Why all Happiness is Not Equal?

 

‘A man’s flesh is his own; the water belongs to the tribe.’^[1]

– a Fremen Quote, Dune

E.M. Goldratt’s Theory of Constraints says, ‘A chain is as strong as its weakest link’^[2] or ‘any system is limited in its pursuit of achieving more of its objectives by a small set of constraints’. For the Fremen of the desert planet Arrakis – in the Sci-Fi Novel ‘Dune’ by Frank Herbert – ‘water’ is the limiting constraint. Wealth is measured in terms of how much water you have. They wear special robes called stillsuits that doesn’t allow moisture in any form to escape the body (sweat-collectors & urine recyclers) – only a thimbleful of water is lost during a day in desert.

Earth on the other hand, is bountiful. Mankind has achieved remarkable growth by partaking of the nature’s bounty. Fuelled by innovation and carbon-based energy, the economic engine of growth has had an amazing run – all in pursuit of greater happiness. But do we have enough resources to provide everyone a fair chance at ‘pursuit of happiness’?

THE GROWTH BOTTLENECK

Kenneth Boulding had said, ‘Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.’^[3] The narrow focus on increasing efficiency in resource utilization has raised questions that when we choose to produce more today, aren’t we jeopardising the lives of the future generations by giving them an imbalanced planet and less resources to live by^[4]. Even when we choose to selfishly focus  on the well-being of our own generation, it is no longer possible for every person on the planet to lead an ‘American way of life’.

Considering this bottleneck, one must take a hard look at the way we are distributing the use of these resources, and ask this question – are we satisfying the basic needs of everybody, at least?

NO, WE AREN’T!

In stark contrast to Arrakis, there is a planet named Solaria (‘Naked Sun’, another classic by Isaac Asimov) where humans are completely depended on Robot labour (10,000 robots per human) – and they are short of nothing, and they have nothing to do^[5].

If this sounds fantastic, zone in to Mumbai, India – a city that inhabits a Mukesh Ambani, chairman of Reliance Industries with a net worth of $22.5 Billion^[6] and also a resident from Dharavi slums, who lives on less than dollar a day. So when one says that the GDP of India grows at 7.4%^[7], is it equitable? Per capita income of a poor in India has a paltry growth rate of 1.49% – where the base itself is very small.  For him, happiness is a 2-square meal.

In the essay ‘Economics and the Quality of Life’, JK Galbraith (prominent development thinker) has talked about the fact that economists have long considered the psychic and the physical needs of people to be the same. By such a formulation, a poor family’s desire for shelter isn’t more urgent to that of a rich family’s desire for a mansion^[8].One can argue that this is a just method, and everyone is same in the eyes of the ‘market force’.

But is it really the case? The richest 10% of the world own 87% of the total wealth^[9], which has in turn, led to a skewed production, wherein more resources are used to satisfy the ‘wants’ of the rich at the expense of ‘needs’ of the poor.

I am trying to build a case for prioritization of resource allocation. One cannot hide behind the fact that GDP is an ‘objective’ & ‘easily quantifiable’ measure, when there is massive inequity across the world.

THE ANSWER ISN’T SIMPLY QUANTIATIVE

The common refrain of Economists is that it is not directly possible to quantify happiness. Interestingly, the idea of GDP emerged from an endeavour to do just that. In 1781, Jeremy Bentham gave the “philosophy of utility that assessed the merits of an action according to how much happiness it produced”. The National Accounting systems is but a stripped-down version of Mr. Bentham’s proposal where ‘happiness’ was replaced by ‘production’ as it was felt that GDP, unlike ‘happiness’ and ‘human welfare’, is defined clearly and unambiguously^[10].

But GDP doesn’t take into the account the Literacy rate or Life Expectancy. Nor does it account for seemingly unquantifiable costs: depletion of natural resources, pollution & global warming, human rights violation, and government policy interventions to integrate their economy to that of the world.

Yet in the past few years, human ingenuity has given rise to a number of models which take into the consideration the ‘Triple Bottom-line’ approach of people, profit (in this case, production!) and planet – and everything from ‘Green GDP’ to Bhutan’s ‘Gross National Happiness’ are increasingly figuring into the discourse of political figures and economists.

