A Comparative Study on Measuring Development: Gross Domestic Product vs. Human Well-being, Schemes and Mind Maps of Economics

Download A Comparative Study on Measuring Development: Gross Domestic Product vs. Human Well-being and more Schemes and Mind Maps Economics in PDF only on Docsity! 1 Measuring development: policies and indicators Risto Heikkinen International business 6290 Arcada Polytechnic 2011 2 DEGREE THESIS Arcada Degree Programme: International Business Identification number: 6290 Author: Risto Heikkinen Title: Measuring development: policies and indicators Supervisor (Arcada): Andreas Stenius Commissioned by: Abstract: We as human beings have many layered relations, not only to each other but to the planet we inhabit. It provides everything we need to support our life systems. This is easy to conclude, since it is clear that scientific interpretations of our existence, as well as expressions from spirituality to arts are all eventually drawn from relationships between us, the environment, and its laws within. Being the environmental foundation for the external existence of the human race, natural resources are also the foundation of our economic systems and activity. Therefore it is reasonable to question our measurements of development, especially the way does growth in it affect positively towards majority of humans and environment we live in? What is the way we truly want to develop? And what are the methods and measurements that help us to get there? These questions are approached from the perspective of a descriptive and normative comparison study and as a result, answer providing for the relationship of positive development and measurement methods, as well as an example for a corrective solution is offered via core values operating these measurement indexes. Keywords: Source, values, indicators, policy Number of pages: 55 Language: English Date of acceptance: 5 development can be verified from several different cultures, sciences and world-view perspectives throughout the world. Conclusion of measurements also from, for example, report conducted autumn 2009 by a commission set by the French government and led by Professor Joseph E. Stiglitz. In this paper I aim to recognize, not only the direction led by GDP –based thinking or advantages and issues related to it, but more importantly, possible complementing development measurements which share a purpose of reaching a sustainable development model which can be considered as a prerequisite towards wellbeing and happiness of humanity with the help of economic activity. What is the way we truly want to develop? And what are the methods and measurements that help us to get there? Most importantly, do humans already have what is needed for it as a whole? It is presumed that happiness and wellbeing can be achieved with quite common traits between humans; therefore I believe that common nominators for prerequisites can be found as well if ideas from different perspectives as well as different parts of the world are observed via methodological help of descriptive and normative comparison study. Via the results of the descriptive methodology, an example for a corrective practice is presented in form of constructive business guidelines and example measurement methods are presented with results. 6 2.Measuring development 2.1 Introduction to measurements The Oxford dictionary for advanced learners defines measurement index as follows, http://www.askoxford.com/concise_oed/measure verb 1 determine the size, amount, or degree of (something) by comparison with a standard unit. 2 be of (a specified size). 3 (measure out) take an exact quantity of. 4 (measure up) reach the required or expected standard. http://www.askoxford.com/concise_oed/index noun (pl. indexes or especially in technical use indices /indiseez/) 1 an alphabetical list of names, subjects, etc., with references to the places in a book where they occur. 2 an alphabetical list or catalogue of books or documents. 3 an indicator, sign, or measure of something. 4 a number representing the relative value or magnitude of something in terms of a standard: a price index. 5 Mathematics an exponent or other superscript or subscript number appended to a quantity. Indicators measure policies. Indicators also embody values to be carried into those policies. In today’s economics in general, when implementing they tend to carry on policies or actions based on current, often international trends of development, without taking into consideration the values behind such trends. Overcoming this is possible by recognizing the bigger picture and the fact that between values and policy implementation are indicators that mediate between them. Indicators capture imagination easier and help convince the lay people, but it is not always easy for the people to discern that indicators are not value neutral, and that the underlying values and principles eventually determine actions and policies. In fact, one can go beyond this and say that indicators drive society in certain direction. (Professor Karma Ura, WHO 2008). From the policies implemented through indicators, due to their interrelation, it is possible to gain glimpse of the values that operate behind, both the indicators and policies, by comparing these means with an end they produce. 7 “In effect, statistical indicators are important for designing and assessing policies aiming at advancing the progress of society, as well as for assessing and influencing the functioning of economic markets.” (Stiglitz sen Fitoussi 2009 p.7.) “What we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices, once environmental degradation is appropriately included in our measurement of economic performance. So too, we often draw inferences about what are good policies by looking at what policies have promoted economic growth; but if our metrics of performance are flawed, so too may be the inferences that we draw.” ( Stiglitz sen Fitoussi,2009 p.7.) “Economic growth is intended to be a means to the end of social well-being. However, as society focuses on what is being measured, the means become the end. In other words, Western nations make the mistake of equation economic growth to social well-being.” ( Dasho Karma Ura and Ms Tshoki Zangmo 2008) Most measuring methods used in today’s societies focus their policies on aspects such as financial development which means growth, nature and environmental condition, and various functions producing societal well-being in mostly material perspectives. In addition to that, great variety of things producing well-being and happiness are valued by standards outside the material and mental dimension. These are as important things to pay attention to, since what good are financial and technological value generated, or achievements from environmental resources, unless it is also a vehicle for that which brings true value, happiness and wellbeing. Therefore must be understood that the environmental resources as a whole are a value-basis for a possibility to any of this to appear and therefore indexes measuring these resources with honesty can be important complementation to what is used by economics. 