Thursday, October 27, 2011

The happiness of a nation

IT IS sad that MP Sylvia Lim's recent call in Parliament for Singapore to measure its sense of well- being (happiness index) degenerated into an off-point discussion on the merits of life in Bhutan and a rejection of her call. Reading her speech, it is clear that life in Bhutan was not what she wanted debated.
By Joseph Chong, For The Straits Times

'Happiness' is currently the subject of significant socio-economic research. Nobel laureate for economics Joseph Stiglitz, among other notable thinkers, has highlighted its importance. Many developed countries are incorporating it into their economic management; even conservative governments in Britain and France are adopting it. Gallup publishes a well-followed well-being index for the United States every month.

Even China is adopting a happiness index. Premier Wen Jiabao recently declared this publicly as a necessity to ensure a more balanced and sustainable development for China going forward.

Happiness is linked to many other socio-economic variables. Many of these are in turn drivers of the policies we have today and may have tomorrow.

My interest in measurements of happiness is personal and occupational. Like many other professional investors, I am interested in the sense of well-being of a society because it correlates to many other economic and social variables which have an impact on return- risk considerations.

Happiness is linked to consumer confidence data published monthly in most developed economies. It is a measure of the propensity to consume and invest going forward. Bond and equity markets are sensitive to readings of consumer confidence.

Happiness is also correlated to fertility rates. My own in-house research has shown how tight the correlation is across countries. This was first published in The Business Times on March 2 (Demographics, fertility and happiness) and can still be accessed freely at

Other researchers appear to have reached the same conclusions. This is not surprising if you see nature in action and zoos' breeding programmes. If you cannot be happy, you are doomed as a species because you will fail to produce enough babies.

Happiness is also linked to other economic variables. My own preliminary internal research indicates correlations with an individual's income growth, inflation rates, societal income inequality (Gini coefficient). Based on Associate Professor Tilak Abeysinghe's work at the National University of Singapore on fertility and housing affordability, happiness is also probably correlated to housing affordability (which is a subset of inflation). Intuitively, we could guess it, but the scientific research is now backing this intuition.

Unfortunately, there appears to be the misconception that happiness is an airy-fairy independent variable.

It is clearly not a stand-alone concept. Mathematically speaking, happiness is a function driven by other variables. In other words, get the other key variables right and the happiness index will take care of itself, because it is an aggregate of these other happiness-inducing factors. One is very unlikely to get a high happiness reading if incomes are falling, inflation is soaring and the rich-poor gap widens.

Happiness also appears to be linked to productivity. Again, this is not surprising, because if you have rising incomes with low inflation, you are getting productivity - which is high-quality economic growth. Given the necessary directional change in Singapore's economic-growth strategy to be more productivity-driven, happiness should be taken seriously.

Economic considerations aside, a sense of well-being or happiness is linked to serotonin levels in human beings. Serotonin is a chemical produced by the body that helps regulate our sense of well-being. Deficiency of serotonin is very clearly linked to mental illnesses, such as depression, anxiety disorders and excessive anger. Elevated serotonin levels make humans more tolerant to mental stress.

This is important in crowded, multi-religious, multiracial Singapore, where intolerance is the major threat to social cohesion. Indeed, being happy makes it less likely that we will have religious or racial riots. Happiness is important for social stability.

However, in the final analysis, the happiness issue is a question of human existence. Surely we live our lives not for the purpose of growing our nation's gross domestic product. Black or white, God-fearing or atheist, rich or poor, our wish to be happy or happier is universal. We are indeed all different as human beings, but we are one in our quest to be happy.

The writer is chief executive officer of financial advisory firm New Independent