1. Measurement of Growth through Gross Domestic Product (GDP) VS Gross National Happiness (GNH)
Wanida Mahakit
Director,National Accounts Office
Office of the National Economic and Social Development Board (NESDB)

2. Outline for discussion
Goals of development: From Wealth of Nation to Nation Happiness
Gross Domestic Product (GDP): Measuring economic activity
Beyond the Gross Domestic Product (GDP): Green GDP, Well-being index, HPI, etc.
Conclusion

3. Policies formulation Values Indicators Policies = PRINCIPLES
= OPERATION
Policies

4. Indicators
Reflect values
Determine policies
Expenditure
Track and evaluate progress

5. Goals of development 1950s – 1960s Main indicators Development
Economic Development
GDP growth

6. Goals of development GDP growth Wealth of Nation Trickle down to
the “poor”?

7. Goals of development Development
1990’s Human development is a process of enlarging people’s choices and the level of their achieved well-being
Development
Human Development

8. Human Development Index (HDI)
Goals of development
Main indicators
Human Development Index (HDI)

9. Goals of development Development
2000’s GNH is being presently pursued through four platforms: economic development, environmental preservation, cultural promotion and good governance
National Happiness

10. What is the suitable indicator for GNH ?
Goals of development
Main indicators
What is the suitable indicator for GNH ?

11. Gross Domestic Product (GDP)
GDP: measuring the total of all economic activities in one country, regardless of who owns the productive asset
GDP : widely used to assess the economic performance of countries
GDP : combines two threads
international concepts
statistical classification

12. Gross Domestic Product (GDP)
GDP: measured in three different but equivalent ways
Aggregate Supply = Aggregate Demand
Y (GDP) = C + I + G + (X – M)
1 .Production Approach
2. Expenditure Approach
3. Income Approach

13. Primary Input Labor Land Capital Entrepreneur Production unit
Economic
activity
Intermediate Input
Goods
and
Services +
Primary Input
Labor
Land
Capital
Entrepreneur

14. GDP calculation: Value Added Approach
Intermediate
Cost : IC
Production
Value
มูลค่าเพิ่ม
(Value Added : VA)

15. Gross Domestic Product (GDP)
GDP omissions: the distinct issue is environment factors
Depletion of resources: an irreplaceable part of the nation’s capital stock of resources has been consumed
Environmental costs: GDP does not distinguish between green and polluting industries.

16. Beyond Gross Domestic Product
Goals of development
Wealth of Nation
National Happiness

17. Beyond Gross Domestic Product
constructing data for development evaluation that wider than economic aspect: 2 approaches
Adjusting GDP : GDP - ?
Green GDP
Supplementing GDP: GDP + ?
Human Development index (HDI)
well-being index in Thailand
Happy Planet Index (HPI)

18. Green GDP sustainable development
Humanity has the ability to make development sustainable -- to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs. (World Commission on Environment and Development, 1987, p. 8).

19. Green GDP sustainable development The three-pillar approach
The ecological approach
The capital approach

20. Green GDP The three-pillar approach economic social environment
sustainable development
environment

21. Green GDP
The ecological approach: Sustainability in the economic and social spheres is subordinate to sustainability of the environment.
environment
social
economic

22. Green GDP The ecological approach to sustainable development
Key property to be sustained is the capacity of ecosystems to respond with resilience to external perturbations and changes
the ecological approach is that the health of ecosystems must be protected and enhanced
measurement within two categories:
measures of the pressures placed on ecosystems by human activities
measures of the responses of ecosystems to these human pressures.

23. Green GDP The capital approach
The idea of sustainable development from a capital base:
“Sustainable development is development that ensures non-declining per capita national wealth by replacing or conserving the sources of that wealth; that is, stocks of produced, human, social and natural capital.”

24. Green GDP The capital approach
The capital approach to sustainable development is most closely associated with the thinking of economists on the Green GDP.
The Green GDP does offer a great deal with the measurement framework of natural capital and its relationship to sustainable development.
Natural capital comprises three principal categories: natural resource stocks, land and ecosystems.

25. Green GDP The capital approach
Natural capital may fall into one of three groups of functions:
Resource function covers natural resources drawn into the economy to be converted into goods and services for the benefit of mankind
Sink function absorbs the unwanted by-products of production and consumption
Service function provides the habitat for all living beings including mankind.

26. Green GDP
The Green GDP or A Satellite System of Integrated Environmental and Economic Accounting (SEEA) is a satellite account of the System of National Accounts.
The Green GDP has the capacity to respond to data needs across the full range of views within the capital approach.

27. The example for Green GDP
No.
Item
Billion Baht
Index (GDP=100) 1
Gross Domestic Product (Value Added)
692.4
100 2
Consumption of fixed capital
104.4
15.1 
3=1-2
Net Domestic Product
588.0
84.9 4
Decline in the value of resource stocks due to extraction
58.6 
8.4
5=3-4
Extraction adjusted domestic product
529.4
76.5 6
Decline in the value of resource stocks due to extraction: net of discoveries/natural growth
12.8 
1.8
7=3-6
Depletion adjusted domestic product
575.2
83.1

28. GDH or GNH indicators: Well-being Index?
In Thailand national well-being has been in concern for development since the 8th National Economic and Social Development Plan ( ).
Office of the National Economic and Social Development Board (NESDB) plays a key role in developing this indicator called Well-being Index

29. GDH or GNH indicators: Well-being Index?
A concept of well-being in Thailand has been developed from professor Sen’s idea
The well-being is an indicator of how well people is functioning or what capabilities people have.
The government’s role is to improve the well-being of people by providing means to increase their capabilities

