ERHNI : refinements and applications

Abstract

In our paper, we propose for nations to shift emphasis from the current “production-oriented” measurement system to one which focuses on people’s well-being. As GDP is insufficient and that happiness can give us more information about actual utility, we should study happiness and make its maximization a goal of policy. Subjective well-being measures can be reliable and valid, and are measured as life satisfaction, affect (emotion) balance or objectively in certain socioeconomic indicators, we believe that the affect perspective is most relevant. Having made the case for happiness as a viable and credible government goal, we select from amongst various indicators the ERHNI as a complementary measure of national success.

Then, we make our contributions by refining ERHNI through first, better estimates of key variables, second, better accounting for external costs through the inclusion of other major greenhouse gases, third, increasing sample size and forth, using world average as a representative baseline instead of China. After which, we rank countries according to our revised ERHNI and compare the results against that of Ng’s (2008).

Last but not least, we further extend an empirical application of the index by ascertaining the determinants of its cross-country variation, testing genetic, cultural and other objective influences. We find that internationally, objective living conditions seem to matter the most.