The wrong economics
There have been quite a few books written about how GDP is the wrong metric. It does not take into account new business models. It certainly does not take into account the true cost of production, which should include pollution, carbon emissions and the real capital cost of impact on nature, but also the social cost.
We are bankrupt
The reason we do not measure properly is that most companies would go bankrupt. Think about it. Our GDP is telling us our economies are growing. While our planet is being destroyed, we have hospital waiting lists, a housing crisis and suicide is the number two cause of death among young men.
Failure to measure
GDP is a calculation that fails at measuring our three major goals:
- Quality of life. Only consumption of market goods and services is counted, and all other aspects of life are ignored.
- Harm to the environment, such as air pollution, water pollution, or chemicals poured on the ground, is ignored.
- Shared prosperity. The use of average GDP to indicate well-being ignores inequality. When incomes at the top increase, GDP per capita increases even as incomes of the nonrich remain stagnant.
However, once environmental damage, health problems, and other social costs are factored in, it amounts 6.5 per cent of global economic output for 2015 (I think that figure is much higher).
Hurricane Katrina is good for GDP
Another example, when Hurricane Katrina destroyed much of New Orleans and the surrounding Gulf Coast in 2005, killing 1,833 people, GDP was not reduced by one penny. In fact, after the disaster struck, relief efforts costing over $120 billion and insurance payments of $41 billion were actually added to the GDP. The mind boggles. So by this measure, the natural disaster helped the economy grow by $161 billion—never mind the decline in quality of life for the residents of New Orleans or the thousands of people who have suffered for months and years as they have tried to rebuild their homes and lives.
Driving a Prius is bad for GDP
Here is another example of how the GDP can be misleading. Let’s compare a person who drives a Prius and gets 50 mpg to a neighbour who drives a Hummer and gets 14 mpg. Free market economics tells us that the Hummer is the better choice for the economy, because it adds more than three times what the Prius adds to the GDP for every mile driven. Since the GDP records only the gas bought,
We should all be sent to jail
That is all going to change soon. An Economist study came to a similar conclusion: by the end of the century, private investors risk losing more than $4 trillion in assets as a result of the devastating effects of climate change, either in the devalued portfolios of fossil fuel companies as fossil fuel use is ended, or in a devaluation across all companies if GHG emissions continue. I think all polluters will be sued like the cigarette companies and CEOs will go to jail. You become a zeronaut or you face the consequences.
Buddhist Economics: An Enlightened Approach to the Dismal Science
Hence “Buddhist Economics: An Enlightened Approach to the Dismal Science”. What would a Buddhist approach to economics, in which people are regarded as more important than output, and a meaningful life is prized above a lavish lifestyle, look like?
There are other ways to measure
Economists already have ways to measure pollution and environmental damage, income inequality, happiness, human capabilities, and nonpaid activities (both useful and harmful). Around the world, broad measures of well-being have already been developed. Among them are Bhutan’s Gross National Happiness Index, the UN’s Human Development Index, the OECD (Organisation for Economic Co-operation and Development) Better Life Index, the Genuine Progress Indicator, and the Happy Planet Index.
The single-value measure expands on GDP by adding in the value of nonmarket benefits (e.g., child rearing, leisure) and subtracting the value of nonmarket costs (e.g., environmental degradation, depletion of natural capital), and also adjusting for inequality across the population.
Bhutan’s Gross National Happiness
GNH is a complex summation of nine equal domains—psychological well-being, use of time, community vitality, cultural diversity, ecological resilience, a standard of living, health, education, and good governance.
Human Development Index
HDI has been calculated for up to 187 countries since 1990. Its three dimensions are health (life expectancy), education (mean and expected years of schooling), and living standards (income per capita).
The UN-GPI brings together three measurement efforts: the UN’s Human Development Index (HDI), along with its adjustments for inequality and women’s rights; the UN’s Sustainable Development Goals Index (SDGI), both the aggregated index and the dashboard; and the UN’s System of Environmental-Economic Accounting (SEEA), which presents a wide range of statistics and indicators regarding the earth’s energy, water, land resources, and ecosystems.
OECD Better Life Index
It compares the quality of life across countries by calculating their relative rankings for eleven indicators: income, jobs, community, education, housing, environment, governance, health, life satisfaction, safety, and work-life balance.
Happy Planet Index
HPI measures a country’s Happy Life Years (the Cantril Ladder score times life expectancy, both adjusted for inequality) divided by its ecological footprint (the amount of land required per person to replicate the country’s consumption over time).
Better Life Index
The BLI uses surveys that ask people their perceptions about their lives, health, and government.
