Measurement of Growth through Gross Domestic Product GDP

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Measurement of Growth through Gross Domestic Product (GDP) VS Gross National Happiness (GNH) Wanida

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

Outline for discussion u u Goals of development: From Wealth of Nation to Nation

Outline for discussion u u 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

Policies formulation Values = PRINCIPLES Indicators = OPERATION Policies

Policies formulation Values = PRINCIPLES Indicators = OPERATION Policies

Indicators Reflect values Determine policies Track and evaluate progress Expenditure

Indicators Reflect values Determine policies Track and evaluate progress Expenditure

Goals of development u 1950 s – 1960 s Development Main indicators Economic Development

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

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

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

Goals of development Development Human Development u 1990’s Human development is a process of

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

Goals of development Main indicators Human Development Index (HDI)

Goals of development Main indicators Human Development Index (HDI)

Goals of development Development National Happiness u 2000’s GNH is being presently pursued through

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

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

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

Gross Domestic Product (GDP) GDP: measuring the total of all economic activities in one

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

Gross Domestic Product (GDP) u GDP: measured in three different but equivalent ways Aggregate

Gross Domestic Product (GDP) u 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

Production unit Intermediate Input + Primary Input • Labor • Land • Capital •

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

GDP calculation: Value Added Approach Intermediate Cost : IC Production Value มลคาเพม (Value Added

GDP calculation: Value Added Approach Intermediate Cost : IC Production Value มลคาเพม (Value Added : VA)

Gross Domestic Product (GDP) GDP omissions: the distinct issue is environment factors u Depletion

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

Beyond Gross Domestic Product Goals of development Wealth of National Happiness

Beyond Gross Domestic Product Goals of development Wealth of National Happiness

Beyond Gross Domestic Product u u constructing data for development evaluation that wider than

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

Green GDP u sustainable development Humanity has the ability to make development sustainable --

Green GDP u 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).

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

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

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

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

Green GDP The ecological approach: Sustainability in the economic and social spheres is subordinate

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

Green GDP The ecological approach to sustainable development u u u Key property to

Green GDP The ecological approach to sustainable development u u u 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.

Green GDP The capital approach u The idea of sustainable development from a capital

Green GDP The capital approach u 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. ”

Green GDP The capital approach u u u The capital approach to sustainable development

Green GDP The capital approach u u u 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 ecosystems.

Green GDP The capital approach u Natural capital may fall into one of three

Green GDP The capital approach u 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.

Green GDP u The Green GDP or A Satellite System of Integrated Environmental and

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

The example for Green GDP No. Item 1 Gross Domestic Product (Value Added) 692.

The example for Green GDP No. Item 1 Gross Domestic Product (Value Added) 692. 4 100 2 Consumption of fixed capital 3=1 -2 Net Domestic Product 104. 4 588. 0 15. 1 84. 9 4 Decline in the value of resource stocks due to extraction 58. 6 8. 4 529. 4 76. 5 12. 8 1. 8 575. 2 83. 1 5=3 -4 Extraction adjusted domestic product 6 Decline in the value of resource stocks due to extraction: net of discoveries/natural growth 7=3 -6 Depletion adjusted domestic product Billion Baht Index (GDP=100)

GDH or GNH indicators: Well-being Index? u In Thailand national well-being has been in

GDH or GNH indicators: Well-being Index? u In Thailand national well-being has been in concern for development since the 8 th National Economic and Social Development Plan (19972001). u Office of the National Economic and Social Development Board (NESDB) plays a key role in developing this indicator called Well-being Index

GDH or GNH indicators: Well-being Index? u A concept of well-being in Thailand has

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

GDH or GNH indicators: Well-being Index? The well-being indicators in Thailand have constructed in

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 u Knowledge u Working life u Income and distribution u Environment u Family life u Good governance u

GDH or GNH indicators: Well-being Index? To construct each well-being component to evaluate the

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)

Indicators for GDH or GNH: Happy Planet index (HPI) u u u The new

Indicators for GDH or GNH: Happy Planet index (HPI) u u u 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.

Indicators for GDH or GNH: Happy Planet index (HPI) The HPI incorporates 3 separate

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)

What is the indicator for GDH or GNH Green GDP Wellbeing Index HPI ?

What is the indicator for GDH or GNH Green GDP Wellbeing Index HPI ?

GDP per capita, HDI Ranking, HPI ranking for 6 ASEAN countries and Bhutan. Country

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

Office of the National Economic and Social Development Board Preliminary conceptual framework Gross National

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

Concepts GDP and growth of GDP per capita have been used to measure development

Concepts GDP and growth of GDP per capita have been used to measure development success of a country From the 8 th 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. GDP is no longer sufficient. There’s a need to develop new indicator that reflects “wellbeing” of the people. Objectives 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. As an instrument for driving changes into the mainstream concept of living a happy life. To set development procedures for database necessary for compiling the well-being index.

Conclusion from review on related indices All of the indices incorporate many aspects of

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.

“Sufficiency Economy” Philosophy Main idea Middle Path Living practices in every level of life

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

Integration Development with “people as the center of development” From focusing on economic development

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

Development Vision Sufficiency Economy Philosophy Thais Moral-led Proficient Keep-up Warm family Community/ institution Strong

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

Definition and components “well-being” means a way of life—mental, physical and wisdom that connect

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 well-being of people and family Balance between human and nature Quality and fair economic system Good governance in country management Strong and peaceful society

Factors for happiness Balance of living between human and environment Preserve natural bases and

Factors for happiness Balance of living between human and environment Preserve natural bases and balance of biological system. Use them fairly, reserving for future generations. Maintain variety of biology and manage environment well. Well-being Quality and fair economy 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. 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 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

THANKS www. nesdb. go. th wanida-m@nesdb. go. th National Accounts Office

THANKS www. nesdb. go. th wanida-m@nesdb. go. th National Accounts Office