Policy Innovations Digital Magazine (2006-2016): Innovations: The Happy Planet Index

Governments around the world are caught between the proverbial rock and a hard place: We are now nearly two years into what is widely heralded as the worst global economic crisis since the Great Depression, and the ecological crisis of global warming threatens the foundations of human civilization. Should countries stimulate their economies at any cost? How should they prioritize the health of global and local ecosystems? The debates about whether government money should be used to shore up struggling car industries neatly encapsulate these sorts of dilemmas.

Many in government may feel that the best overall path is far from clear. Part of the problem is that they lack tools for making these sorts of policy decisions. The common yardstick since the 1940s has been GDP growth. Gross Domestic Product reflected the wartime concern with increasing economic productivity, and since then it has become synonymous with progress. As the United Kingdom's Sustainable Development Commission notes, "The state has become caught up in a belief that growth should trump all other policy goals."

Yet intrinsic to growing GDP is the need to produce more stuff. This is exactly what our planet cannot sustain. More stuff requires more of the Earth's dwindling fossil energy supplies, with waste products that threaten the climate.

The kernel of the solution to resolving these competing demands lies within the structure of the problem itself. The fact that economic growth can be conceived of in opposition to the health of the planet suggests that neither can claim to be regarded as the true overall measure of success in human society. A much more convincing case is made by the concept of well-being. The experience of well-being is about feeling that your life is going well, something which is universally important to people everywhere. The concept of well-being enables us to define the ultimate aim of human endeavor to be healthy, happy, and meaningful lives.

The Earth's resources are the fundamental input to this system. A well-regulated economy is just one means to produce well-being—along with others including community, technology, values, and governance. Systems thinking also shows us that using planetary resources so that they can be sustained into the future is vital to ensuring that human well-being can also be maintained in the long term.

The updated Happy Planet Index (HPI), published last month by nef (the new economics foundation), uses this view of society to formulate an indicator of overall progress. Scores on the HPI represent the amount of human well-being a country produces relative to its resource use. It is measured in terms of long and happy lives. The HPI is thus an efficiency index, measuring how much well-being is achieved per unit of environmental impact:

HPI ≈ (Life expectancy x Life satisfaction) / Ecological footprint

Average life expectancy is measured in years. Life satisfaction comes from survey data where people report how satisfied they are with their lives overall on a scale of zero to 10 (where zero is dissatisfaction and 10 is satisfaction). Environmental impact is measured in terms of ecological footprint, an estimate of how much of the Earth's land is required to sustain the people of a country in terms of food and other goods, and to absorb their CO2 emissions. An ecological footprint of 2.1 hectares per capita is the level of resource use representing a country’s fair share, given the Earth's total resources and population. Overall HPI scores sit on a scale from 0 to 100.

For a country to do well on the index, it needs to achieve a high level of well-being without using too large a share of the Earth's resources. However, it is also possible to score fairly well by achieving a high well-being score together with high environmental impact. Therefore to fully explore the trade-offs between well-being and environmental impact, scores for each of the three elements of the HPI can be disaggregated and examined.

Looking at the results from the 143 nations included in the second edition of the HPI, no country manages to achieve high well-being and live within its means. On the one hand, there are rich Western countries that succeed in producing high levels of well-being but at a huge environmental cost. For example, if everyone in the world consumed resources at the same rate as citizens of the United States, we would need more than four planets to sustain consumption. Furthermore, it seems that as countries get richer, they move further away from achieving sustainable well-being: They enjoy only marginal gains in well-being at an enormous additional environmental cost.

On the other hand are the poorer developing countries, such as those of sub-Saharan Africa—doing very well in terms of living within their environmental means, but not achieving high well-being by any stretch of the imagination.

The countries that come closest to achieving sustainable well-being are middle-income countries, particularly in Latin America and the Caribbean. For example, life expectancy in Costa Rica is higher than in the United States, as is life satisfaction, yet the country uses only a quarter of the resources per capita. This is not surprising—the country produces a staggering 99 percent of its energy from renewable resources, has one of the most developed welfare states outside of Scandinavia, and manages to combine relatively good living conditions with strong social capital. But even Costa Ricans consume, on average, slightly more than their fair share of the world’s resources—perhaps due to the wealthy minority in the country.

While Costa Rica and countries like it have not yet reached high scores across all elements of the Happy Planet Index, their examples provide an important guide for national governments around the world. Improving the economy and reducing environmental impact should both be viewed through the lens of how they contribute to and detract from long-term human well-being, rather than seen as impossibly conflicting demands. The HPI demonstrates that policy decisions which improve the environmental sustainability of a country are possible without sacrificing well-being.