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Lateral Error

May 28, 2008

There is something wrong.
In the way we interpret things. Like the old men of our civilization, who thought, sun goes around the earth, just because sun is moving everyday across the sky. Well, is sun not moving? Definitely it is? Is earth not stationary? Surely it is. [as per what our ancestors would have observed]. So 2+2=4…

We are always prone to making such observations and interpretations which often leads to wrong conclusions. What a mouthful! Read: We err.

Take for example GDP. Gross Domestic Product. We believe higher the GDP, happier the people are. But is it really so? For example, US is having the highest GDP last year, I don’t think they are really happy than what we are. Threatened by tomorrow’s possibilty, and today’s opportunities. So is GDP a marker of human happiness?
Or take for, more objectively, US and Japan registered the highest GDP last year, as per the IMF, World Bank ,CIA and a host of other guys. So does that mean, they are substantially happier than other guys in the world. Say that of a tribal in Polynesia? I don’t think Japan will qualify as a destination exactly, for my twilight years.Rising unemployment levels, increasingly widening urban-rural gap. In US, unemployment levels are rising, medical front is falling and overall amidst all hoopla of growth, life is definitely not good for the homeless.
Happier? Well if the amount of PlayStations you can buy is a mark of happiness,then perhaps yes it is. But is that really the definition? GDP, doesnt inherently measure anything else but how many McD burgers and PlayStations you can buy, per year.

My question being, is GDP a redundant marker? No, definitely no. Never no. Nelson Mandela once said,

Money doesn’t ensure happiness, but freedom to make does

So if you see GDP growth as the indicator of business freedom, good well and fine. But to see it as an indicator of human happiness, which we often inherently and tacitly assume is wrong. And for that a whole range of measures need to be implemented. Human Development Index in a more encompassing way, stress on the basic amenities of life, and of course human rights. And that is where I think, the ‘lateral error’ in quantification of growth is coming. For ultimately the true growth which we seek, is human. And human growth is perhaps the only factor which will ensure happiness. And that need not be only in economic sense but also from the point of view of health-care, poverty and education.

Coming back to my old question:Happiness,GDP and their entente. In 2006, the happiest nation of the world was Denmark [28 in GDP] and the most satisfied nation in the world, I think was Madagascar.So perhaps the beggar in New York is not that satisfied when you pit him against the arrow shooting tribal in Polynesia.

[The author is an active stock market follower and a global economics observer. By profession he is an electronics engineer working for a high-tech startup based in Chennai. He blogs at Jump Up!]

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