10 2.2 The Gross Domestic Product (GDP) Two most used index measurements for development are Gross National Product (GNP) and Gross Domestic Product (GDP). Main difference between these is that where GNP regards value of products made by nationals, for example Finnish people as a whole, GDP focuses on the value of final goods produced by the nation itself, for example Finland. GDP therefore is a basic measure of a country's economic performance and is the market value of all final goods and services made within the borders of an economic area, such as a country, in a defined period usually being a year. What GDP calls final products consist of products which do not require any additional transformation prior to use, and are presumed to be used by end users instantly in that time period for consumption or investing purposes. Final products are also therefore final energy values consumed to a certain production, and within that production. It can consist of goods or services, which can be assigned a monetary value to represent that energy. Therefore total GDP presents total energy used, valued and measured in monetary terms in a given region for commercial purposes deducted by imported amount of energy in that certain time interval. Gross Domestic Product is simple and effective when measuring commercial productivity and therefore also material standards of living and consumption in given areas. It is standardized to current GDP, which is measurement expressed in current prices and of the period being measured, and nominal GDP, which is the production of final products valued at current prices. Real GDP has been useful in measuring if production has decreased or increased despite changes in other variables, since it values production of final products at a constant price level. Components that form Gross Domestic Product are as follows: consumption in form of private consumption and investment activity, usually the largest component. This includes every form of goods and services consumed by individual or private entity. Investments consist of activities contributing to future consumption by the same entities. Along with private consumption and 11 investments, GDP includes similar activities performed by public entity, such as the government. These can be defined as public investments in form of expenditure of final goods and investment methods stimulating economic activity, and public expenses for example in form of maintenance and functional expenses. Finally, besides domestic activity, GDP is affected by relation of imports and exports across its borders. Imports include supply received for domestic consumption from outside its borders, whereas exports define the amount produced for consumption outside these same borders. In order to see that ratio, exports have positive effect on GDP as imports are deducted from it. Due to the fact that GDP measurement is internationally standardized and measured frequently and consistently, it is reliable and up to date in its purpose. Simplified formula for GDP is as follows: + Private consumption and investments + Public investments + Public expenses + exports - imports =GDP in fractional reserve currency adjusted to value of local currency. Gross Domestic Product is not only measured for a single countries or larger economical areas, but also for smaller segments inside a country. Example of this is useful measurement of GDP per capita, where GDP of defined area is divided by entities inside that area contributing to and affecting it. (Formula at UNDATA -webservice) 12 2.2.1 Values and policies related to GDP Gross Domestic Product has been gaining status as a main measurement of performance and growth slowly over years it has existed, taking attention from the broader picture and actual direction of development, as well as the underlying reasons and values behind it. “It is widely used by policymakers, economists, international agencies and the media as the primary scorecard of a nation‟s economic health and well- being. Yet, as we know from its creator Simon Kuznets, the GDP was never intended for this role (Kuznets, 1934)”(Redefining Progress: GPI 2006) This usage is well understandable, for GDP was chosen to economic measurement during the time when material well-being was not certain, and building new was necessary right after the world war. It was seen necessary to focus economy in a oversimplified way of growth for providing this well-being quickly to countries many people. It is clear that GDP is a very narrow tool to measuring anything but growth in quantity of commercial production, technically this means spending of energy and resources of that area. Being so simplified, GDP does not take values into account, elements such as environmental issues related to pollution and finite part of the resources available, both attached to economic growth itself. Therefore it does not recognize the ratio or quality of the energy resources used to the energy of final products. It should also be understood that GDP is actually measuring consumption of resources instead of final products although presented differently, for the actual consumption of final goods produced can only be assumed. Therefore when rise in GDP is set as an objective, it automatically means only that consumption of resources rise. This is similar, as said regarding to GNP. “GNP also fails as a measure of social well-being, since it does not willingly account for assets. Businesses gauge financial condition and performance by using a balance sheet and income statement. Using GNP to measure social well-being (or even economic performance) would be like a firm using only income statement to measure financial condition” (Redefining Progress: GPI 2006) 15 does not identify quality of resources used or quality of what is being consumed, and it aims focus to consider mostly physical and material growth with the help of mental aspects. Indicator: the Gross Domestic Product Policies: physical and mental growth, profit and gain from measurers perspective, adapted to the usage of economics. Values: physical and mental growth via profit and external gain. It must be recognized that GDP was never meant to be in the use where it is in today’s economical society. Nevertheless, it can be usable with full