The following model is yet another alternative to the question of ‘economic growth’, and it is primarily based on these two aspects:-

1) Prioritization of resource allocation

2) Adoption of the 3Ps: Production, People and Planet

MASLOW’S NEEDS THEORY FOR NATION BUILDING: PRIORITIZATION

This model is an extrapolation of ‘Maslow’s Hierarchy of Needs’  from individuals to national economies, where it is assumed that an economy is a living and breathing entity with her own challenges regarding motivational levels and drive. The rationale for adopting this framework is that it provides a ready mechanism for resource prioritization based on a pyramid structure which is bottom-up in its approach, and which intuitively suggests that one has to sufficiently satisfy people’s needs at the base, before moving higher-up in the ladder.

So how does this model work? As it is known, the five levels of ‘Maslow’s Hierarchy of needs’ are Physiological, Safety, Social, Esteem and Self-Actualization^[11].

So what are the physiological needs of a nation ? For any nation to survive – it should have three things: Food, healthcare and Education. These basic needs have to be fulfilled sufficiently enough in order to build a strong foundation for the nation to stand on.

The first thing that pops up in one’s mind when thinking about a nation’s Safety & Security is Defence. But that is mainly needed to counter external threat. In order to bolster a nation’s internal strengths – one needs to have strong institutions^[12] that prevent a nation from tumbling into anarchy and chaos. We need not only an institution that protects and upholds the human rights, like the judiciary, but also the ones without which our day-to-day existence is nearly impossible – industries like Telecom, Transportation, IT, Manufacturing, Mining, Electricity, Financial Institutions etc.

Belonging needs in a nation’s context means, how integrated an economy is to the rest of the world. In other words, Globalization. All those aspects that the WTO deals with, i.e. tariff and non-tariff trade barriers, in order to facilitate global trade are included at this stage.

Esteem has much to do with a nation’s soft power. The essence of any country is in its art and culture, History and Heritage, Architecture and monuments. Tourism and Entertainment industry, which enhances a nation’s soft power are included here.

Lastly, Self-Actualization – all those aspects that make us future-proof and which completely utilizes a nation’s potential to innovate and create wonders, are considered. Technological Innovation is the ultimate goal of any economy – hence at this level we identify all issues pertaining to Intellectual Property Rights (IPR) & fostering a culture of creativity.

MASLOW’S NEEDS THEORY FOR NATION BUILDING: THE 3Ps

Now that we have established 5 stages of economy, we identify three broad factors that must be considered:

1) Intervention: It segments the ‘Production’ (GDP) into five hierarchal levels.

2) Cost: The Costs associated with this output relate to ‘Planet’: like the carbon credit & pollution – all the non-economic and intangible factors which don’t normally figure into the GDP calculations.

3) Effectiveness: It is a measure of how successfully have we been able to maximize the well-being of the ‘People’.

To further expand this idea, let’s consider the first level – ‘Physiological needs’.

Intervention in this case would include the Agricultural Output, Infrastructure and services related to Healthcare and Education – all of which can be found out from the GDP data. The associated costs at this level are Land pollution, water pollution, bio-wastes, global warming. Effectiveness would measure the Human Development Index (HDI) parameters – Life Expectancy, Per-capita income and Literacy Rate. Similarly we can do this for the other  four levels as well.

Now, let’s use this model to satiate Finland’s sweet tooth.

SHOULD FINLAND EAT LESS ICECREAMS?

Should the “New Sick Man of Europe”^[13] – Finland, eat less (or more) ice creams? In 2011, its government felt that the Nordic Nation was better off eating less ice creams and introduced something called ‘fat tax’ on candies, cocoa-based products, chocolates, ice lollies and ice creams to counter obesity^[14]. Such a ‘sin-tax’ on discretionary items increased tax-revenues, which it needed to maintain the level of public-spending at 59% of GDP and support the welfare programs of the country^[13].

With a demographic profile which is getting older, rising wages and decreasing intent of working age population to be economically active – the competitiveness of the nation has taken a hit, and it has now entered its fourth year of recession. So I have just one question to ask at this point – If Finland were a person, where would it fit in the ‘Maslow’s Hierarchy of needs’?

Finland already ranks 24th (out of 188 countries) in the Human Development Index Report^[15], 2014. So, one can say that it has amply satisfied the ‘physiological needs’ of its people. Also, it strongly protects civil liberties of its people , is a highly industrialized nation with an economy mainly dependent on services and manufacturing – hence there are strong institutions in place. Also it has a large alliance of nations to look after it in case it runs into rough weather. Hence, it has sufficiently taken care of its ‘Safety and Security’ needs.