Genuine Progress IndicatorGPI assigns prices to the things we value, such as consumption, housework, democratic participation, and environmental conservation. The GPI is calculated from over two dozen variables in the following way:
- Personal consumption adjusted for inequality (using the Gini coefficient), plus the value of nonmarket work (such as child care and housework),
- plus the value of leisure (adjusted for unemployment) and volunteer work,
- plus public goods (such as health care, education, roads and parks),
- minus defensive expenditures (such as crime and commuting, that reduce the quality of life),
- minus environmental impact (including depletion of natural capital, CO2 emissions, and water pollution).
Buddhist economics wants to go beyond the GDP and use other measures in a way that helps people and nations create more meaningful, sustainable lives worldwide. To do this, we need to use a single-value measure, such as the GPI, to replace the GDP as the measure of economic performance over years and across countries.
What is Buddhist economics?
Free market economics holds that human nature is self-centered and that people care only about themselves as they push ahead to maximise their incomes and fancy lifestyles. Buddhist economics, in contrast, provides guidance for restructuring both our individual lives and the economy to create a better world. “Practice compassion to be happy” replaces “More is better.” “Everyone’s well-being is connected” replaces “Maximize your own position.” “The welfare of humans and Nature is interdependent” replaces “Pollution is a social cost that the individual can ignore.”
- In Buddhist economics, prosperity is not equated with market goods and services (gross domestic product) as in free-market economics, where activities are ignored unless they include a purchase of some sort.
- In Buddhist economics, income is just one element used to measure a person’s prosperity. More important is how a person is able to use resources to create a meaningful life.
- In Buddhist economics, people are interdependent with one another and with Nature, so each person’s well-being is measured by how well everyone and the environment are functioning with the goal of minimising suffering for people and the planet.
- The Buddhist model measures prosperity by focusing on the quality of life of all people and Nature.
- Buddhist economics takes into consideration the protection of the environment, the state of the human spirit, and the quality of life of all people.
- Buddhist economics is based on people developing their full potential and living a life in service to others and the community.
- In Buddhist economics, the micro and macro are interconnected and come together to create a high quality of life.
- Buddhist economics cares about shared prosperity.
- In Buddhist economics, taking care of our human spirit is part of our lifestyle.
- Buddhist economics recognises the harm that people in rich countries do by buying inexpensive goods made by foreign workers, even children, who work long hours in dangerous conditions at jobs that pay very low wages.
- In Buddhist economics, the full price of all resources used is included in the market prices for all goods and services.
What is wealth?
Buddhist wealth includes our mindful use of resources to enjoy life and to help others, and Buddhism teaches that our true wealth—love, compassion, and wisdom—is inexhaustible. Instead of rushing about buying things to achieve ephemeral happiness, we stop to look at the shells on the beach, enjoy the wildflowers in the spring fields, watch the dogs running around our neighbourhood, listening to and playing music, cook, paint or sculpt, gardening, having dinner with family and friends, sitting quietly to enjoy our surroundings, reading a good book, take a walk on the beach, etc.
Once we replace maximising our own income and status with being connected to and caring about others; once we let go of desire and attachment and focus on how fortunate we are; once we surrender our ego with its incessant demands, then we realise the beauty and joy in our lives. The cultivation of inner wealth in Buddhism is part of a follower’s daily practice on the path to enlightenment. We can quiet our minds and let go of our sense of a separate self and our illusions about reality constructed by society. Our true self is like a sun that has been covered by clouds of delusion, and once we let go of our attachment to self-importance and ego and embrace our impermanence and our oneness with others and the earth, our suffering ends.
When psychologists study what makes people happy, they find that being kind to others makes people happier. Kindness makes you happier, and happier people engage in more acts of kindness. Buddhist economics focuses on activities and experiences that don’t have a price tag.
Back to the beginning. We are measuring the wrong things. Here are some policy suggestions from Buddhist Economics.
- Introduce a carbon tax is to accelerate the transition to a carbon-free world.
- Introduce a guaranteed minimum income, which provides a safety net for all.
- Restore the balance between family and work, by shorter work hours and family-focused policies.
- Demanding that stores carry only products manufactured under humane conditions.
- Provide a capital endowment to young people at adulthood, so that they have a chance to finance their education or make investments in their future.
- Introduce employee ownership and profit sharing.
Buddha would vote labour.
On a personal level
Focus on well-being rather than income. Think about what is important to you, what you really care about, what makes life meaningful. Practice living simply, which frees up time to spend in activities that bring you joy: hanging out with friends, playing with your kids, writing in your journal, creating art, working in the garden, cooking what you bought at the farmers’ market.
When you are feeling unhappy because of all the demands on your life, help someone you know.
I leave you with a spiritual perspective. The healing of our bodies and minds must go together with the healing of the Earth. The more people become mindful, the more they become Buddhist Economist. I see this happening all the time. There is hope.