understanding of the index, and when complemented in ways that shift it into a more balanced, proper and correct usage. Additionally a measurement for qualitative values producing actual happiness and well-being to individuals and therefore humanity are needed. (Stiglitz sen Fitoussi,2009 p.17.). There exists research showing that amount of income and consumption correlates only to a certain level with happiness and well-being. Therefore, the level of necessary GDP can be the amount of income needed to provide for physical well-being of an individual, since this makes possible shifting individual’s focus towards positivity on a larger scale and more freely that manifests the true value. GDP is also recognized to be complemented with dimension of standard deviation in order to be relevant, as the commonly used GDP per capita cannot view real income distribution. There are several holistic indexes, a few more developed than others, measuring development and performance leading to well-being and happiness which is viewed here in comparison with Gross Domestic Product. 16 2.3 Genuine Progress Indicator (GPI) “The GPI is one of the first alternatives to the GDP to be vetted by the scientific community and used regularly by governmental and non-governmental organizations worldwide. Redefining Progress advocates for the adoption of the GPI as a tool for sustainable development and planning. “ (Redefining Progress 2009, http://www.rprogress.org) The developer of the GPI, Redefining Progress, is one of the leading public policy think tanks dedicated to smart economics located in the USA. Redefining Progress declares its purpose as to find solutions that ensure a sustainable and equitable world for future generations. While conventional models for economic growth discount such assets, values, as clean air, safe streets, and cohesive communities, Redefining Progress integrates these assets into a more sustainable economic model. Working with government and advocacy groups, Redefining Progress develops innovative policies that aim to balance economic well-being, environmental preservation, and social justice. Currently GPI is in some form used for example, in Canada in form of GPI Atlantic. “Our policy initiatives address pressing environmental issues such as global climate change and natural resource depletion, while ensuring that both the burdens and the benefits of these policies are shared equally among affected communities. We inject ground-breaking ideas into public dialogue, policy discourse, and decision-making in compelling and nonpartisan ways.” (GoGreen: an ecotribe initiative) 17 Figure 3. Graph shows how economic growth shown by GDP per Capita seizes to reflect growth in GPI per Capita after certain level of economic activity is reached. The lack of correlation may be caused by differing valuation of same attributes in both of these indexes. General Process Indicator uses same data as GDP, but values it differently recognizing the direction of causal energy flow in clear situations. It also includes several additions to calculation that is considered to show more realistic picture of the development at hand. Although many of the additions shown are not directly measurable in monetary terms, GPI considers the monetary amount required if an entity was hired to accomplish the aspect or task measured. GPI includes following factors frequently presented in spreadsheet form, where from the actual GPI measurements is calculated as follows: + Weighted personal consumption, (1.Personal consumption, 2.Income distribution),Value of household work and parenting, Value of higher education, Value of volunteer work, Services of consumer durables, Services of highway and streets, - Costs of crime, Loss of leisure time, cost of underemployment, Cost of consumer durables, Cost of commuting, Cost of household pollution abatement, Cost of automobile accidents, Cost of water pollution, Cost of air pollution, Cost of noise pollution, Loss of wetlands, Loss of farmland, Loss of primary forests and damage from logging roads, Depletion of nonrenewable energy resources, Carbon dioxide emission damage, cost of ozone depletion, Net capital investment, Net foreign borrowing, = GPI (GPI/capita follows). The resulting indicators in general GPI spreadsheet is as follows; GPI indicator as calculated above. GPI per capita, where total GPI values are divided by number of people involved. Finally, 20 items and to public infrastructure, such as highways. Dependence on Foreign Assets If a nation allows its capital stock to decline, or if it finances consumption out of borrowed capital, it is living beyond its means. “The GPI counts net additions to the capital stock as contributions to well-being, and treats money borrowed from abroad as reductions. If the borrowed money is used for investment, the negative effects are canceled out. But if the borrowed money is used to finance consumption, the GPI declines.” (GPI Report 2006, by Redefining Progress.) GPI shows similar idea as Gross National Happiness –principle, described next, by acknowledging clear interconnectedness and correlation due to the clear cause-effect –relations. Also, from every measurement noted in this paper, GPI is the only one including the very important aspect of volunteer work into the calculations and therefore the quality of energy flow in work. It recognizes interactive social matrices formed by individuals by their freedom of choice in the form of neighborhoods and communities. As said in GPI, “Whether each additional lawyer, broker, or advertising account executive represents a net gain for the nation is arguable. But there is little questioning that workers in the underserved community and volunteer sectors – the churches and synagogues, civic associations and informal neighborly efforts – are doing work that is desperately needed”. GPI measures volunteer work by first estimating the total number of hours volunteered each year from data which is gathered via external surveys. Yearly estimation received from data is transformed from time measurement into monetary sum, rated by standards of independent sector (15,68 USD per hour, 2006). Therefore value of volunteer activities in US stood $131 billion in 2004, which is $447 per capita. Same measurement carried from the year 1950 is $202 per capita, pointing clearly the direction of time usage by people observed. The Genuine Progress Indicator and its variants were conceived as a way to measure changes in national economic with a single aggregate scale. GPI considers households as the basic building blocks of national welfare and thus focuses its measurements towards personal consumption patterns and in clear situations adds positive and negative effects the total of consumption or work done that rises from economic, social and environmental domains. Even 21 though there are issues related to its ability to measure sustainable welfare as well towards its methodological soundness, GPI can measure and combine rarely measured aspects with account data going back 54 years making it usable utility to many researchers around. As in other measurement indexes, interconnectedness of both the negative and positive aspects makes it difficult to value them accurately, although GPI identifies many important of these with success. “'Volunteering makes the heart grow stronger,' said David Eisner, CEO of the Corporation. 