In such an environment, should Finland really be taxing discretionary spending in order to fund welfare measures or should it focus more on the higher levels of the pyramid of Maslow’s, wherein it fosters a culture of technological innovation and creativity? Should it not incentivize the next Nokia?

Incidentally, Finland plans to scrap the tax on sweets and icecreams in 2017^[14]!

QUANTITATIVE MASLOW

While the model has been qualitatively described in the aforementioned example, it is also backed by quantification. Each level has been assigned a ‘weight’ – and this weight changes across countries and over time.

Based on the past historical data of the performance of Finland’s economy, the weights assigned to ‘psychological’ and ‘security’ needs would be low – as it has already performed well on these two fronts. Whereas Somalia direly needs to address its ‘physiological’ and ‘safety’ needs before moving higher up – hence those two levels might need to be assigned a weight of more than 0.6, in total. With improved performance on these frontiers, the weights may change over time.

Considering all five levels, and the associated ‘Intervention’, ‘Cost’ and ‘Effectiveness’ – along with their weights, we tabulate a final figure for an economy.

The advantages of this model is, we come to know:

1) At what stage an economy currently lies

2) How a nation can formulate its budget based on prioritized resource allocation

3) How to ensure equitable growth

4) How to optimize resource use (by innovatively reducing intangible costs)

POLITICAL WILL TO CHANGE

While, an attempt has been made to come up with a more comprehensive model as against GDP, the author humbly accepts that this hypothesis, like any other, is imperfect.

This model is based on how effectively do we allocate ‘weights’ to the tangible and intangible aspects of the model, to all the nations of the world – and that can be the bone of contention among various economies. It is the hope of the author that with time, the mechanism to derive these weights would gradually improve.

Also, because it includes so many different aspects, the cost of collating data increases drastically. But again, we can pool various resources – the HDI, Ease of Doing Business Index, Universal Human Rights Index, GDP – in order to arrive at a comprehensive report card for a country.

But in the end, any such exercise fails, unless there is a ‘political will and capital’ at the highest levels to change the system. One only hopes that it is done much sooner, as time is something not on our side.

 

REFERENCES

1. Herbert, Frank. (2006). Dune. London, London: Hodder & Stoughton
2. Goldratt, E.M. (2004). The Goal: A process of Ongoing Improvement (3rd ed.). Great Barrington, Massachusetts: North River Press
3. Boulding, Kenneth. (1973). “Energy reorganization act of 1973: Hearings, Ninety-third Congress, first session.” In the United States Congress, USA
4. Smith, Noah. “Balancing Fairness and Efficiency.” Bloomberg, http://www.bloombergview.com/articles/2016-01-11/a-fair-world-doesn-t-have-to-be-an-inefficient-one
5. Asimov, Isaac. (1993). The Naked Sun. New York, New York: HarperCollins
6. Forbes. “India’s Richest List”. Forbes, http://www.forbes.com/profile/mukesh-ambani/
7. Diplomat, The. “India’s 7.4% GDP Growth Rate Keeps It Ahead of the Emerging Economy Pack.” The Diplomat, http://thediplomat.com/2015/12/indias-7-4-gdp-growth-rate-keeps-it-ahead-of-the-emerging-economy-pack/
8. Galbraith, J.K. (1975). Economics, Peace and Laughter. edited by Williams A.D. New York, New York: Penguin
9. Credit Suisse. “Global Wealth Report 2014”. Credit Suisse, https://thenextrecession.files.wordpress.com/2014/10/cs_global_wealth_report_2014_vf.pdf
10. Fox, Justin. “The Economics of Well-Being”. Harvard Business Review, https://hbr.org/2012/01/the-economics-of-well-being
11. Robbins S.P. et.al. (2014). Organizational Behavior (15th ed.). New Delhi, Delhi: Pearson
12. Özdağlar, Mehmet. “Economic Development and Maslow’s Hierarchy of Needs”. Foreign Policy News, http://foreignpolicynews.org/2015/07/26/economic-development-and-maslows-hierarchy-of-needs/
13. Rosendahl, Jussi and Ercanbrack, Anna. “‘Sick Man of Europe’ Finland Agonises over Austerity”. Reuters, http://uk.reuters.com/article/uk-finland-economy-idUKKCN0T012620151111
14. BBC News. “Finland: Tax on Sweets and Icecreams Scrapped”. BBC, http://www.bbc.com/news/blogs-news-from-elsewhere-34389928
15. UNDP. “Human Development Report 2015: Finland”. UNDP, http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/FIN.pdf

 

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