30. GDH or GNH indicators: Well-being Index?
The well-being indicators in Thailand have constructed in composite index that is covered in 7 components 25 sub-components
Health
Knowledge
Working life
Income and distribution
Environment
Family life
Good governance

31. GDH or GNH indicators: Well-being Index?
To construct each well-being component to evaluate the achievement of the development, the equation is
Achievement index = ………. (1) Or
Achievement index = ………. (2)
For index on social problems, the lower value the better development;
Achievement index = …………. (3)

32. Indicators for GDH or GNH: Happy Planet index (HPI)
The new economics foundation (nef) has introduced the Happy Planet Index (HPI) that is new measurement shows the ecological efficiency with which human well-being is delivered.
HPI has different rationale to the other alternative indicators which begin with GDP, and then minus social and environmental costs to create a more accurate measure of economic prosperity.
The HPI calculates for the ecological efficiency with which countries deliver happiness and long lives for their people.

33. Indicators for GDH or GNH: Happy Planet index (HPI)
The HPI incorporates 3 separate components: ecological footprint and life expectancy are objective variables
while self-reported life satisfaction is subjective variables .
HPI =
*life expectancy x life satisfaction
= Happy Life Years (HLY)

34. What is the indicator for GDH or GNH
Green GDP
HPI
Well-being Index ?

35. GDP per capita, HDI Ranking, HPI ranking for 6 ASEAN countries and Bhutan.
Country
GDP per capita Ranking
HDI Ranking
HPI ranking
1.Singapore 21 25
131
2. Brunei Darussalam 29 33
100
3. Malaysia 58 61 44
4.Thailand 66 73 32
5. Philippines
103 84 17
6. Indonesia
115
110 23
7. Bhutan
134 13
Source: The Happy Planet Index and Human Development Report 2005

36. Gross National Happiness By NESDB
Office of the National Economic and Social Development Board
Preliminary conceptual framework
Gross National Happiness By
NESDB

37. Concepts
Objectives
GDP and growth of GDP per capita have been used to measure development success of a country
Develop framework, compile well-being index in Thailand on the basis of participation
To be a tool to indicate status, and trend, to evaluate and consequently to apply for public policy formulation toward happiness of the Thai society.
From the 8th Plan, Sufficiency Economy philosophy has been brought in to lead the country’s development. The key concerns, thus, shift to the people and their happiness.
As an instrument for driving changes into the mainstream concept of living a happy life.
GDP is no longer sufficient.
There’s a need to develop new indicator that reflects “well-being” of the people.
To set development procedures for database necessary for compiling the well-being index.

38. Conclusion from review on related indices
All of the indices incorporate many aspects of development and do not rely mainly on the GDP.
Development of indices focuses intensively on measuring happiness of the people.
Well-being components of these indices are mainly subjective data.
These indices are used as instrument for policy-planning, evaluation as well as building community learning process to solve problems on their own.

39. “Sufficiency Economy” Philosophy
Middle Path
Main idea
Living practices in every level of life
Family, community and state – on development
Sufficient
Concept
Rational
Immunity
Knowledge
Merit
Effort
Condition
Individual knowledge in theories, cautious
Honest, trustworthy
Patient, hard-working, conscious
Goal or expect results
Linking way of life/economics/social/environment/politics
Create balance/security/fair/sustainability
Prepared for changes

40. human Integration Development with
“people as the center of development”
To human-centered and happiness
People as the center of benefits and well-being
From focusing on economic development
Benefits of the people
Consider “geo-social” of variety of physical environment of the area and the community’s way of life
Geo-
From separate thinking
To integration of all aspects
human
Social
Participation
Develop “step-by-step” on self-reliance-grouping-network-connect to outside, or “explode from the inside”
From top-down development
To bottom-up strategy
Living peacefully among people,
Between people, nature and environment sustainably

41. Sufficiency Economy Philosophy
Development Vision
Sufficiency Economy Philosophy
Thais
Community/ institution
Country Management System
Economic system
Natural resources environment
Moral-led
Proficient
Keep-up
Warm family
Strong community
Peaceful society
Quality
Stability
Fair
Quality environment and sustained natural resources
Good governance
Institutional Democracy
Living in the world society with pride
Overall Happiness throughout Society

42. Definition and components
“well-being”
means a way of life—mental, physical and wisdom that connect social, economic and environmental aspects together whose relationship is right, balance and leading toward peaceful living among human beings, between human, nature and environment under good management.
Develop factors leading toward happiness
Develop well-being of people and family
Good governance in country management
Balance between human and nature
Quality and fair economic system
Strong and peaceful society

43. Promote moral and learning continuously
Factors for happiness
Well-being
Quality and fair economy
Balance of living between human and environment
Economic growth with efficiency and productivity. Use of knowledge, innovation. Nation-wide employment. Strong grassroots economy. Businesses compete with transparency, fair, responsible, aiming to build economic immunity so that the country is stable. Benefits are distributed fairly and equally.
Preserve natural bases and balance of biological system. Use them fairly, reserving for future generations. Maintain variety of biology and manage environment well.
People and family
Good health, mind, emotion, body. Balanced wisdom that reaches religious philosophy and morality. Altruism, honest occupation, have security in life. Warm and loving family in good environment with independence, pride and equality
Strong and peaceful society
People and community access to Buddhism philosophy, have good culture and values to hold on to. Accept differences of cultures, respect each other, solve problem with peace, leading toward healthy community and peaceful society
Good governance in country management
Good management structure, mechanism and procedures. Rules encourage involvement by all parties to manage the country with rule of law, morality, transparency and responsibility. Hold on to democratic culture and decentralize power to the people
Promote moral and learning continuously

44. THANKS
National Accounts Office