'More than 61 million Americans volunteer to improve conditions for people in need and to unselfishly give of themselves. While the motivation is altruistic, it is gratifying to learn that their efforts are returning considerable health benefits.'" (World Volunteer Web, 2010) Indicator: the Genuine Progress Indicator Policies: Development in a cause-effect relationship, direction of energy flow manifesting as positive or negative in relation to well-being and measured in, and converted to, monetary terms. Values: Quality of energy resources, its transformation to, and results produced, by positive and negative relationships. Actions positive to oneself sometimes negative in the long run and in larger proportional picture, due to interconnectedness. GPI calculated for Finland, according to which growth in economics has not correlated with growth in well- being since 1980's. (Tilastokeskus-website, 2010) 22 2.4 Gross National Happiness (GNH) One, maybe most interesting of the balancing indicators to Gross Domestic Product comes from a small, still quite isolated Buddhist country of Bhutan. Bhutan has based its developmental policies on indicators known collectively as Gross National Happiness (GNH), which represents more holistic, spiritual and philosophical view of development due to its background. Similar to some extent with more western concept of the green economics. Bhutan has recognized that without a common vision, or value, founded through indicators of GNH, each individual merely looks to his or her own ends even though welfare is a shared pursuit. Therefore GNH index aims not only to assist building and maintaining this vision and foundation of happiness, but is also a necessary tool for government to protect its cultural- and natural- environmental-, and spiritual heritage. With these aspects as tools, main goal of species wide happiness and understanding of universal interdependence becomes reachable for individuals according to GNH.(Nation Master -statistics, 2011) GNH consists of a matrix model, where chosen indicators related to processes or policies at hand are defined and their effect is considered together with the values commonly shared in Bhutan. GNH is not a simple formula, but a collection of interrelated and qualitative variables and survey data that aim to provide a perspective broad as possible towards situation it is used in. In order to qualify valid, an indicator with respect to any variable has to have either a positive or a negative influence on well-being and happiness. The direction of causality towards happiness and well- being must be clear. For examples, more lawfulness, more health, and more clean air have a more positive influence on happiness than more crime, illness, and pollution. Besides objective causality in describing these interdependent relationships, addition of completive open self-reporting of experiences provides more accurate picture of well-being. The interdependence of all things, instead of divisive abstractive versus conventional and subjective versus objective is a key concept in GNH. For GNH indicators, this cultural concept means that 25 “In recent years, researchers from several disciplines have begun investigating the benefits of contact with plants, especially trees. In studies of the stress-reducing effects of nature, people recovered more quickly and completely from stress when exposed to plant-rich natural settings, as indicated by lowered blood pressure, heart rate, muscle tension and skin conductance.” (Conductance measurement is considered one of the best physiological measures of autonomic nervous system and stress response). (Dr. David Hoffmann, PhD 2003) Indicator: The Gross National Happiness Policies: Soundness of rational scientific methodology supported by subjective values. Actions that lead to positive effect for everyone supported. Values: Quality of Interdependence, of individual and policies of whole. Common values, vision, reflecting to means and to an end. Cause-effect relation with recognition of positive and negative effect towards the interconnectedness. 2.5 The Happy Planet Index (HPI) Happy Planet Index is a measurement index developed by an independent think tank, The New Economics Foundation (referred as NEF). It aims to focus on measuring qualities of what truly matters in relation to our well-being in terms of long, happy and meaningful life and reflects it to our relationship with our planet and the consumption of its resources. These are also the values it represents. HPI aims to be the ultimate efficiency ratio aiming to provide information needed in order to shift development into more sustainable direction. NEF has been awarded by the International Society for Quality-of- life Studies’ award for the betterment of human condition 2007, for development of HPI. 26 “New Economic Foundation considers its aim to improve quality of life by promoting innovative solutions that challenge mainstream thinking on economic, environment and social issues by working in partnerships and putting people first. NEF was founded in 1986 by the leaders of The Other Economic Summit (TOES) which forced issues such as international debt onto the agenda of the G7 and G8 summits. NEF aims to combine rigorous analysis and policy debate with practical solutions on the ground, often run and designed with the help of local people. As HPI shows, NEF creates new ways of measuring progress towards increased well-being and environmental sustainability.” (The Happy Planet Index 2.0, by The New Economics Foundation 2006) “NEF works with all sections of society in the UK and internationally - civil society, government, individuals, businesses and academia - to create more understanding and strategies for change.” (The Happy Planet Index 2.0, by The New Economics Foundation 2006) Happy Planet Index was launched in July 2006 with a purpose of offering alternative to the seemingly economic obsession with GDP. HPI identifies its values more accurately as health and positive experience of life, forming positive emotions, and