhappy. The data is ideally nationally representative, dividing citizens up by region and district.

To calculate the GNH index, the following steps are taken:

  1. Choose indicators (a set of 3, within nine domains)
  2. Apply sufficiency thresholds (who has enough of each indicator?)
  3. Apply weights for each indicator (how much does something like psychological well-being affect overall happiness?)
  4. Apply the Happiness Gradient to identify four categories of Bhutanese (is deeply happy, extensively happy, narrowly happy, and unhappy)
  5. Select the middle cutoff as the happiness threshold and identify two groups: A) Happy people (extensively and deeply happy) B) Not-yet-happy people (unhappy and narrowly happy). The not-yet-happy are the subject of any policy changes.
  6. Identify among the not-yet-happy people, in what percentage of domains they lack sufficiency, and in what percentage they enjoy sufficiency.
  7. Calculate the GNH Index and its associated statistics.

Alkire and Foster became involved in the calculation of Bhutanese Gross National Happiness through their work with the Oxford Poverty and Human Development Initiative (OPHI), of which Prof. Alkire is the director. The method is useful in calculating many multi-varied factors such as happiness and poverty, because of its unique ability to monitor changes over time, complement other metrics, or be broken down into population group or indicator.

The Gross National Happiness Conference was 4-6 November in Paro, Bhutan. This Conference discussed the survey findings and future policy. As Lyonchoen Tshering Tobgay, Prime Minister of Bhutan, said in his keynote to the Conference, “The movement for change, the move into the mainstream, the shift of paradigm is underway. But it needs to be carefully nurtured.” There are currently movements away from simply calculating GDP in other nations, including the United States, United Kingdom, India, Australia, Canada, and Brazil. In 2012, the United Nations declared March 20 the “International Day of Happiness.” In the past months, The United Nations formally recognized the multidimensional nature of well being and poverty in Sustainable Development Goal (SDG) Target 1.2:  the elimination of poverty “in all its dimensions.” In October, the Multidimensional Poverty Index was adopted as a UN indicator of poverty.

Although GDP is useful in calculating the economic status of a country, more diverse and multidimensional calculations are necessary to determine total well-being. Accordingly, they are increasingly being utilized alongside traditional income-based indicators to get a more holistic and complete view of inequality, poverty, and ‘happiness’.



The Institute for International Economic Policy (IIEP), which is located within the Elliott School of International Affairs, serves as a catalyst for high quality, multi-disciplinary, and non-partisan research on policy issues surrounding economic globalization. The Institute research program helps develop effective policy options and academic analysis in a time of growing controversies about international economic integration in many countries around the world. The institute's work also encompasses policy responses for those who face continued poverty and financial crises despite worldwide economic growth. Affiliated faculty have appointments in the departments of economics, history, and political science as well as the law and business schools.

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