the natural resources that human existence is physically dependent on. The goal, the policy of HPI, can be defined as a happiness that does not cost the Earth, and is measuring progress towards this target with both, statistical data and empirical studying. The most important findings provided by the second HPI indexing are: more what is often thought as development and consumption rarely means more happiness and well-being, and countries with same ecological footprint, meaning usage of planetary resources, support lives with differing levels of well-being and happiness. Also it is important to mention that no country currently achieves three accurate goals given by HPI; high life satisfaction, high life expectancy and one-planet living. HPI equation in its simplified form is 27 2.5.1 How HPI measures development This measurement is composed from statistical data gathered from various sources, as well as empirical survey provided by people living in countries included in it's measurements. Life expectancy statistics are provided by Human Development Index report (UNDP 2007), whereas life satisfaction is measured by numeric scale questionnaires provided by NEF and external sources such as World Values Survey, discussed before. This is in order to provide broader view with differing samples. Third part of measurement, the ecological footprint, is based on data provided by WWF's living planet -report 2008. Ecological footprint compares the biocapacity available as resources and absorbing products with the rate it is produced, for example via greenhouse gases. Since this data covers only some countries in measurements, different variables have been used in stepwise linear regression to provide comparable information. These variables include per capita CO2 emissions and GDP growth. Other affecting variables noted include growth of industrial sector, population density and level of urbanization. “Economic development needs to be decoupled from environmental impact and, perhaps more importantly, well- being needs to be further decoupled from economic development.” (The Happy Planet Index 2.0, by The New Economics Foundation. 2006) +HPI index provides valuable information regarding sustainable, balanced development in physical and mental aspects. Important aspect regarding HPI, besides its simplicity, is its emphasis on ecological perspective and the relation it has with subjective well-being. Where for example GDP focuses on final products in form of physical products and intangible services, HPI focuses consciously on resources that are behind both segments and which provide energy needed for positive action and -result in general. As HPI shows, high subjective well-being and perceived happiness is rarely related to high consumption. This is well seen in difference between USA and Costa Rica, where people in latter live longer and tend to report being happier with ecological footprint that is a quarter of the USA's. 30 percent of all cumulative emissions. The actual level of the development threshold differs in global perspective and between countries with subjective variation, especially when presented in clear monetary terms. GDR uses example amount of approximately 20$ per day per person or equivalent in its calculations. Key themes, values and policies in GDR, are capacity and responsibility. Effort share based on these principles is common, sound and ethically reasonable method. Capacity quantified in GDR is done in a manner that accounts for intranational disparities in income in respect to above explained development threshold. Example of this can be seen considering what GDR defines as key countries, USA, China and India, in chart below, where capacity above development threshold is visible in green color and yellow under it (Figure 4.).(GDR framework 2009) Responsibility according to GDR is defined by cumulative CO2 –emissions from fossil fuel consumption since 1990, although it is recognized that there is several “correct” definitions for this. The year 1990 is considered reasonable one, largely because earlier emissions were usually (though not always) made in ignorance of the harms they were causing. By the metric responsibility is higher in wealthy countries and effectively zero in the poorest countries. As a contrast for high capacity and responsibility countries such as USA, countries with high emissions such as China and India have relatively low responsibility. 31 2.6.1 How GDR measures development There are many formulas which have properties needed in GDR framework, but one mostly used is the one that defines a simple weighted sum of responsibility and capacity, and also allows different weights to be given to each: RCI = a R + b C The capacity „C‟ of a country is the sum of all individual incomes above the development threshold. For example, let’s assume that in a country 10 per cent people have yearly incomes above US $9,000. In that case, the individual incomes of this group above the threshold are added up to arrive at the country’s capacity index. Responsibility index „R‟ is calculated as the total of a country’s cumulative per capita CO2 emissions from fossil fuel consumption since 1990, above the developmental threshold. The result, “RCI”, comes from Responsibility/Capability Indicator. GDR specifies that A. and B. sum to 1, so that as the paired weights go from A =1 and B = 0 at one extreme, A=0 and B=1 at the other, the RCI goes from being exactly equal to responsibility(R) to being exactly equal to capacity(C). GRD framework suggests that obligations would presumably be passed down to individual level from national level, another level of “c” and “r”. Finally the aim of GDR is to be able to built a framework upon the principles of common but differentiated responsibilities and respective capabilities. What is notable to acknowledge is that “costs” cumulating from emissions should be seen as future investments or opportunities. +GDR framework is scientifically well constructed for its measuring purpose. Even though the relation of man made CO2 emissions to climate change is still controversial when different researches and values, for example behind carbon trade, are observed. For the financial profit making motives of the participants seem to go in front of the actual purpose of environmental protection as a policy intented in carbon trade. One resulting example of the policy reflecting these values can be seen in form of the so-called geoengineering-programs. However, besides reasonable development threshold perspective, GDR framework consists valuable directions and guidelines to cross-country co-operation and interaction towards sustainability. These parties are defined as North and South. According to GDR framework, the North in particular has work to 32 do to convince the world that it is willing to engage seriously in a global effort to protect the climate by demonstrating its readiness to reduce its domestic emissions and therefore engage positively towards the stabilization of the climate. Until now, northern countries have been capable only to partially engage in meeting commitments done in, for example Kyoto or Rio. North also must agree to, and begin to deliver, the technological and financial support needed to accelerate mitigation in developing countries. This can enable the South to launch its own transition into low-carbon development path according to agreements done and grow positively. GDR sees the main challenge of the North, what it defines as many broken promises towards the South in the past, and is expected to take the lead in new trust building process to make up for its responsibilities towards the South. This requires at least transparent and equally fair and honest procedures. The South, too, is hoped to act dramatically to overcome this international lack of trust recognized. It is appropriate for South to act voluntarily for trust-building period to become successful. It is necessary that South starts to operate towards this positive development on its own, as well with real effort and be willing and open to contract with North when equal, honest, and fair commitment is presented. Perhaps even to engage further than these commitments require in friendly way to show solidarity and forgiveness. Prominent examples regarding this can be seen in South Africa’s commitment to drive towards an emissions peak by 2025 (Earthlife Africa Jhb -websource), by Indonesia 25% reduction (Springerlinks publication -websource) and South Korea's announcement to support long-term goal of cutting emissions aggressively (Bloomberg 2009). Finally, GDR report says that the South should demonstrate that it is serious in its desire to prioritize in eradication of poverty and building sustainable human development in a positive way instead of previous happenings regarding the development. 35 of the needs providing basics for well-being. Maslow defines these needs together as physiological- and safety needs, which include basic resources for physical human living. It also shows that values above these can best be fulfilled outside the spectrum of financial activity and perhaps even the material dimension. It is also clear that ultimately Maslow's hierarchy reflects only what Abraham Maslow himself has identified as needs, and cannot be stated to have absolute validity or reliability to humans in general. Indicator: Abraham Maslows hierarchy of needs Policies: Fulfillment via elimination of needs identified to be adverse to well-being and happiness Values: Needs identified. Elimination of needs, for example via fulfillment. Figure 5. Above shows the relationship between individual development as seen by Abraham Maslow and possible paradigm change from individual to more holistic and socially altruistic, in order for it to be sustainable and ethical considering the whole: When individual development reaches higher, increases therefore the possibility, and necessity, for socially altruistic behavior inversely. That is actually the middle levels of love and belonging of the pyramid, resembling the idea of the golden rule. 36 The first two steps of the pyramid are levels that factors outside individual, such as governmental institutions, can positively affect. According to Maslow, satisfied individual physiological and safety needs are therefore prerequisite for fulfillment of upper needs to be possible to emerge. This can be applied relatively when global macro –level is considered, and is focus of every measurement index presented in this paper. The GDR -framework is clearly focused towards the first step, but includes principles with further measurement adaptability. Similarly, the Happy Planet Index is affecting these first steps with measurement focus towards the steps above these. The next two steps, according to Maslow and what he describes in turquoise and purple, start to emerge more freely when individual physiological and safety needs are well enough met, or fear of these are reduced. These middle levels of love and belonging, and esteem, can be seen as a turning point where individuals focus may, and usually does, shift from the first basic needs focusing on individual self towards needs for community and relationships around them. The most important levels of love and belonging, which produce esteem and actual happiness, can best be met by voluntary and equal interaction. This more balanced focus allows also the defensive approach and pressure towards bottom levels of the pyramid to ease. It is also clear, that from these levels of love and belonging sprouts fulfillment to every other step described in the Maslow's pyramid, being the actual need behind all of these. Capstone of the Maslow’s pyramid, which he defines as level of indigo, is viewed as a goal of the individual development. This can be reached sustainably and permanently with relative ease, with well-functioning lower levels which require functions as individual as well as community, or as a whole. Indigo level of self-actualization is reached by adjusting individual’s personal needs to the needs of relationships and the whole in order to achieve sustainable balance in subjective and objective, between individualism and fellowship. The level of self-actualization can also be achieved via economics by accumulation of material wealth so large that it does not offer anything, or any fulfillment anymore. For it has so exceedingly fulfilled its usable purpose of building the first two levels presented in Maslow's pyramid. Therefore there is no other direction to go than holistic spiritual. Often it seems that people with this accumulation, due to the nature of economy, stay in the material egoistic pursuit for they have been required to work 37 and act in ways that take them more far away from the altruistic, emotional and therefore purely spiritual. Current usage of the GDP measurement can assist in every step of Maslows hierarchy, with the exception of the most important step to happiness, of love and belonging. This is supported by both Maslow and Alderfer, and is also visible in effect called the hedonist treadmill. “Alderfer also proposed a regression theory to go along with the ERG theory. He said that when needs in a higher category are not met then individuals redouble the efforts invested in a lower category need. For example if self-actualization or self-esteem is not met then individuals will invest more effort in the relatedness category in the hopes of achieving the higher need.”(Principles of management, Carpenter, Bauer, Erdogan. 2009.) Therefore in order for this hierarchy to be sustainable and balanced, as according to the above picture, the most important step is what is called the level of love and belonging for it enables that overall sustainability by taking pressure from steps before it by reducing fear, and providing for the healthy development of the steps above it. Support of this step is the main focus in measurement indexes Gross National Happiness and the Genuine Progress Indicator, although attention is set towards every other step as well. “In today's materialistic society, if you have money and power, you seem to have many friends. But they are not friends of yours; they are the friends of your money and power. When you lose your wealth and influence, you will find it very difficult to track these people down.” (His Holiness the Dalai Lama) Like mentioned, institutions such as government or companies via commercial activity, can have clear positive effect only on the first two levels of Maslow’s hierarchy providing the prerequisites for the possibility of reaching higher levels in a sustainable and responsible way. Purpose of making this possible can be seen as a natural purpose of every measurement index compared in this paper; for due to the nature of the measurement goals and values, there are objective views above self-interests involved providing level of trustworthiness. 40 Table 2. continues Attribute / Index GDP GPI GNH GDR HPI Qualitative X X X X Resources X X Final goods X X Quantitative X X X X X Resources X X X X final goods X X Objective well being Economy X X* X X X Ecology/nature X* X X X Holistic recognition X* X subjective well being X X* *These aspects are noted, but only partial. With the comparisons shown above, GNH and the GPI have most holistic spectrum and value elements from the measurements included here. From the similarity between these two, although sprouting from completely different backgrounds, a connection between values can be found. Clear examples of this are the focus of actual quality, or qualitative approach, to values and interconnectedness of individual persons and aspects making the whole in relationships. Although the rest of the measurements seem more directly focused on their special focal point, this focusing gives definitely more accuracy into analysis in their special context and measurement purpose than two previously mentioned indexes. 41 4. Results and discussion Figure 6.Many different, still the same. The paradox of GDP and GNH Although there exists common nominators and themes in goals of the indexes viewed, equally important aspect is to consider the ways they differ and can therefore complement each other when ideas and elements are combined and viewed, or used, together. For they all share the purpose of reaching the goal of species wide well-being and happiness and are therefore not competing. Instead of policy of mere quantitative focus towards the end products and consumption of resources, the values, focus needs to be set qualitatively towards these same phases of process. Start and the result of it. Each of the aspects, values, important to development is present in these indexes together and it is interesting to see how diversified world views affect the composition of these measurements. For they share similar values underneath this diversification. This is best seen in between index of GPI compared to GNH that have differences at least in cultural and geographical background, as well as political stand point and spiritual perspective, but share similar values. Main difference between GDP and other measurement indexes compared here are different values. Latter focuses the policy of profit and positive effect to a larger spectrum than measurer itself, and recognizes positive effect much broader than, and not always correlating with, financial profit. 42 Similarly to Maslow's hierarchy of needs, GDP measures values and resources inversely and has therefore values only of itself. This means that it has no values embedded besides sustenance of economics, corporations within it, and the Central banking-system on top, which in this current structure is growth. Growth is defined via profit, and the profit for central banks occurs via interests and other service costs keeping it relevant. Central bank being, monopolistic, globally oligopolistic closed economy on top of the visible economics, where the visible economics are its forced profitable customer. Figure 7. Shows results concluded in visible form. Policies from Gross domestic product and values it is based on. Figure 7. Policies from comparable measurement indexes and values it is based on 45 threshold ideas, similar of GDR -framework's development threshold, and GPI's income/happiness correlation, both varying on diversified factors in the area measured. “For since growth in GDP does not correlate with happiness after safety needs are met, it can be said that what this economics define as profit does not bring happiness after reducing fear of safety. For if presumed that gain of profit to oneself should bring something of value to oneself, and therefore profit should bring happiness if that can be seen as its purpose, the definition of profit then must be flawed. As quote from Professor Stiqlitz in the beginning of this paper also notes, this is when profit is taken as an indicator itself with values defined by economics, which has values (well-being of economy) different than (values and wellbeing of) human beings. For if this does not bring happiness, therefore more fulfilling happiness must exist. This means that there must be next dimension of “profit” beyond mental and material, that adds to the current definition of profit. Perhaps this can be described as spiritual “profit” that adds another level of happiness that economics cannot give, due to the spirit countering nature of it?.” 3.2 Values common behind the measurements itself In order to emerge relevant measurement for development, goals should reflect, or more like support the values central to the development itself. When focusing attention to the detail that one of these measurements, the Gross National Happiness, is consciously built upon the spiritual and ethical values of the geographic are it is developed in, light can be shed to the background of indicators here, for similar heritage behind other measurements also exists. Considering the policies mediated via the measurement indexes visible in this paper, and glimpse of the values identified behind these policies, it is also reasonable and interesting to see do the values mediated to policies via other measurement indexes support, and correlate with, similarly the ethical and spiritual heritage present in 46 geographical and cultural areas the same way that the GNH -indicator? Because this has effect on the way people overall treat each other, not only in governance or business, and can help defining the actual values operating behind the measurement indexes compared here. Figure 8. Shows the way the different indexes are located from west to east, close to northern hemisphere. Index of GPI has been also in use to some extent in Australia and Canada, idea of HPI also in some extent in Thailand. The collected values from these measurement indexes and values from the spiritual and ethical heritage in above visible areas where these are developed (Fig.8), include indirectly and directly the same exact values mediated to policies via them. This means that policies collected from these measurement indexes represent the same which are present in the identifiable value systems operating behind them in the same areas. These are identified as Buddhism and Christianity and the comparison of these are presented in appendix of this paper. “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be.” (NKJW Bible Matt 6:19) 47 Table 3. Values operating behind measurement indexes compared, (Appendix 2) Values (spiritual heritage) Indicators (Religions) Policies (values operating measurement indexes) Golden rule (Many, for example, Udana varga 5:18, Sutta Nipata 705, concept of karma and Dharma, and the noble eightfold path) Buddhism Responsibility – capability, Interconnectedness, Actions that lead to positive effect for everyone, cause-effect relationships. Golden rule (Many, for example, NKJV The Holy Bible, Matt. 7:12 and Luke 6:36) Christianity Happy life years, balance, profit to oneself can be sometimes negative in larger scale, and also other way around. Values and policies share a common stand, all being derivations of the Golden rule. This is the basis behind the spiritual inheritance and traditions in the same geographical areas of measurements, and also behind the policies of these same measurements. “Do unto others as you wish them do to you”. These are also what economists publicly want, and believe can be achieved within the economic structure: transparency, stability, and strengthening of the financial system with resources. All of these values are derivations of the Golden rule. More importantly, common policy and focus in every measurement index present here emphasis the importance of relationships, within and between people, between values and policies, and cause and effect. If not proclaiming it directly, emphasizing it indirectly. According these indexes, relationships established according to current economic paradigm are not working towards happiness and well-being, for this is one major reason for their creation. It is important to understand, that relationships based on principles encouraged by the Gross Domestic Product are almost inverse, and therefore nearly completely opposite, to that of a Golden rule. “The lesson in every chapter of this book is that our Gross National Happiness depends on how we teach and live our values” (Arthur C. Brooks 2008) 50 compassion and love, it can be seen that everlasting happiness is something beyond material and ultimately mental views although including steps in every element in both. Only thing we must die for is the not-understanding of this love and compassion and accept the road and values that are offered, for example, in the sermon on the mount into our mutual interaction. For this fulfills the law of love beyond the seeming separation that the economy is currently based on. “it's the economy, stupid” (the presidential campaign of Bill Clinton 1992.) “From my own limited experience I have found that the greatest degree of inner tranquility comes from the development of love and compassion.” (His Holiness the Dalai Lama) “A new commandment I give to you, that you love one another; as I have loved you, that you also love one another”. (NKJV the Holy Bible John 13:34) 51 5.1 Further questions - Since paid work seem to bring well-being to a certain point and volunteer work seem to bring happiness /well-being after that point. Is there clear correlation between growth in volunteer work and well-being? For voluntary working, as volunteering in general, seems to correlate with at least the sense of happiness. - Is there inverse correlation between growth in debt and well-being when standard deviation is taken to calculations? When influence of temporary growth in economical work is taken into notice, especially in long term consideration. For growth in debt, shown as growth in money supply, requires more growth in economy. Growth in economy is currently achieved via growth in GDP, therefore reducing the possibility, for example, to voluntary activity. - GDP measures consumption. Consumption treats consumables as resources. Therefore GDP also treats consumables as resources. If consumables = material resources + labor, then GDP deducted of “energy value” of, and connected to, labor measures physical resources used, because priceless “energy value” of innovation and inspiration is not included into the measurement. Does therefore GDP only measure these resources instead of “growth of, and economic well? And can growth in physical aspect of economics today be in correlation with overall well-being of human beings? Or adverse to it? 52 List of references and appendix References -Professor Dasho Karma Ura and Ms Tshoki Zangmo, WHO 2008, “An approach to the indicators of GNH”, Found at:[http://www.searo.who.int/LinkFiles/Conference_Panel-B3.pdf] Accessed: 28.10.2010 -Professor Dasho Karma Ura, 2009 “A Proposal for GNH value education in Schools”, Found at:[http://www.grossnationalhappiness.com/PowerPoints/value-education.pdf], Accessed: 28.10.201 -”South Korea to Cut Greenhouse Emissions 30% by 2020”, Bloomberg 17.11.2009. Found at:[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTCt6NfyRFDo], Accessed: 12.5.2011 -”Bridge to Bhutan: Measuring Gross National Happiness”, Websource, Found at:[http://www.bridgetobhutan.bt/blog/?p=687], Accessed 12.5.2011 -Tenzin Gyatso; The Fourteenth Dalai Lama, ”Compassion and the individual” Found at: [http://www.dalailama.com/messages/compassion],Accessed: 22.10.2010 -“South Africa’s Emissions Offer”, Earthlife Africa Jhb, Press Release 10.12.2009, Found at:[http://www.earthlife.org.za/?p=715], Accessed: 12.5.2011 -Zina O’Leary 2004, The Essential guide to doing research, Sage Publications Ltd., ISBN:0- 7619-4198-3 -Encyclopedia of the Nations: Costa Rica. Found at: [http://www.nationsencyclopedia.com/economies/Americas/Costa-Rica-POVERTY-AND- WEALTH.html], Accessed: 12.5.2011